National Stock Exchange of India
National Stock Exchange of India Limited (NSE) is the leading stock exchange of India, located in Mumbai, Maharashtra. NSE was established in 1992 as the first dematerialized electronic exchange in the country. NSE was the first exchange in the country to provide a modern, fully automated screen-based electronic trading system which offered easy trading facilities to investors spread across the length and breadth of the country. Vikram Limaye is Managing Director & Chief Executive Officer of NSE.
National Stock Exchange of India's Logo
|Owner||National Stock Exchange of India Limited|
|Currency||Indian rupee (₹)|
|No. of listings||1,952|
|Market cap||US$2.27 trillion (April 2018)|
|Volume||₹28,692 billion (US$400 billion) (June 2014)|
NIFTY Next 50
National Stock Exchange has a total market capitalization of more than US$2.27 trillion, making it the world's 11th-largest stock exchange as of April 2018. NSE's flagship index, the NIFTY 50, a 50 stock index is used extensively by investors in India and around the world as a barometer of the Indian capital market. The NIFTY 50 index was launched in 1996 by NSE. However, Vaidyanathan (2016) estimates that only about 4% of the Indian economy / GDP is actually derived from the stock exchanges in India.
Unlike countries like the United States where nearly 70% of the country's GDP is derived from large companies in the corporate sector, the corporate sector in India accounts for only 12-14% of the national GDP (as of October 2016). Of these only 7,800 companies are listed of which only 4000 trade on the stock exchanges at BSE and NSE. Hence the stocks trading at the BSE and NSE account for only around 4% of the Indian economy, which derives most of its income-related activity from the so-called unorganized sector and household spending.
Economic Times estimates that as of April 2018, 6 crore (60 million) retail investors had invested their savings in stocks in India, either through direct purchases of equities or through mutual funds. Earlier, the Bimal Jalan Committee report estimated that barely 1.3% of India's population invested in the stock market, as compared to 27% in the United States and 10% in China.
National Stock Exchange was incorporated in the year 1992 to bring about transparency in the Indian equity markets. Instead of trading memberships being confined to a group of brokers, NSE ensured that anyone who was qualified, experienced and met the minimum financial requirements was allowed to trade. In this context, NSE was ahead of its time when it separated ownership and management of the exchange under SEBI's supervision. Stock price information which could earlier be accessed only by a handful of people could now be seen by a client in a remote location with the same ease. The paper-based settlement was replaced by electronic depository-based accounts and settlement of trades was always done on time. One of the most critical changes involved a robust risk management system that was set in place, to ensure that settlement guarantees would protect investors against broker defaults.
NSE was set up by a group of leading Indian financial institutions at the behest of the Government of India to bring transparency to the Indian capital market. Based on the recommendations laid out by the Pherwani committee, NSE was established with a diversified shareholding comprising domestic and global investors. The key domestic investors include Life Insurance Corporation, State Bank of India, IFCI Limited , IDFC Limited and Stock Holding Corporation of India Limited. Key global investors include Gagil FDI Limited, GS Strategic Investments Limited, SAIF II SE Investments Mauritius Limited, Aranda Investments (Mauritius) Pte Limited and PI Opportunities Fund I.
The exchange was incorporated in 1992 as a tax-paying company and was recognized as a stock exchange in 1993 under the Securities Contracts (Regulation) Act, 1956, when P. V. Narasimha Rao was the Prime Minister of India and Manmohan Singh was the Finance Minister. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The capital market (equities) segment of the NSE commenced operations in November 1994, while operations in the derivatives segment commenced in June 2000. NSE offers trading, clearing and settlement services in equity, equity derivative, debt, commodity derivatives, and currency derivatives segments. It was the first exchange in India to introduce an electronic trading facility thus connecting the investor base of the entire country. NSE has 2500 VSATs and 3000 leased lines spread over more than 2000 cities across India.
NSE was also instrumental in creating the National Securities Depository Limited (NSDL) which allows investors to securely hold and transfer their shares and bonds electronically. It also allows investors to hold and trade in as few as one share or bond. This not only made holding financial instruments convenient but more importantly, eliminated the need for paper certificates and greatly reduced incidents involving forged or fake certificates and fraudulent transactions that had plagued the Indian stock market. The NSDL's security, combined with the transparency, lower transaction prices and efficiency that NSE offered, greatly increased the attractiveness of the Indian stock market to domestic and international investors.
