The National Stock Exchange of India Limited (NSE) was incorporated in November 1992 by IDBI and other All-India Financial Institutions and became recognised stock exchange with effect from April 26, 1993 to provide nationwide stock trading facilities. The NSE has a fully automated screen-based trading system. It operates on the principles of an order-driven market. It was a part of the financial market sector reforms being undertaken in the economy. To identify the lacunae of the Indian stock market and to investigate what was wrong with the current system, a committee was constituted under the chairmanship of Sh. M. J. Pherwani, who mooted the idea of a National Stock Exchange. The basic idea of setting up of NSE was to facilitate computerised trading in debt market instruments. It provides a nationaly-integrated stock market system, facilitating an easy flow of transactions and resources on a cost-effective manner.
Promoters of NSE:
Following financial institutions were the promoters of National Stock Exchange :
- Industrial Development Bank of India(IDBI).
- Industrial Finance Corporation of India(IFCI).
- Industrial credit and Investment corporation of India(ICICI).
- Life Insurance Corporation of India(LIC).
- General Insurance Corporation of India(GIC).
- SBI Capital Markets Limited.
- Stock Holding Corporation of India Limited.
- Infrastructure Leasing and Financial services Limited.
Market Segments of NSE:
The NSE was intended to establish a viable and vibrant debt market which was in an under developed stage. Now, it provides the traditional retail market for securities and also operates a Wholesale Debt Market (which may be termed as money market segment). The NSE consists of three mutually exclusive segments :
- Wholesale debt market segment, started operations in June 1994.
- Capital market segment, started operations in November 1994, and
- Derivatives (Futures and Options) Trading, started operations in June 2000.
The Wholesale Debt Market segment of the NSE is a facility for institutions including subsidiaries of banks engaged in financial services and corporate bodies including companies to enter into high value transactions in instruments such as Public Sector Undertakings (PSUs) bonds, Treasury Bills (T-BilIs), Governments Securities, Units of UTI, Commercial Papers (CPs), Certificate of Deposits (CDs), Floating yields bonds, etc. Members on the Wholesale Debt Market segment can trade on their own behalf and on behalf of their clients. NSE trading system facilitates making of two ways quotes in a highly flexible manner.
The Capital Market segment covers trading in equities and retail trade in convertible or non-convertible debentures and hybrids. This particular segment comprises the securities of medium and large companies with nation-wide investors base. These will also include securities which are being traded on their stock exchanges. By virtue of equal access nationwide, such securities can be traded at the same price from any part of the country. This provides good trading and investment opportunities, increases the volume of the trade and increases the liquidity considerably.
Besides the capital market segment, the NSE also provide opportunity to the investors to deal in the derivative products, i.e., futures and options. At present, NSE provides facility to trade in Nifty Futures, Nifty Options, Individual Stock Options and Individual Stock Futures.