The trading on stock exchanges in India utilized to happen through open outcry without usage of infotech for instant matching or recording of trades. This was time consuming and ineffective. This enforced limitations on trading volumes and performance. In order to supply efficiency, liquidity and transparency, NSE presented a nation-wide on-line fully automated screen based trading system where a member can punch into the computer system amounts of securities and the costs at which he likes to transact and the deal is executed as quickly as it finds a matching sale or purchase order from a counter party.
Screen based electronic system electronically matches orders on a strict price/time priority and hence minimizes time, expense and danger of mistake, along with on fraud leading to enhanced functional effectiveness. It permits faster incorporation of cost delicate information into prevailing prices, therefore increasing the informative efficiency of markets.
It makes it possible for market participants, regardless of their geographical locations, to trade with one another synchronised, improving the depth and liquidity of the market.
It supplies complete privacy by accepting orders, big or little, from members without exposing their identity, therefore providing equal access to everybody. It likewise supplies a perfect audit trial, which assists to fix disputes by logging in the trade execution procedure whole. The drawn liquidity from other exchanges and in the really first year of its operation, NSE became the leading stock exchange in the nation, impacting the fortunes of other exchanges and forcing them to embrace SBTS also.
Today India can boast that almost 100% trading take place through electronic order matching. In order to promote dematerialization of securities, NSE joined hands with leading financial institutions to establish the national securities depository Ltd. (NSDL), the first depository in the country, with the objective of enhancing the efficiency in settlement systems as also to reduce the menace of fake/forged and stolen securities. This has ushered in an era of dematerialised trading and settlement. SEBI has made dematerialised settlement mandatory in an ever -increasing number of securities in a phased manner, thus bringing about an increase in the proportion of shares delivered in dematerialised form. There is an increasing preference to settle trades, particularly in high value securities, in demat form. Such high level of demat settlement reassures success of rolling settlement.
In India , a demat account, the abbreviation for dematerialised account, is a type of banking account which dematerializes paper-based physical stock shares. Conversion of Securities from Physical (Paper) Mode into Electronic Mode is Called Dematerialisation. The Client opens Demat Account with any DP. Upon Demat, the Certificates are destroyed and credit entry of exactly equal number of Securities is created in Depository in Electronic mode. The B.O. account of holder is credited and the securities loose their identities. The dematerialised account is used to avoid holding physical shares: the shares are bought and sold through a stock broker. This account is popular in India.
The market regulator, securities and exchange board of India (SEBI) mandates a demat account for share trading above 500 shares. As of April 2006, it became mandatory that any person holding a demat account should possess a permanent account number (PAN), and the deadline for submission of PAN details to the depository lapsed on January 2007. Dematerialisation is the process by which physical certificates of an investor are converted to an equivalent number of securities in electronic form and credited in the investor’s account with its DP. In order to dematerialize certificates; an investor will have to first open an account with a DP and then request for the dematerialisation of certificates by filling up a dematerialisation request form [DRF], which is available with the DP and submitting the same along with the physical certificates. The investor has to ensure that before the certificates are handed over to the DP for demat, they are defaced by marking “Surrendered for Dematerialisation” on the face of the certificates.
A demat account are opened on the same lines as that of a Bank Account. Prescribed Account opening forms are available with the DP, needs to be filled in. Standard Agreements are to be signed by the Client and the DP, which details the rights and obligations of both parties