TRADING RULES. A) Trading System

Transcription

1 TRADING RULES A) Trading System The Emerge trading platform shall be made available on the capital market segment of NSEIL. The SME trading platform has some unique features as follows:- Market Types SME securities are distinctly identified on NEAT trading system. Alternate options are available for trading of the securities of the listed companies. The SME securities can trade either in the normal (continuous) market or have daily liquidity window through a call auction session. The trading system will have hybrid features which will allow quotes by market makers in an order driven system. A separate front end is provided to market makers for facilitating eligible quotes. Issuers on the Emerge platform will have the option of trading their securities either in the normal (continuous) market or the call auction market. The chosen option will be defined by the issuer in the offer document. Issuers may change the market type at a later date, with approval from the exchange, and one month s notice to the market. Normal Market (N) Normal market includes SME securities which trade in continuous market. Matching will take place continuously on the basis of price time priority. Members can place limit orders as well as market orders. Shares will trade in the respective market lots defined by the exchange for each security. Market maker shall be required to provide two way quotes, of minimum depth (one trading lot) during the day in continuous trading session, for atleast 75% of the time. Call Auction 1 Market (C) Call Auction 1 market includes SME securities which trade in the call auction sessions. The members can place limit order as well as market order. Shares will trade in the respective market lot defined by the exchange for each security. In call auction market the order flow over a certain time period is pooled, and the equilibrium price is determined based on the principle of demand supply mechanism. Market maker has to provide two way quotes, of minimum depth (one trading lot) in each call auction session. The call auction shall consist of two different phases namely: 1) Phase I: Order Entry, modification and cancellation During this phase orders can be entered, modified and cancelled. Random closure of the session will take place in last five minute of the session 2) Phase II: Order Matching Order matching period will start immediately after completion of phase I. Orders will be matched at a single (equilibrium) price. Market Maker orders will not match against each other. The order matching will happen in following sequence:

2 Eligible limit orders will match with eligible limit orders Residual eligible limit orders will match with market orders Market orders will match with market orders Additionally, both of the following windows will be available to all the investors on Emerge. Odd Lot Market (O) All orders less than the Exchange defined market lot size are traded in odd lot market. In an odd-lot market, both the price and quantity of both the orders (buy and sell) should exactly match for the trade to take place. For SME the existing Odd lot market facility of the Capital Market is used for the Odd lot segment. In the odd lot market, only market makers are allowed to enter buy order. Further market makers are not allowed to entered sell order. Non market makers are allowed to enter only sell orders. This facility is given for non-market makers to sell off the shares in case number of shares held by them is less than the lot size. Auction Market (A) In the Auction Market, auctions are initiated by the Exchange on behalf of trading members for settlement related reasons. There are 3 participants in this market: - Initiator - the party who initiates the auction process is called an initiator - Competitor - the party who enters orders on the same side as of the initiator - Solicitor - the party who enters orders on the opposite side as of the initiator Order Books The NSE trading system provides flexibility to members in the kinds of orders that can be placed by them. Orders are first numbered and time-stamped on receipt and then immediately processed for potential match. Every order has a distinctive order number and a unique time stamp on it. In case of normal market, the SME Order Book displays a five deep market depth with market maker quotes. The market makers quotes are flagged with a distinct identifier # to differentiate these quotes from other anonymous orders that populate the order book. In case of call auction market the SME Order Book displays a four deep market depth with market maker quotes and Market orders displayed in the 5th row. The market maker quotes will be flagged with a distinct identifier # to differentiate these quotes from other anonymous orders that populate the order book. Order Matching Rules Normal Market The matching takes place on price-time priority basis. The best buy order is matched with the best sell order. An order may match partially with another order resulting in multiple trades. For order matching, the best buy order is the one with the highest price and the best sell order is the one with the lowest price. This is because the system views all buy orders available from the point of view of a seller and all sell orders from the point of view of the buyers in the market. Members can proactively enter orders in the system, which will be displayed in the system till the full quantity is matched by one or more of counter-orders and result into trade(s) or is cancelled by the

3 member. Alternatively, members may be reactive and put in orders that match with existing orders in the system. Orders lying unmatched in the system are 'passive' orders and orders that come in to match the existing orders are called 'active' orders. Orders are always matched at the passive order price. This ensures that the earlier orders get priority over the orders that come in later. Call Auction 1 Market Trade in Call Auction 1 market consists of two different phases namely: i) Phase I: Order Entry, modification & cancellation During this period orders can be entered, modified and cancelled. Random closure of the session will take place in last five minute of the session. ii) Phase II: Order Matching Order matching period will start immediately after completion of order collection period. Orders will be matched at a single (equilibrium) price. Market Maker orders will not match against each other. The order matching will happen in following sequence: o o o Eligible limit orders will be matched with eligible limit orders Residual eligible limit orders will be matched with market orders Market orders to will match with market orders Unmatched order All unmatched orders will be cancelled after the end of call auction session. Determination of Equilibrium price Both limit and market orders will be reckoned for calculation of Equilibrium Price. Indicative Equilibrium Price shall be displayed during phase I and Final Equilibrium Price (FEP) shall be displayed at the end of phase II. Following is the rule for determination of equilibrium price:- The equilibrium price is determined based on the principle of demand supply mechanism. The equilibrium price is the price at which the maximum volume is executable excluding matching between market maker orders. In case more than one price meets the said criteria, the equilibrium price will be the price at which there is minimum order imbalance (unmatched order quantity). The absolute value of the minimum order imbalance quantity will be taken into consideration. In case more than one price has same minimum order imbalance quantity, the equilibrium price will be the price closest to the last traded price, if traded on that day (LTP), else previous day s closing price. In case LTP or previous day s closing price is the mid-value of pair of prices which are closest to it, then the LTP or previous day s closing price itself will be taken as the equilibrium price. In case of corporate action, previous day s closing price will be the adjustable closing price or the base price. In case only market orders exist both in the buy and sell side, then order shall be matched at LTP, if traded on that day or previous day s close price or adjusted close price / base price. In case no price is discovered in call auction session, all orders will get cancelled.

