Module IV –Dealings in Stock Exchanges

 Role of Brokers,
 Stock Market Quotations,
 Procedure for buying & selling,
 BOLT - On Line Trading/ NEAT System,
 Clearing & Settlement,
 Order Matching,
 Recent developments in the subject

Role of Brokers
A stock broker is an individual or firm that is authorized to trade in securities on behalf of clients
(investors or traders) through the stock exchange platform.
They may operate as:
 Full-Service Brokers (providing trading, advisory, and research services)
 Discount Brokers (providing only trading services at lower brokerage fees)
Stock brokers play a crucial role in the functioning of the stock market. They act as intermediaries
between investors and the stock exchange, facilitating the buying and selling of securities such as
shares, bonds, and derivatives.
Brokers are registered members of stock exchanges (like NSE, BSE) and are regulated by the
Securities and Exchange Board of India (SEBI) under the SEBI (Stock Brokers) Regulations,
1992.
Their role is not limited to just executing trades—they also provide advisory, research, and portfolio
management services, thereby contributing to the overall efficiency and liquidity of the market.

Types of Brokers in India

1. Full-Service Brokers – Offer trading, advisory, research, and wealth management services.
Examples: ICICI Direct, HDFC Securities, Kotak Securities.
2. Discount Brokers – Focus on online trading with low brokerage fees and no advisory
services.
Examples: Zerodha, Groww, Angel One, Upstox.
3. Sub-Brokers/Authorized Persons – Agents who act on behalf of a main broker to provide
services in smaller regions or client groups.

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Roles and Functions of Stock Brokers
(a) Acting as an Intermediary - The broker acts as a link between the investor and the stock
exchange. They receive orders from clients to buy or sell securities and execute them through the
stock exchange’s online trading system (like NSE’s NEAT or BSE’s BOLT).

(b) Execution of Orders - Brokers ensure that the buy and sell orders placed by investors are
executed accurately, promptly, and at the best possible price.
They use advanced trading terminals and algorithms to achieve price efficiency and speed.

(c) Advisory and Research Services - Full-service brokers provide investment advice, stock
recommendations, and market research reports.
They guide clients on:
 Which stocks to invest in
 Timing of entry and exit
 Risk-return trade-off
 Market trends and sectoral analysis

(d) Facilitating Online Trading - In the modern era, brokers provide online trading platforms or
mobile apps that allow investors to trade directly.
These platforms also provide:
 Live market updates
 Portfolio tracking
 Technical and fundamental analysis tools

(e) Client Registration and KYC Compliance - Brokers ensure that every investor completes Know
Your Customer (KYC) formalities before trading.
They maintain client details, PAN, bank accounts, and trading codes as per SEBI and exchange
regulations.

(f) Margin Funding and Leverage - Brokers may provide margin trading facilities, allowing
clients to buy securities by paying only a portion of the total value. The remaining amount is financed
by the broker, subject to SEBI’s margin requirements.

(g) Clearing and Settlement - After trades are executed, brokers coordinate with clearing
corporations (like NSCCL or ICCL) to ensure:
 Proper delivery of securities to buyers
 Receipt of funds from sellers
 Settlement of trades within T+1 day

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(h) Custodial and Demat Services - Many brokers are linked with Depository Participants (DPs)
of NSDL or CDSL.
They help clients in:
 Opening and maintaining Demat accounts
 Ensuring electronic transfer of securities
 Converting physical shares into dematerialized form

(i) Compliance and Record Keeping - Brokers are required to maintain detailed records of all
transactions, client communications, contract notes, and financial statements.
They must comply with SEBI, stock exchange, and AML (Anti-Money Laundering) guidelines.

(j) Investor Education and Grievance Redressal - Brokers conduct investor awareness programs,
webinars, and workshops to promote financial literacy.
They also handle investor grievances and complaints through mechanisms like Investor Grievance
Redressal Committee (IGRC) and Arbitration.

