Online Trading Mechanism

What is BOLT?

• Bombay Stock Exchange's trading system is popularly known as BOLT (BSE's Online Trading System). The BSE has deployed an Online Trading system (BOLT) on March 14, 1995
• BOLT has a two-tier architecture. The trader workstations are connected directly to the backend server, which acts as a communication server and a Central Trading Engine (CTE).
• Other services like information dissemination, index computation, and position monitoring are also provided by the system.
• Access to market related information through the trader workstations is essential for the market participants to act on real-time basis and take immediate decisions
• BOLT has been interfaced with various information vendors like Bloomberg, Bridge, and Reuters. Market information is fed to news agencies in real time
• It makes the trade efficient, transparent and time saving.

NSE Trading System

NSE provides its customers with a fully automated screen based trading system known as NEAT system, in which a member can punch into the computer quantities of securities and the prices at which he likes to transact and the transaction is executed as soon as it finds a matching sale or buy order from a counter party. It electronically matches orders on a price/time priority and hence cuts down on time, cost and risk of error, as well as on fraud, resulting in improved operational efficiency. It allows faster incorporation of price sensitive information into prevailing prices, thus increasing the informational efficiency of markets.

The stocks are hold in a demutualised format helping in fast, transparent and efficient preservation and transactions.

• The erstwhile settlement system on Indian stock exchanges was also inefficient and increased risk, due to the time that elapsed before trades were settled. The transfer was by physical movement of papers. There had to be a physical delivery of securities -a process fraught with delays and resultant risks. The second aspect of the settlement relates to transfer of shares in favour of the purchaser by the company. The system of transfer of ownership was grossly inefficient as every transfer involves physical movement of paper securities to the issuer for registration, with the change of ownership being evidenced by an endorsement on the security certificate. In many cases the process of transfer would take much longer than the two months stipulated in the Companies Act, and a significant proportion of transactions would end up as bad delivery due to faulty compliance of paper work. Theft, forgery, mutilation of certificates and other irregularities were rampant. In addition, the issuer has the right to refuse the transfer of a security. All this added to costs and delays in settlement, restricted liquidity and made investor grievance redressal time consuming and, at times, intractable.
• To obviate these problems, the Depositories Act, 1996 was passed. It provides for the establishment of depositories in securities with the objective of ensuring free transferability of securities with speed, accuracy and security. It does so by (a) making securities of public limited companies freely transferable, subject to certain exceptions; (b) dematerializing the securities in the depository mode; and (c) providing for maintenance of ownership records in a book entry form. In order to streamline both the stages of settlement process, the Act envisages transfer ownership of securities electronically by book entry without making the securities move from person to person. The Act has made the securities of all public limited companies freely transferable, restricting the company's right to use discretion in effecting the transfer of securities, and the transfer deed and other procedural requirements under the Companies Act have been dispensed with. Two depositories, viz., NSDL and CDSL, have come up to provide instantaneous electronic transfer of securities
• In any stock exchange, trades or transactions have to be settled by either squaring up the carrying forward positions or settling by payment of net cash or net delivery of securities. This account settlement period, if it is long leads to several price distortions and allows for market manipulation. It increases the chances of speculation resulting in volatility, which hurts the small investors. With the application of IT in the securities market - screen-based trading and trading through the Internet - it has been possible to reduce this settlement period