4 Order Conditions I] Normal Market (N) A Member can enter various types of orders depending upon his/her requirements in the Normal Market. These conditions are broadly classified into three categories: time related conditions, price-related conditions and quantity related conditions. Time Conditions DAY - A Day order, as the name suggests, is an order which is valid for the day on which it is entered. If the order is not matched during the day, the order gets cancelled automatically at the end of the trading day. IOC - An Immediate or Cancel (IOC) order allows a Member to buy or sell a security as soon as the order is released into the market, failing which the order will be removed from the market. Partial match is possible for the order, and the unmatched portion of the order is cancelled immediately. Price Conditions Limit Price/Order An order that allows the price to be specified while entering the order into the system. Market Price/Order An order to buy or sell securities at the best price obtainable at the time of entering the order. Stop Loss (SL) Price/Order The one that allows the Trading Member to place an order which gets activated only when the market price of the relevant security reaches or crosses a threshold price. Until then the order does not enter the market. A sell order in the Stop Loss book gets triggered when the last traded price in the normal market reaches or falls below the trigger price of the order. A buy order in the Stop Loss book gets triggered when the last traded price in the normal market reaches or exceeds the trigger price of the order. E.g. If for stop loss buy order, the trigger is 93.00, the limit price is and the market (last traded) price is 90.00, then this order is released into the system once the market price reaches or exceeds This order is added to the regular lot book with time of triggering as the time stamp, as a limit order of Quantity Conditions Disclosed Quantity (DQ)- An order with a DQ condition allows the Trading Member to disclose only a part of the order quantity to the market. For example, an order of 1000 with a disclosed quantity condition of 200 will mean that 200 is displayed to the market at a time. After this is traded, another 200 is automatically released and so on till the full order is executed. The Exchange may set a minimum disclosed quantity criteria from time to time.

5 II] Call Auction 1 Market (C) Members can place orders on time and price conditions given below: Time Conditions GTS A Good Till Session (GTS) order allows the Member to place orders valid only till call auction session in the system. After the call auction session all the unmatched orders are cancelled from by the system. Price Conditions Limit Price/Order An order that allows the price to be specified while entering the order into the system. Market Price/Order When member enter buy / sell order, it indicates that member is ready to buy / sell at equilibrium price determined in call auction session. B) Market Timings & Holidays The Holidays applicable for Capital Market Segment will be applicable for SME Segment. Market Timings A) Normal Market: 9:15 am to 3:30 pm. B) Call Auction 1 Market: The call auction session will be scheduled between 9:15 am to 3:30 pm. The timing of each call auction would be determined in advance and the same would be widely disseminated to the public. Currently the proposed call auction timing is 11:00 am to 12:00 pm. The call auction session shall consist of different phases namely: i) Phase I: Order Entry, modification and cancellation phase (random closure in last five minute) ii) Phase II: Order Matching phase. C) Market Sub-segments The following sub-segments shall be available in the SME segment: Rolling Settlement In a rolling settlement, each trading day is considered as a trading period and trades executed during the day are settled based on the net obligations for the day. The securities in rolling settlement made available in SM series. At NSE, trades in rolling settlement are settled on a T+2 basis i.e. on the 2nd working day. For arriving at the settlement day all intervening holidays, which include bank holidays, NSE holidays, Saturdays and Sundays are excluded. Typically trades taking place on Monday are settled on Wednesday, Tuesday's trades settled on Thursday and so on. The securities in Rolling settlement are made available for trading under SM series.

6 Trade for Trade Settlement The securities in Trade for Trade settlement are made available for trading under ST series. The settlement of securities available in this segment is done on a trade for trade basis and no netting off is allowed. Odd Lot Segment Trading in SME securities is allowed in standard lot sizes. There will be different lot sizes for different securities. Any quantity which is less than the minimum lot size will be considered as odd lot. As per SEBI guidelines, in order to facilitate odd lot trading, a separate trading window is provided for odd lots. Under odd lot market orders with the same price and quantity will match on time priority. The base price, price band and tick size will be same as corresponding normal market (series SM / ST) on that day. The series for odd lot market is SO and market is odd lot ( O ). D) Circuit Breakers In case the Capital market of the Main board is closed on account of nationwide index circuit filter, or for any other reason, Emerge will also be closed. It will be reopened simultaneously, as and when the Capital market is reopened for trading. For further details kindly click on the below link. E) Price Bands Price bands for securities are as follows: o Daily price bands of 20% (either way) o Price Bands may be changed as per surveillance action from time to time. o For Call Auction 1 market the price bands of 20% are applicable. F) Trader Workstation Members can use the same trader workstation of Capital Market Segment for trading in SME Securities. Further, there will be separate trader workstation for Market Maker. For further details kindly click on the below link:- G) Computer to Computer Link (CTCL) NSE offers a facility to its trading members by which members can use their own trading front-end software in order to trade on the NSE trading system. This facility called Computer-to-Computer Link (CTCL) facility is available only to trading members of NSE. The same will be applicable for SME market. For further details kindly click on the below link:-

7 H) Internet Trading The Securities & Exchange Board of India (SEBI) approved the report on Internet Trading brought out by the SEBI Committee on Internet Based Trading and Services in January Internet trading can take place through order routing systems, which will route client orders to exchange trading systems for execution. Thus a client sitting in any part of the country would be able to trade using the Internet as a medium through brokers' Internet trading systems. For further details kindly click on the below link.