Importance of Brokers in Stock Market Functioning

 Ensure liquidity in the market by enabling continuous buying and selling.
 Maintain price discovery through competitive order matching.
 Increase market participation by connecting investors across regions.
 Provide transparency and efficiency through regulated trading systems.
 Contribute to economic growth by channelizing savings into productive investments.

Stock Market Quotations

A Stock Market Quotation refers to the current market price or value of a company’s share or
security as displayed or published on a stock exchange. It represents the latest trading
information—showing at what price buyers are willing to purchase and sellers are willing to sell.
Quotations help investors, brokers, and analysts track market movements and make informed
investment decisions.
A quotation in the stock market is the statement of price of a particular security at a given time.
It shows:
 The current price (market rate)
 The highest and lowest prices during the day
 The opening and closing prices
 The trading volume (number of shares traded)

In simple words, stock market quotations tell us the market status and value of securities on a
real-time or daily basis.

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Components of a Stock Market Quotation
A typical quotation includes the following elements:
(a) Name of the Company - Indicates the listed company whose share is being traded. Example:
Reliance Industries Ltd.
(b) Face Value - The nominal or original value of a share as stated in the company’s books, e.g., ₹1,
₹10, or ₹100.
(c) Market Price / Last Traded Price (LTP) - The most recent price at which the share was traded
on the exchange.
(d) Opening Price - The price at which the share was first traded when the market opened for the
day.
(e) Highest and Lowest Price (Day’s Range) - The maximum and minimum price of the share
during the trading session.
(f) Previous Closing Price - The final price at which the share was traded on the previous trading
day.
(g) Volume of Trade - The total number of shares bought and sold during the trading session —
indicating market activity or investor interest.
(h) 52-Week High and Low - The highest and lowest prices at which the stock has traded over the
past 52 weeks (one year). It helps assess long-term trends and volatility.
(i) Change in Price - Shows how much the stock price has increased or decreased compared to the
previous day’s close (in both ₹ and % terms).

Example of a Stock Market Quotation

Particulars Details (Example)
Company Reliance Industries Ltd.
Face Value ₹10
Opening Price ₹2,380
Day High / Low ₹2,410 / ₹2,365
Last Traded Price ₹2,400
Previous Close ₹2,385
Change +₹15 (+0.63%)
52-Week High / Low ₹2,580 / ₹2,140
Volume 18,50,000 shares

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Procedure for Buying and Selling of Securities
The procedure for buying and selling of securities refers to the systematic steps followed by
investors to purchase or sell shares and other securities through stock exchanges.
It involves processes such as opening a trading account, placing an order, executing trades, and final
settlement through a depository and clearing corporation.
Buying and selling of securities in India are conducted through recognized stock exchanges such as
NSE (National Stock Exchange) and BSE (Bombay Stock Exchange).
Investors do not directly deal with the exchange but trade through registered stock brokers or
trading members.
The procedure has become fully electronic and dematerialized, ensuring transparency, efficiency,
and quick settlement (T+1 basis).

Major Participants in the Trading Process

1. Investor / Client – The person who wants to buy or sell securities.
2. Stock Broker / Trading Member – The intermediary registered with SEBI and a stock
exchange.
3. Stock Exchange – The platform where securities are traded (e.g., NSE, BSE).
4. Depository & Depository Participant (DP) – Hold securities in electronic form (e.g., NSDL,
CDSL).
5. Clearing Corporation – Ensures smooth clearing and settlement (e.g., NSCCL, ICCL).
6. Bank – Handles payment of funds related to transactions.

Steps in the Procedure for Buying and Selling of Securities

A. Steps in the Buying Procedure

Step 1: Selection of a Broker
 The investor must first select a registered stock broker or sub-broker who is a member of
the recognized stock exchange.
 Brokers can be full-service or discount brokers (e.g., ICICI Direct, Zerodha, Angel One).