NSE EMERGE is NSE's new initiative for Small and medium-sized enterprises (SME) & Startup companies in India. These companies can get listed on NSE without an Initial public offering (IPO). This platform will help SME's & Startups connect with investors and help them with the raising of funds. In August 2019, the 200th company listed on NSE's SME platform.
NSE offers trading and investment in the following segments
- Mutual fund
- Exchange-traded funds
- Initial public offerings
- Security Lending and Borrowing etc.
- Equity Derivatives (including Global Indices like S&P 500, Dow Jones and FTSE)
- Currency derivatives
- Commodity Derivatives
- Interest rate futures
The National Stock Exchange of India Limited (NSE) commenced trading in derivatives with the launch of index futures on 12 June 2000. The futures and options segment of NSE has made a global mark. In the Futures and Options segment, trading in NIFTY 50 Index, NIFTY IT index, NIFTY Bank Index, NIFTY Next 50 index and single stock futures are available. Trading in Mini Nifty Futures & Options and Long term Options on NIFTY 50 are also available. The average daily turnover in the F&O Segment of the Exchange during the financial year April 2013 to March 2014 stood at ₹1.52236 trillion (US$21 billion).
On 29 August 2011, National Stock Exchange launched derivative contracts on the world's most-followed equity indices, the S&P 500 and the Dow Jones Industrial Average. NSE is the first Indian exchange to launch global indices. This is also the first time in the world that futures contracts on the S&P 500 index were introduced and listed on an exchange outside of their home country, USA. The new contracts include futures on both the DJIA and the S&P 500 and options on the S&P 500.
On 3 May 2012, the National Stock exchange launched derivative contracts (futures and options) on FTSE 100, the widely tracked index of the UK equity stock market. This was the first of its kind of an index of the UK equity stock market launched in India. FTSE 100 includes 100 largest UK listed blue chip companies and has given returns of 17.8 per cent on investment over three years. The index constitutes 85.6 per cent of UK's equity market cap.
On 10 January 2013, the National Stock Exchange signed a letter of intent with the Japan Exchange Group, Inc. (JPX) on preparing for the launch of NIFTY 50 Index futures, a representative stock price index of India, on the Osaka Securities Exchange Co., Ltd. (OSE), a subsidiary of JPX.
Moving forward, both parties will make preparations for the listing of yen-denominated NIFTY 50 Index futures by March 2014, the integration date of the derivatives markets of OSE and Tokyo Stock Exchange, Inc. (TSE), a subsidiary of JPX. This is the first time that retail and institutional investors in Japan will be able to take a view on the Indian markets, in addition to current ETFs, in their own currency and in their own time zone. Investors will therefore not face any currency risk, because they will not have to invest in dollar denominated or rupee denominated contracts.
In August 2008, currency derivatives were introduced in India with the launch of Currency Futures in USD–INR by NSE. It also added currency futures in Euros, Pounds, and Yen. The average daily turnover in the F&O Segment of the Exchange on 20 June 2013 stood at ₹419.2616 billion (US$5.9 billion) in futures and ₹273.977 billion (US$3.8 billion) in options, respectively.
Interest Rate FuturesEdit
In December 2013, exchanges in India received approval from market regulator SEBI for launching interest rate futures (IRFs) on a single GOI bond or a basket of bonds that will be cash settled. Market participants have been in favour of the product being cash settled and being available on a single bond. NSE will launch the NSE Bond Futures on 21 January on highly liquid 7.16 percent and 8.83 percent 10-year GOI bonds. Interest Rate Futures were introduced for the first time in India by NSE on 31 August 2009, exactly one year after the launch of Currency Futures. NSE became the first stock exchange to get an approval for interest-rate futures, as recommended by the SEBI-RBI committee.
On 13 May 2013, NSE launched India's first dedicated debt platform to provide a liquid and transparent trading platform for debt related products.
The Debt segment provides an opportunity for retail investors to invest in corporate bonds on a liquid and transparent exchange platform. It also helps institutions who are holders of corporate bonds. It is an ideal platform to buy and sell at optimum prices and help Corporates to get adequate demand when they are issuing the bonds.
Trading on the equities segment takes place on all days of the week (except Saturdays and Sundays and holidays declared by the Exchange in advance). The market timings of the equities segment are:
- (1) Pre-open session:
- Order entry & modification Open: 09:00 hrs
- Order entry & modification Close: 09:08 hrs*
*with random closure in last one minute. Pre-open order matching starts immediately after the close of pre-open order entry.
