Friday, February 22, 2013

Excellent Trading School - 6 - Entities and Conditions in Trading system


Trading members: Trading members are members of NSE. They can trade either on their own account or on behalf of their clients including participants. The exchange assigns a trading member ID to each trading member. Each trading member can have more than one user. The number of users allowed for each trading member is notified by the exchange from time to time. Each user of a trading member must be registered with the exchange and is assigned an unique user ID. The unique trading member ID functions as a reference for all orders/trades of different users. This ID is common for all users of a particular trading member. It is the responsibility of the trading member to maintain adequate control over persons having access to the firm’s User IDs.

Clearing members: Clearing members are members of NSCCL. They carry out risk management activities and confirmation/inquiry of trades through the trading system.

Professional clearing members: A professional clearing member is a clearing member who is not a trading member. Typically, banks and custodians become professional clearing members and clear and settle for their trading members.

Participants: A participant is a client of trading members like financial institutions. These clients may trade through multiple trading members but settle through a single clearing member.
  
Order types and conditions
The system allows the trading members to enter orders with various conditions attached to them as per their requirements. These conditions are broadly divided into the following categories:
• Time conditions
• Price conditions
• Other conditions

• Time conditions
- Day order: A day order, as the name suggests is an order, which is valid for the day on which it is entered. If the order is not executed during the day, the system cancels the order automatically at the end of the day.

- Immediate or Cancel (IOC): An IOC order allows the user to buy or sell a contract as soon as the order is released into the system, failing which the order is cancelled from the system. Partial match is possible for the order, and the unmatched portion of the order is cancelled immediately.

• Price condition
- Stop-loss: This facility allows the user to release an order into the system, after the market price of the security reaches or crosses a threshold price e.g. if for stop-loss buy order, the trigger is 1027.00, the limit price is 1030.00 and the market (last traded) price is 1023.00, then this order is released into the system once the market price reaches or exceeds 1027.00.

This order is added to the regular lot book with time of triggering as the time stamp, as a limit order of 1030.00. For the stop-loss sell order, the trigger price has to be greater than the limit price.

• Other conditions
- Market price: Market orders are orders for which no price is specified at the time the order is entered (i.e. price is market price). For such orders, the system determines the price.
- Trigger price: Price at which an order gets triggered from the stop-loss book.
- Limit price: Price of the orders after triggering from stop-loss book.
- Pro: Pro means that the orders are entered on the trading member’s own account.
- Cli: Cli means that the trading member enters the orders on behalf of a client.
  
The Trader Workstation - The Market Watch Window
The following windows are displayed on the trader workstation screen:
• Title bar
• Ticker window of futures and options market
• Ticker window of underlying (capital) market
• Toolbar
• Market watch window
• Inquiry window
• Snap quote
• Order/trade window
• System message window

The market watch window and the Inquiry window.
The market watch window is the third window from the top of the screen, which is always visible to the user. The purpose of market watch is to allow continuous monitoring of contracts or securities that are of specific interest to the user. It displays trading information for contracts selected by the user. The user also gets a broadcast of all the cash market securities on the screen. This function also will be available if the user selects the relevant securities for display on the market watch screen. Display of trading information related to cash market securities will be on “Read only” format, i.e. the dealer can only view the information on cash market but cannot trade in them through the system. This is the main window from the trader’s perspective.
  
Inquiry window
The inquiry window enables the user to view information such as Market by Price (MBP), Previous Trades (PT), Outstanding Orders (OO), Activity log (AL), Snap Quote (SQ), Order Status (OS), Market Movement (MM), Market Inquiry (MI), Net Position, On line backup, Multiple index inquiry, Most active security and so on. All information for the selected contract/ security can be viewed. We shall look in detail at the Market by Price (MBP) and the Market Inquiry (MI) screens.

Market by price (MBP): The purpose of the MBP is to enable the user to view passive orders in the market aggregated at each price and are displayed in order of best prices. The window can be invoked by pressing the [F6] key. If a particular contract or security is selected, the details of the selected contract or security can be seen on this screen.

Market inquiry (MI): The market inquiry screen can be invoked by using the [F11] key. If a particular contract or security is selected, the details of the selected contract or selected security defaults in the selection screen or else the current position in the market watch defaults.

 The first line of the screen gives the Instrument type, symbol, expiry, contract status, total traded quantity, lifetime high and lifetime low. 

The second line displays the closing price, open price, high price, low price, last traded price and indicator for net change from closing price. 

The third line displays the last traded quantity, last traded time and the last traded date.

 The fourth line displays the closing open interest, the opening open interest, day high open interest, day low open interest, current open interest, life time high open interest, life time low open interest and net change from closing open interest. 

The fifth line display very important information, namely the carrying cost in percentage terms.
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