Step 2: Opening of Accounts

The investor must open the following accounts:
1. Trading Account – To place buy/sell orders through the broker.
2. Demat Account – To hold securities in electronic (dematerialized) form.
3. Bank Account – To transfer or receive funds for securities transactions.

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Step 3: Placing the Buy Order
 The investor instructs the broker to buy a specific quantity of securities at a specified price.
 Orders can be placed:
o Market Order – Buy at the current market price.
o Limit Order – Buy only if the price reaches a specified limit.
 The broker enters the order into the online trading system (like NSE’s NEAT or BSE’s
BOLT).

Step 4: Execution of Order

 Once a matching sell order is found, the trade is executed automatically by the exchange.
 The investor receives a trade confirmation slip with details like price, quantity, time, and
brokerage.

Step 5: Contract Note

 After execution, the broker issues a Contract Note, which is a legal document containing:
o Details of transaction
o Brokerage charges
o Date and time of trade
o Unique Order Number (UON)
 It acts as official proof of the transaction.

Step 6: Settlement and Delivery

 Settlement is done on a T+1 basis (i.e., within one working day).
 The buyer’s bank account is debited, and the securities are credited to the Demat account.
 Clearing corporations (like NSCCL for NSE or ICCL for BSE) handle the process securely.

B. Steps in the Selling Procedure

Step 1: Placing the Sell Order

 The investor instructs the broker to sell specific shares from their Demat account.
 Orders can again be market or limit orders depending on price expectations.

Step 2: Order Execution

 The broker enters the sell order into the exchange’s online system.
 When a matching buy order is found, the trade is executed instantly.

Step 3: Contract Note

 The broker issues a contract note to the seller confirming:
o Number of shares sold
o Sale price
o Brokerage and other charges
o Date and time of trade

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Step 4: Delivery of Securities
 The seller’s Demat account is debited automatically by the depository (NSDL/CDSL).
 Securities are transferred to the buyer’s Demat account through the clearing corporation.

Step 5: Payment to Seller

 On the settlement day (T+1), the sale proceeds (after brokerage and charges) are credited to
the seller’s linked bank account.

BOLT - On Line Trading/ NEAT System

BOLT - On Line Trading
BOLT stands for BSE On-Line Trading system. It is the electronic trading platform of the
Bombay Stock Exchange (BSE), introduced to replace the traditional open outcry (floor-based)
trading system. BOLT made trading faster, transparent, and more efficient by enabling members
to buy and sell securities through computer terminals connected to the BSE network. The BOLT
System is an automated, screen-based trading system that allows brokers to place buy and sell
orders electronically through terminals installed in their offices.
Orders are matched automatically on the basis of price–time priority, ensuring fairness and
efficiency in the trading process.
The Bombay Stock Exchange (BSE) introduced the BOLT system in 1995. Before that, trading on
BSE was conducted through open outcry, where brokers shouted bids and offers on the trading floor.
BOLT replaced this manual system with electronic order matching, revolutionizing the Indian
capital market. It helped BSE maintain its reputation as one of the oldest and most technologically
advanced stock exchanges in Asia.

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Objectives of BOLT System
1. To bring transparency in trading by displaying all buy and sell orders on screen.
2. To increase trading efficiency through computerized order matching.
3. To reduce time and paperwork involved in executing trades.
4. To provide nationwide access to investors and brokers via network connectivity.
5. To ensure accuracy and minimize human errors.

Features of BOLT System

(a) Fully Computerized and Automated
BOLT is a screen-based trading system where orders are entered, matched, confirmed, and executed
electronically—eliminating the need for physical interaction.

(b) Order-Driven System

Orders are matched automatically on the basis of price-time priority:
 Highest buy order and lowest sell order get matched first.
 This ensures fair and transparent price discovery.

(c) Real-Time Trading

All transactions occur in real time, allowing brokers and investors to view live prices, volumes, and
order status instantly.

