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Mechanism of trading system. &. Types of Brokers. Krunal Kapadia Roll No.: 16. Mechanism of trading system. Trading Process in the Exchange.

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krunal kapadia roll no 16

Mechanism of trading system


Types of Brokers

Krunal Kapadia

Roll No.: 16

mechanism of trading system
Mechanism of trading system

Trading Process in the Exchange

NSE trading mechanism operates on the principles of order driven system. To understand this we have to understand the existing trading mechanism in various exchanges across the globe.
  • Primarily, there are three trading mechanism namely
  • 1) Order driven
  • 2) Market Maker or quote driven
  • 3) Negotiated trades mechanism
  • In order driven trading mechanism any market participant can enter a order which is visible over the market screen. The other participants on viewing this order may enter a counter order at same price or price suitable for them. Trade occurs when orders match.
  • Market making or quote driven mechanism was prevalent in BSE long ago. With the introduction of anonymous screen based automated trading systems market making has lost its shine. However, it exist in small form at BSE especially in illiquid stocks. Liquid stocks do not depend on market making. In a negotiated trading mechanism, a trade is negotiated outside the trading system and subsequently entered in a negotiated book for the benefits of market participants or for complying regulations.
The NSE provides a facility for screen based trading with order matching facility. The members are connected from their respective offices at dispersed locations to the main system at the NSE premises through a high- speed efficient satellite telecommunication network.
  • The trading system is an order driven, automated order matching system which does not reveal the identity of parties to an order or a trade. This helps orders whether large or small to be placed without the members being disadvantaged by disclosure of their identity. Orders are matched automatically by the computer keeping the system transparent, objective and fair. Where an order does not find a match it remains in the system and is displayed to the whole market, till a fresh order which matches, comes in or the earlier order is cancelled or modified.
The trading system provides tremendous flexibility to the users in terms of the type of orders that can be placed on the system. Several time related, price related or volume related conditions can easily be placed on an order.
  • The trading system also provides complete on-line market information through various inquiry facilities.
In addition to the trading network, NSE also has Internet connectivity, which is used for browsing and e-mail.

“We used to regulate our outgoing Internet traffic and not incoming traffic,”

--Narayan Neelankantan (Manager-Telecom-NSE)

He added, “It is a part of the infrastructure where internal people browse the Internet. We use Websense Enterprise, a Web filtering solution to manage Internet access for our 1,000-plus employees or contractors.” NSE has also opted for Security Filtering, an offering of Websense’s categories for filtering. This blocks peer-to-peer and streaming apart from restricting spyware, bots and keyloggers.

  • NSE deployed the Websense solution in 2000. Explained Neelankantan, “In 2005, we carried out a review to see if we needed to upgrade. We evaluated a competitive solution and found that Websense was more suitable for our needs. Websense has a huge database of URLs. Additionally, it had better categorization and URL identification.”
NSE integrated the product with its firewall, and was using it purely for Web filtering. But with Internet threat burgeoning, it opted for a standalone deployment and since then it has not experienced any major security problems in the last seven years.
  • Neelankantan explained now there is a single interface through which all the traffic is mirrored to Websense and based on the policies deployed, it can carry out URL filtering and protocol level filtering. One of the benefits is that it is not inline, so the traffic does not passes through Websense. So in case something goes wrong the Websense server crashes for instance-browsing can still continue without interruption.
Stock brokers handle most of the buying and selling activities on the stock market. An average investor will hire the services of a broker to handle his trades. A broad range of brokerage services is available nowadays. Full-service brokers can give advice about which stocks to buy or which stocks to sell. They often have full research facilities that they use to analyze market trends and to predict market movements.
  • An investment broker acts as an intermediary between buyers and sellers of investments. Investment brokerage requires a license. Buyers and sellers instruct their investment brokers to execute trades on their behalf and in return they pay their broker a commission. Some of the most famous investment brokerage firms are Charles Schwab, Smith Barney and Merrill Lynch.
Investment brokers come in many different types. There is the on line broker which is very cheap or the full service broker that can get very expensive. If you do not have the right amount of knowledge before you invest in stocks, both of these types can get very expensive from losing you money. The full service broker recommends which investments would be suitable for you. This is easy for him to decide because he has the proper equipment to do so. With this, his fees are the highest. The on line broker has you do your own research and that is why it cost much less with him.
Here are some definitions that can help you in understanding a few of the most popular types of brokers.
  • THE Full Service Broker
  • THE Discount Broker
  • THE On line Broker
  • THE Deep Discount Brokers
  • THE Prime Brokers
the full service broker
THE Full Service Broker:

This broker is the most costly. They do research and give recommendations on which stocks you should invest in. A lot of times the recommendations that they give are stocks of which their own company specializes in. The company makes all this information public. In a full service firm you get a personal broker that gets a commission for selling the investment to you. They can also give you a lot of very important information that you don't have any other access to.

the discount broker
THE Discount Broker:

This broker is discounted by giving you a list of stocks they recommend, but you are to do your own research on these stocks.

THE On line Broker:

This broker, the newest type of broker, is run on line. They give you research to do, charts to look over, and news on investments to help you in completing your own research. It is not usual for this broker to recommend any stocks to research, but it happens sometimes. The on line brokers are a very cheap way to invest, but you are required to learn the basics of investments before you are able to use their services.

deep discount brokers
Deep Discount Brokers
  • They charge a meager commission and provide limited services. They do not offer consultation.

Prime Brokers

  • Apart from executing trade on behalf of buyers and sellers, Prime Brokers also provide a fuller range of services for hedge funds, including back office support, financing, recordkeeping and trade reconciliation.


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