MBA (Finance) – IV Semester, Investment and Portfolio Management, Unit 1.4
National Stock Exchange of India (NSE)
With the liberalisation of the Indian economy during the 1990s, it was inevitable that the Indian stock market trading system be raised to the level of international standards.
National Stock Exchange of India (NSE)
With the liberalisation of the Indian economy during the 1990s, it
was inevitable that the Indian stock market trading system be raised to the
level of international standards. The high powered committee on stock exchanges
known as Pherwani Committee recommended, in 1991, the setting up of a new stock
exchange as a model exchange and to function as a national stock exchange. It
was envisaged that the new exchange should be completely automated in terms of
both trading and settlement procedures.
On the basis of the recommendations of the Pherwani committee, a
new stock exchange was promoted by the premier financial institutions of the
country, namely 1DB!, ICICI, IFCI, all insurance corporations, selected
commercial banks and others. The new exchange was incorporated in 1992 as the
National Stock Exchange (NSE). It started functioning in June 1994.
The purpose of setting up the new exchange was to create a
world-class exchange and use it as an instrument of change in the Indian stock
market through competitive pressure. Technology has been the backbone of NSE.
It chose to harness technology in creating a new market design. Its trading
system, called National Exchange for Automated Trading (NEAT), is a
state-of-the-art client-server based application. The NSE also uses satellite
communication technology for trading. Its trading system has shifted the
trading platform from the trading hall in the premises of the exchange to the
computer terminals at the premises of the trading members located at different
geographical locations in the country. It has been instrumental in bringing
about many changes in the trading system such as reduction of settlement cycle,
dematerialisation and electronic transfer of securities, establishment of
clearing corporations, professionalisation of trading members, etc.
All the stock exchanges in the country, starting with the Bombay
Stock Exchange, have shifted to the new computerised trading system which
facilitates screen-based trading. As a consequence, the stock market today uses
the state-of-the-art information technology tools to provide an efficient and
transparent trading, clearing and settlement mechanism at par with
international standards. The National Stock Exchange has played a leading role
as a change agent in transforming the Indian stock market to its present form.
Since its inception, the NSE has been playing the role of a catalytic agent in
reforming the stock market and evolving the best market practices. The NSE has
brought about unparalleled transparency, speed and efficiency, safety and
market integrity. In this process the NSE has become the largest stock exchange
in the country, relegating the Bombay Stock Exchange to the second place.