(d) Nationwide Connectivity

BOLT connects BSE members across India through a wide area network (WAN).
This allows brokers from different cities to trade on the same platform without being physically
present on the exchange floor.
(e) Transparency
Every order entered in the system is visible to all market participants, ensuring equal access to
market information and minimizing insider advantages.

(f) Security and Reliability

BOLT uses advanced data encryption and backup systems to protect investor data and ensure
reliability even in case of power or network failure.

(g) Multi-Segment Trading

Through BOLT, brokers can trade in multiple segments such as:
 Equity Shares
 Debt Instruments
 Derivatives (Futures and Options)

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(h) User-Friendly Interface
The system provides a menu-driven, easy-to-use screen displaying:
 Buy and sell order books
 Market depth
 Best bid and offer prices
 Trade confirmation and order status

National Exchange for Automated Trading (NEAT)

NEAT stands for National Exchange for Automated Trading. It is an order-driven, fully
automated online trading system that facilitates buying and selling of securities through
computer terminals connected to NSE’s central trading system. In NEAT, all orders are entered
and matched automatically based on price-time priority, without any manual intervention.
The National Stock Exchange of India (NSE) introduced a fully automated electronic trading
system known as NEAT—short for National Exchange for Automated Trading.
Launched in November 1994, NEAT revolutionized Indian capital markets by replacing the
traditional open outcry system with a screen-based, order-driven trading system.
This system allows brokers to enter, match, and execute trades electronically, ensuring
transparency, speed, and nationwide accessibility.

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Objectives of NEAT
 To modernize and automate the trading process.
 To ensure fairness and transparency in price discovery.
 To provide speed and efficiency in order execution.
 To eliminate regional barriers by allowing brokers from any location in India to trade
electronically.
 To create a safe, secure, and reliable trading environment for investors.

Features of NEAT System

(a) Screen-Based Trading
All buy and sell orders are entered into computer terminals, and trades are executed automatically
through an electronic interface—eliminating manual trading.

(b) Order-Driven System

NEAT operates on an order-driven mechanism, where:
 Orders are matched based on price-time priority.
 Highest buy order is matched with the lowest sell order first.
 This ensures fairness and transparency in trade execution.

(c) Real-Time Order Matching

As soon as an order is entered, the system checks for a matching counter-order.
If available, the trade is executed instantly, and both buyer and seller receive immediate
confirmation.

(d) Nationwide Connectivity

NEAT provides connectivity to brokers across India through the NSE’s wide area network
(WAN). This allows brokers from any part of the country to trade on the same platform
simultaneously.

(e) Transparency
Every participant sees the same market information—best bid and offer prices, total buy/sell
quantities, and market depth—ensuring equal access to data.

(f) Risk Management

NEAT is integrated with risk management systems that monitor trading limits, margin
requirements, and exposure levels in real time to prevent defaults.

(g) Multi-Market Access

Through NEAT, trading is available in multiple segments:
 Equity Market

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  Debt Market
 Derivatives (Futures & Options)
 Currency Derivatives

(h) Security and Reliability

The system uses advanced encryption, backup, and surveillance mechanisms to ensure data
security, system reliability, and protection against unauthorized access.

Advantages of NEAT System

 Transparency: All orders and trades are visible to all market participants.
 Speed: Instant order matching and execution.
 Efficiency: Can handle large volumes of transactions seamlessly.
 Fairness: Eliminates human bias through automatic price-time matching.
 Accessibility: Brokers from any part of India can trade.
 Risk Reduction: Integrated with advanced surveillance and risk controls.
 Cost-Effective: Reduces paperwork, physical movement, and errors.

