NSE stands for National stock exchange and BSE stands for Bombay stock exchange. Mainly two exchanges in India regulated under SEBI(Security Exchange Board of India)

1. SEBI –Securities Exchange Board of India
SEBI is the designated regulatory body for the finance and investment markets in India. The SEBI was established
in 1988 but was only given regulatory powers on April 12, 1992, through the Securities and Exchange Board of
India Act, 1992. It plays a key role in ensuring the stability of the financial markets in India, by attracting foreign
investors and protecting Indian investors.Its headquarters is located at the Bandra Kurla Complex Business District
found in Mumbai. It also has northern, eastern, southern and western regional offices.
Functions and Responsibilities
 Its Preamble states that SEBI must "protect the interests of investors in securities and to promote the
development and regulate the securities market.
 SEBI must be responsive and proactive to the needs and interest of the groups that constitute India's
financial and investment markets: the investors, the market intermediaries and the issuers of securities.
 SEBI is allowed to approve by-laws of stock exchanges.
 It is its job to require the stock exchange to follow its by-laws.
 SEBI's role covers compelling particular companies to list their shares in stock exchanges.
 Aside from these, SEBI is tasked to manage the registration of brokers.
Bombay Stock Exchange (BSE)
The first and largest securities market in India, the Bombay Stock Exchange (BSE) was established in 1875 as the
Native Share and Stock Brokers' Association based in Mumbai, India, the BSE lists close to 6,000 companies. In
1995 the BSE switched from an open-floor to an electronic trading system. Securities listed by the BSE include
stocks, stock futures, stock options, index futures, index options and weekly options. The BSE's overall performance
is measured by the Sensex, an index of 30 of the BSE's largest stocks covering 12 sectors.
What is Sensex
 Sensex, otherwise known as the S&P BSE Sensex index, is the benchmark index of the Bombay Stock
Exchange (BSE). It is composed of 30 of the largest and most actively-traded stocks on the BSE.
 The Sensex experienced enormous growth in the first decade of the 21st century, rising from a close of
3,377.28 in 2002 to one of 20,286.99 in 2007. According to IMF estimates, India's GDP grew at an average
annual rate of 8.01% between 2002and2007.
GDP growth in 2016 is expected to be over 7%, significantly higher than the projected growth rates of 2-
2.5% in the U.S. and1-2% in Japan and Europe.
National Stock Exchange Of India Limited - NSE
The National Stock Exchange Of India Limited (NSE) is India's largest financial market. Established in 1992, and
started trading in 1994. The NSE conducts transactions in the wholesale debt, equity and derivative markets.
Settlement Cycle and Trading Hours
Equity spot markets followa T+2 rolling settlement.This means that any trade taking place on Monday, gets settled by
Wednesday.
All trading on stockexchanges takes place between 9:55 am and3:30 pm, Monday through Friday. Delivery of shares
must be made in dematerialized form, and each exchange has its own clearing house,which assumes allsettlement risk,by
serving as a central counterparty.
Trading Mechanism
Trading at both the exchanges takes place through an open electronic limit order book, in which order matching is
done by the trading computer. There are no specialists and the entire process is order-driven, which means
that market orders placed by investors are automatically matched with the best limit orders.

2. As a result, buyers and sellers remain anonymous. The advantage of an order driven market is that it brings
more transparency, by displaying all buy and sell orders in the trading system. However, in the absence of market
makers, there is no guarantee that orders will be executed. All orders in the trading system need to be placed
through brokers, many of which provide online trading facility to retail customers.
Market Indexes
NSE index is the S&P CNX Nifty; it includes 50 shares listed on the NSE, which represent about 62% of its free-
float market capitalization. It was created in 1996 and provides time series data from July 1990, onward.
Admission procedure for new membership
Who Can Invest In India?
India started permitting outside investments only in the 1990s. Foreign investments are classified into two
categories: foreign direct investment (FDI) and foreign portfolio investment (FPI). All investments in which an
investor takes part in the day-to-day management and operations of the company, are treated as FDI, whereas
investments in shares without any control over management and operations, are treated as FPI.

3. For making portfolio investment in India, one should be registered either as a foreign institutional investor (FII) or
as one of the sub-accounts of one of the registered FIIs. Both registrations are granted by the market regulator,
SEBI. Foreign institutional investors mainly consist of mutual funds, pension funds, endowments, sovereign wealth
funds, insurance companies, banks, asset management companies etc. At present, India does not allow foreign
individuals to invest directly into its stock market.
Market segments
The exchange (NSE) provides trading in four different segments as depicted in fig. below.
Future and option segment
The Futures and Options segment of NSE witnessed huge increase in volumes during 2009-10 and continued to
achieve a commendable place on the international front. In the year 2009 NSE ranked as the seventh largest
derivatives exchange in the world1, the second largest exchange in single stock futures and stock indexoptions and
the third largest in the stock index futures category.
The derivatives trading at NSE commenced on June 12, 2000 with futures trading on S&P CNX Nifty Index.
Subsequently, the product base has been increased to include trading in options on S&P CNX Nifty Index, futures
and options on CNX IT, Bank Nifty Nifty Midcap 50 Indices and 190 single stocks as of March 2010.
What is a Derivative
A derivative is a security with a price that is dependent upon or derived from one or more underlying assets. The
derivative itself is a contract between two or more parties based upon the asset or assets. Its value is determined by
fluctuations in the underlying asset. The most common underlying assets
include stocks, bonds, commodities, currencies, interest rates and market indexes.
Common Forms of 'Derivative'
Futures contracts are one of the most common types of derivatives. A futures contract (or simply futures,
colloquially) is an agreement between two parties for the sale of an asset at an agreed upon price. One would
generally use a futures contract to hedge against risk during a particular period of time.
For example, suppose that on July 31, 2014 Diana owned ten thousand shares of Wal-Mart (WMT) stock, which
were then valued at $73.58 per share. Fearing that the value of her shares would decline, Diana decided that she
wanted to arrange a futures contract to protect the value of her stock. Jerry, a speculator predicting a rise in the value
of Wal-Mart stock, agrees to a futures contract with Diana, dictating that in one year’s time Jerry will buy Diana’s
ten thousand Wal-Mart shares at their current value of $73.58.
Market segments
Wholesale
debt Market
Capital Market Future and
options Segment
Currency derivative
segments

4. Trading Mechanism
The derivatives trading system at NSE is called NEAT-F&O trading system. It provides a fully automated screen-
based trading for all kind of derivative products available on NSE on a nationwide basis.
It supports an anonymous order driven market, which operates on a strict price/time priority. Various time and price
related conditions like Immediate or Cancel, Limit/Market Price, Stop Loss, etc. can be built into an order. Trading
in derivatives is essentially similar to that of trading of securities in the CM segment.
The NEAT-F&O trading system distinctly identifies two groups of users. The trading user more popularly known as
trading member has access to functions such as, order entry, order matching and order & trade management.
The clearing user (clearing member) uses the trader workstation for the purpose of monitoring the trading
member(s) for whom he clears the trades. Additionally, he can enter and set limits on positions, which a trading
member can take.
Eligibility criteria for membership individual/ partnership firms

5. Trading value and contract traded
The total turnover on the F&O Segment increased by 60.43 % to ` 17,663,665 crore (US $ 3,913,085 million) during
2009-10 as compared with ` 11,010,482 crore (US $ 2,161,037 million) during2008-09. The average daily turnover
during 2009-10 was ` 72,392 crore (US $ 16,037 million). The business growth of F&O segment and the number of
contracts traded during the year is presented in table.
Contract Specification