Order placement and execution are well-defined and regulated process in the Indian market exchanges. The process ensures transparency and fairness in trading and helps to maintain the integrity of the Indian financial markets. Here’s a step-by-step guide to understanding how orders are placed and executed in Indian market exchanges:
In India, orders for buying and selling stocks, commodities, and other financial instruments are placed and executed through various exchanges, such as the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
Table of Contents
Order placement
The first step to executing a trade is placing an order. An order can be placed by an investor through a broker or through an online trading platform provided by the broker. Orders can be placed for buying or selling a particular stock or commodity at a specific price or at the market price.
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Order Matching
Once an order is placed, it is sent to the exchange’s order matching system. The order matching system matches the buy and sell orders based on the price, time, and quantity of the order. If a buy order matches a sell order, a trade is executed.
Execution of Trade for order placement
The trade is executed at the prevailing market price or the price specified in the order, whichever is lower in the case of a buy order and higher in the case of a sell order. The exchange’s trading system sends a confirmation of the trade to the broker and the investor.
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Settlement
Settlement is the process of transferring ownership of the securities and funds between the buyer and the seller. In India, the settlement process takes place on the T+2 (transaction day plus two business days) basis, which means that the settlement is completed two business days after the trade is executed.
Clearing
The clearing process involves the determination of the obligations of the buyer and the seller, the calculation of the net position, and the transfer of securities and funds between the clearing members. Clearing ensures that the obligations of all parties are met.
Custody
The custodian holds the securities on behalf of the investor in a dematerialized (demat) form. The demat account of the investor is credited or debited based on the trades executed.
All these steps happen automatically when you place orders through your broker terminal. No intervention is required at any stage. The above 6-step processes ensure safe, sure and successful order placement and execution of the orders in the exchanges.