Clearing & Settlement

A. Clearing
Clearing is the process of identifying, confirming, and calculating the obligations of buyers and
sellers that arise from those trades. Clearing is a post-trade process carried out between the execution
of a trade and its final settlement. “Clearing” is the process of determining obligations of buyers and
sellers after trade execution.
Thus, Clearing and Settlement is the final stage of the trading cycle, ensuring that both parties
fulfill their obligations accurately, safely, and on time.
It includes:
 Matching and confirming trades
 Determining obligations of each party (buyer and seller)
 Ensuring availability of securities and funds
 Managing risk through margin collection and monitoring
The process is handled by a specialized institution called a Clearing Corporation.
In short, clearing means preparing trades for settlement.

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Importance of Clearing
 Ensures accuracy and reliability in post-trade activities.
 Reduces financial and operational risk.
 Guarantees completion of transactions even in case of member default.
 Facilitates a smooth transition from trading to settlement.
 Builds trust and stability in the stock market system.

B. Settlement
The process of trading in the stock exchange involves three main stages — Trading, Clearing, and
Settlement. After trades are executed and cleared, the final step is Settlement.
Settlement refers to the actual transfer of securities and funds between the buyer and the seller,
thereby completing the trade.
 The buyer receives the securities in his Demat Account.
 The seller receives the money in his Bank Account.
Settlement is the final stage of the trading cycle in a stock exchange.
It represents the fulfilment of obligations that arise out of the clearing process.
Settlement ensures that ownership of securities is transferred, and the transaction is completed legally.

Objectives of Settlement
1. To ensure smooth and timely transfer of securities and funds.
2. To complete all obligations arising from trade.
3. To ensure financial discipline among brokers and investors.
4. To minimize risk and maintain confidence in the market.
5. To make transactions legally final and binding.

Participants involved in the clearing and Settlement Process

Clearing Corporation - Main authority responsible for ensuring settlement of all trades.
Example:
 NSCCL (National Securities Clearing Corporation Ltd.) – for NSE
 ICCL (Indian Clearing Corporation Ltd.) – for BSE

Clearing Members / Brokers - Responsible for fulfilling obligations of clients (buyers and sellers).

Depositories (NSDL and CDSL) - Handle electronic transfer of securities from seller to buyer.

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Clearing Banks - Authorized banks responsible for transfer of funds between buyer and seller.

Custodians - Represent institutional investors such as mutual funds or insurance companies.

Role of Clearing Corporation in Settlement

The Clearing Corporation ensures that settlement happens smoothly and on time by:
1. Acting as a Central Counterparty (CCP) between buyer and seller.
2. Guaranteeing trade completion even in case of default.
3. Managing settlement risk through Settlement Guarantee Funds.
4. Coordinating with Depositories and Clearing Banks.
5. Providing post-settlement reports and confirmations to members.

Process of clearing and Settlement

Step 1: Trade Execution
 The trade is executed on the exchange platform (like NSE’s NEAT or BSE’s BOLT).
 Both buyer and seller enter into a legally binding contract.
Step 2: Clearing
 The clearing corporation calculates the net obligations of each member.
 It determines how much money the buyer has to pay and how many securities the seller must
deliver.

Step 3: Transfer of Securities

 On the settlement day, the seller’s securities are debited from his Demat account and credited
to the buyer’s Demat account through NSDL or CDSL.

Step 4: Transfer of Funds

 Simultaneously, funds are debited from the buyer’s clearing bank account and credited to
the seller’s account.

Step 5: Completion of Settlement

 Once both securities and funds have been exchanged successfully, the settlement is said to be
completed.
 The buyer becomes the legal owner of the securities.

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Order Matching
A. Order
An order is an instruction given by an investor to a broker or trading platform to buy or sell a
specific quantity of shares at a particular price.
Definition: An order is a request placed by a trader or investor to buy or sell securities (shares, bonds,
derivatives, etc.) through a stock exchange.
All orders are entered through an electronic trading system such as:
 NEAT (National Exchange for Automated Trading) – NSE
 BOLT (BSE On-Line Trading System) – BSE

An order specifies the following details:

 Name of the security (e.g., Reliance Industries, Infosys, etc.)
 Quantity to be bought or sold
 Price at which the investor wants to trade
 Type of order (market, limit, stop-loss, etc.)
 Duration of validity (day order, good-till-cancelled, etc.)
Once the order is placed, the stock exchange matches it with a counter-order (a buyer or seller with
matching terms).