- (2) Regular trading session
- Normal/Retail Debt/Limited Physical Market Open: 09.15 hrs
- Normal/Retail Debt/Limited Physical Market Close: 15:30 hrs.
- After market hours: 16:00 - 09:00 hrs
Exchange Traded Funds and Derivatives on National Stock ExchangeEdit
The following products are trading on NIFTY 50 Index in the Indian and international Market:
- 7 Asset Management Companies have launched exchange-traded funds on NIFTY 50 Index which are listed on NSE
- 15 index funds have been launched on NIFTY 50 Index
- Unit linked products have been launched on NIFTY 50 Index by several insurance companies in India
- World Indices
Derivatives Trading on NIFTY 50 Index:
- Futures and Options trading on NIFTY 50 Index
- Trading in NIFTY 50 Index Futures on Singapore Stock Exchange(SGX)
- Trading in NIFTY 50 Index Futures on Chicago Mercantile Exchange(CME)
NSE's trading systems is a state-of-the-art application. It has an uptime record of 99.99% and processes more than a billion messages every day with the sub-millisecond response time.
NSE has taken huge strides in technology in these 20 years. In 1994, when trading started, NSE technology was handling 2 orders a second. This increased to 60 orders a second in 2001. Today NSE can handle 1,60,000 orders/messages per second, with infinite ability to scale up at short notice on demand, NSE has continuously worked towards ensuring that the settlement cycle comes down. Settlements have always been handled smoothly. The settlement cycle has been reduced from T+3 to T+2/T+1.
NSE has collaborated with several universities like Gokhale Institute of Politics & Economics (GIPE), Pune, Bharati Vidyapeeth Deemed University (BVDU), Pune, Guru Gobind Singh Indraprastha University, Delhi, the Ravenshaw University of Cuttack and Punjabi University, Patiala, among others to offer MBA and BBA courses. NSE has also provided mock market simulation software called NSE Learn to Trade (NLT) to develop investment, trading and portfolio management skills among the students. The simulation software is very similar to the software currently being used by the market professionals and helps students to learn how to trade in the markets.
NSE also conducts online examination and awards certification, under its Certification in Financial Markets (NCFM) programmes. At present, certifications are available in 46 modules, covering different sectors of financial and capital markets, both at the beginner and advanced levels. The list of various modules can be found at the official site of NSE India. In addition, since August 2009, it offered a short-term course called NSE Certified Capital Market Professional (NCCMP). The NCCMP or NSE Certified Capital Market Professional is a 100-hour program for over 3–4 months, conducted at the colleges, and covers theoretical and practical training in subjects related to the capital markets. NCCMP covers subjects like equity markets, debt markets, derivatives, macroeconomics, technical analysis, and fundamental analysis. Successful candidates are awarded joint certification from NSE and the concerned.
NSE co-location caseEdit
On 8 July 2015, Sucheta Dalal wrote an article on Moneylife alleging that some NSE employees were leaking sensitive data related to high-frequency trading or co-location servers to a select set of market participants so that they could trade faster than their competitors. NSE alleged defamation in the article by Moneycontrol. On 22 July 2015, NSE filed a ₹1 billion (US$14 million) suit against Moneycontrol. However, on 9 September 2015, the Bombay High Court dismissed the case and fined NSE ₹5 million (US$70,000) in this defamation case against Moneycontrol (www.moneylife.in). The High Court asked NSE to pay ₹150,000 (US$2,100) to each journalist Debashis Basu and Sucheta Dalal and the remaining ₹4.7 million (US$66,000) to two hospitals.
The Bombay High Court has stayed the order on costs for a period of two weeks, pending the hearing of the appeal filed by NSE.
In May 2019 SEBI has debarred NSE from accessing the markets for a period of 6 months. While NSE confirmed this will not impact their functioning, they won't be able to list their IPO or introduce any new trading products for that period. Additionally, the watchdog also ordered NSE to disgorge Rs 624.9 crores (along with accrued interest for the period), an amount equivalent to the profits it made from the unfair trade practice of co-location servers they provided during the period from 2010–11 to 2013–14.
The board also passed orders against 16 individuals including former managing directors and CEOs Ravi Narain and Chitra Ramakrishna ordering them to disgorge 25% of their salaries during that period along with interest. All money is to be paid into the Investor protection and education fund. These individuals have also been debarred from the markets or holding any position in a listed company for a period of five years.
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