Types of Orders
A. Types of Orders Based on Price
1. Market Order
 A market order is an instruction to buy or sell shares immediately at the best available
market price.
 The investor does not specify the price; the trade is executed instantly at the current market
rate.
Example:
If the market price of Infosys is ₹1,500 and you place a buy market order, it will be executed near
₹1,500.
Features:
 High execution speed
 Price not guaranteed (depends on market fluctuations)
 Suitable for investors who prioritize execution over price

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2. Limit Order
 A limit order allows the investor to specify the maximum price they are willing to pay (for
buy order) or the minimum price they are willing to accept (for sell order).
 The order is executed only if the market reaches the specified limit price or better.

Example:
 Buy Limit Order: Buy Reliance shares at ₹2,450 or lower.
 Sell Limit Order: Sell Reliance shares at ₹2,500 or higher.

Features:
 Price is controlled by the investor
 Execution is not guaranteed (if market does not reach that price)

3. Stop-Loss Order
 A stop-loss order is used to limit potential losses on a trade.
 The investor sets a trigger price; when the market reaches this trigger, the order is converted
into a market order and executed.
Example:
If you bought Infosys at ₹1,500 and want to limit your loss to ₹50 per share, you can place a stop-
loss sell order at ₹1,450.
Features:
 Protects from heavy loss
 Automatically executes when price hits the trigger
 Common in volatile markets

4. Stop-Limit Order
 A stop-limit order combines features of stop-loss and limit orders.
 When the trigger price is reached, the order becomes a limit order instead of a market order.

Example:
You set a stop price of ₹1,450 and a limit price of ₹1,440.
When the stock falls to ₹1,450, a sell limit order at ₹1,440 will be placed.
Feature:
 Protects from sharp price swings but may not execute if price moves fast below the limit.

B. Types of Orders Based on Time Duration

1. Day Order
 A day order remains valid only for the trading day on which it is placed.
 If not executed by the end of the day, it gets automatically cancelled.

Example:
You place a buy order for 100 shares at ₹200. If it is not executed by 3:30 PM, it will expire.

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2. Good Till Cancelled (GTC) Order
 A GTC order remains active until the investor cancels it or it gets executed.
 Some brokers limit the duration (e.g., 30 or 90 days).

Feature:
Useful for long-term investors who want to buy/sell only at a specific price without re-entering
the order daily.

3. Immediate or Cancel (IOC) Order

 The order is executed immediately, either fully or partially.
 Any portion not executed is automatically cancelled.

Example:
If you place an order to buy 500 shares and only 300 are available at the desired price, 300 will
be bought and the remaining 200 cancelled instantly.

C. Types of Orders Based on Execution Conditions

1. Fill or Kill (FOK) Order
 The order must be executed in full immediately or else cancelled entirely.
 No partial execution allowed.
Feature:
Used by traders who want complete execution instantly or not at all.
2. Disclosed Quantity (DQ) Order
 The trader can choose to disclose only part of the total order quantity to the market.
 Helps avoid revealing the full trading intention.
Example:
You want to buy 1,000 shares but disclose only 200 at a time.
Once 200 are executed, another 200 become visible, and so on.

3. Iceberg Order
 Similar to disclosed quantity, but automatically splits large orders into smaller visible parts
to minimize market impact.
 Commonly used by institutional investors.

4. Stop Market Order

 Similar to stop-loss order, but when the trigger price is hit, the order becomes a market order,
not a limit order.
 It executes at the best available price after the trigger.

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Order Matching
Order Matching is the process by which the stock exchange’s electronic trading system matches buy
orders and sell orders based on price and time priority to execute trades.
When investors place buy and sell orders in the stock market, these orders are processed by the
exchange’s electronic trading system. To complete a transaction, every buy order must find a
corresponding sell order — this process is called Order Matching.
When a buy order (for a certain price and quantity) and a sell order (for the same or matching price
and quantity) meet, a trade is automatically executed.
The exchange system (like NEAT for NSE or BOLT for BSE) performs this matching electronically
within seconds.

Process of Order Matching

The step-by-step order matching process is as follows:
1. Order Entry - Investors enter buy or sell orders through brokers into the trading system.
2. Order Validation - The exchange verifies order details — price, quantity, margin, etc.
3. Order Book Formation - All unmatched orders are stored in an electronic order book (separate
for buy and sell).
4. Order Matching - The system continuously scans the order book and matches compatible buy
and sell orders based on price-time priority.
5. Trade Execution - Once matched, the trade is executed automatically, and trade confirmation is
sent to both parties.
6. Clearing and Settlement - After matching, the clearing and settlement process begins for fund
and securities transfer.

Example of Order Matching

Let’s consider a security — ABC Ltd. — with the following orders in the system:
Buy Orders: Sell Orders:
Buyer Quantity Price (₹) Seller Quantity Price (₹)
A 100 98 X 100 99
B 200 99 Y 150 100
C 150 100 Z 200 101

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Matching Process:
 The system first looks for best buy (highest price) and best sell (lowest price) orders.
 Buy at ₹100 (C) and Sell at ₹99 (X) → match found at ₹99.
 Trade executed for 100 shares at ₹99.
 Remaining unmatched orders stay in the order book until matched or cancelled.

Advantages of Order Matching

1. Ensures fair trading without manipulation.
2. Provides equal opportunity to all investors.
3. Enhances market liquidity and price discovery.
4. Reduces human error and fraud.
5. Enables real-time execution of trades.
6. Promotes investor confidence through transparency.

Recent developments in the subject

1. Direct payout settlement mechanism
o On 25 Feb 2025, the National Stock Exchange of India (NSE) and its market-infrastructure
partners implemented the Direct Payout Settlement mechanism. This means that
securities sold are directly credited to clients’ demat accounts and funds are paid more
seamlessly.
o Implication: Improved efficiency in settlement, reduced counterparty risk, and faster
“money-in‐hand” for sellers.

2. Faster settlement cycles (T+0/T+1)

o India already operates a T+1 settlement cycle for equity markets (i.e., trade date + 1
working day) but regulatory discussions and pilot schemes are pushing toward shorter
cycles (even T+0) for selected securities.
o Implication: This will reduce liquidity and settlement risk, but also requires upgraded
technology and margin/collateral infrastructure.

3. Regulatory reforms by the Securities and Exchange Board of India (SEBI) to ease
compliance & digitise
o SEBI’s June 2025 Board meeting approved several reforms: e.g., dematerialisation
requirements extended to more stakeholders (promoters, large investors, key management)
before IPOs.
o Simplification of Qualified Institutional Placement (QIP) disclosure processes.

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 o These reforms affect how securities are bought/sold in the primary market (issuance) which
indirectly affects secondary market liquidity and trading.
o Implication: Cleaner, more transparent onboarding of securities and investors; reduces
friction.

4. Algorithmic trading / retail investor participation regulation

o SEBI introduced a framework for retail investor participation in algorithmic trading
(effective August 1, 2025) to bring transparency, regulate “algo platforms”, and ensure
risks are controlled.
o Implication: As more orders become automated, the matching and execution process may
speed up, but oversight becomes more important.

5. Flexibility in selling of converted securities / OFS (Offer for Sale)

o SEBI allowed shares arising from conversion of instruments (like debentures, preference
shares) to be eligible for OFS after one year of holding. This expands avenues for holders
to sell via market rather than being locked up.
o Implication: More supply in the market which may affect price discovery, increased
liquidity for certain securities, and more options for investors to sell.

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