So, PRAGATI PUBLIC SCHOOL ( Ny; © SUBJECT: FINANCIAL MARKETS MANAGEMENT (805) amet’ CLASS XII IMPORTANT QUESTIONS 1. Write the advantages of SBTS? Ans: It electronically matches orders on a strict price/ time priority and hence cuts down on time, cost and risk of error, as well as on fraud resulting in improved operational efficiency. J It allows faster incorporation of price sensitive information into prevailing prices, thus increasing the informational efficiency of markets. i It enables market participants, irrespective of their geographical locations, to trade with one another simultaneously, improving the depth and liquidity of the market. lt provides full anonymity by accepting orders, big or small, from members without revealing their identity, thus providing equal access to everybody. 2 It also provides perfect audit trail, which helps to resolve disputes by logging in the trade execution process in entirely. PG-40 2. Explain the all market phases. ‘Ans: Market Phases: The trading system is normally made available for trading on all days except Saturdays, Sundays and other holidays. Holidays are declared by the Exchange from time to time. A trading day typically consists of number discrete stages as below: (a) Opening : The trading member can carry out the following activities after login to the NEAT system and before the market opens for trading: + Set up Market Watch (the securities which the user would like to view on the screen) « View Inquiry screens At the point of time when the market is opening for trading, the trading member cannot login to the system. A message ‘Market status is changing’. Cannot logan for sometime’ is displayed. If the member is already logged in, he cannot perform trading activities tll market is opened. (b) Pre-open: The pre-open session is for duration of 15 minutes i.e. from 9:00 am to 9:15 am. The pre- open session is comprised of Order collection period and order matching period. The order collection period of 8* minutes shall be provided for order entry, modification and cancellation. (* - System driven random closure between 7th and &th minute). During this period orders can be entered, modified and cancelled. (c] Normal Market Open Phase: The open period indicates the commencement of trading activity. To signify the start of trading, a message Is sent to all the trader workstations. The market open time for different markets is notified by the Exchange to the all the trading members. Order entry is allowed when all the securities have been opened. During this phase, orders are matched on a continuous basis. Trading in all the instruments is allowed unless they are specifically prohibited by the Exchange. The activities that are allowed at this stage are Inquiry, order Entry, order Modification, Order Cancellation (including quick order cancellation), Order Matching and Trade Cancellation. (d) Market Close: When the market closes, trading in all instruments for that market comes to an end. A message to his effect is sent to all trading members. No further orders are accepted, but the user is permitted to perform activities like inquiries and trade cancellation. (e) Post-Close Market: This closing session is available only in Normal Market Segment. Its timings are from 3.40 PM to 4.00 PM. Only market price orders are allowed. Special Terms, Stop Loss and Disclosed Quantity Orders, Index Orders are not allowed. The trades are considered as Normal Market trades. Securities not traded in the normal market cession are not allowed to participate in the Closing Session,(f) SURCON: Surveillance and Control (SURCON) is that period after market close during which, the users have inquiry access only. After the end SURCON period, the system processes the data for making the system available for the next trading day. When the system starts processing data, the interactive connection with the NEAT system Is lost and the message to that effect is displayed at the trader Workstation.PG 44-46 3. Explain corporate hierarchy? Explain corporate hierarchy in terms of trading system? Ans: The trading member has the facility of defining a hierarchy amongst its users of the NEAT system. Corporate Manager Branch 1 Branch 2 Dealer 11 Dealer12 Dealer21. Dealer 22 (i) Corporate Manager: The corporate manager is a term assigned to a user placed at the highest level in a trading firm. Such a user receives the end of-day reports for all branches of the trading member. The facility to set branch order value limits and user order value limits is available to the corporate manager. The corporate manager also has facility to set symbol wise user order quantity limit. He can view outstanding orders and trades of all users of the trading member and can also cancel/modify outstanding orders of all users of the trading member. (ii) Branch Manager: The branch manager is a term assigned to a wer whos placed under the corporate manager. The branch manager receives end-of-day reports for all the dealers under that branch. He can set user order value limit for each of his branch. He can view outstanding orders and trades of all users of his branch and can also cancel/modify outstanding order of all users of his branch. (iil) Dealer: Dealers are users at the lowest level of the hierarchy. A dealer can view and perform order and trade related activities only for him and do not have access to information on other dealers under either the same branch or other branches.PG 43 4, Explain the types of Capital Market system? ‘Ans: 1 Normal Market: It consists of various book types in which orders segregated as Regular Kot orders,special term orders and Stop Loss orders depending upon the order attributes. 2 Auction Market- Auctions are initiated by the exchange on behalf of trading members for settlement related reasons 3 Odd Lot Market-Itis used for the limited Physical Market for the block trades session. 4 Retail Debt Market-RETDEBT market facility on the NEAT system of capital market segment is used for transaction in Retails Debt market session . It takes place in the same manner as in equities .PG 42 5. Explain order management process? ‘Ans: Order Management consists of entering orders, order modification, order cancellation and order matching. (a) Entering Orders: the Trading member can enter orders in the normal market, odd lot, RETDEBT and auction market. A user can place orders in any of the above mentioned markets by invoking the respective order entry screens. After doing so, the system automatically picks up information from the last invoked screen (e.g. Market Watch/ MBP/ 0O/ SQ and Security List). When the user invokes the order entry screen, the fields that are taken as default are Symbol, Series and Book Type.{(b) Order Modification: All orders can be modified in the system till the time they do not get fully traded and only during market hours. Once an order Is modified, the branch order value limit for the branch gets adjusted automatically. {c) Order Cancellation: Order cancellation functionally can be performed only for orders which have not been fully or partially traded (for the untraded part of partially traded orders only) and only during market hours and in pre-open period. (a) Pre-open Matching Priority: The opening price is determined based on the principle of demand, supply mechanism. The equilibrium price is the price at which the maximum volume is executable. 6. Write in brief about the following NEAT window : i. Outstanding Order, ii. Snap Quote, li.Previous Trade Window , iv. Activity Log v. Message Window? A i, Outstanding Orders: The purpose of Outstanding Orders is to enable the user to view the outstanding orders for a security. An outstanding order is an order that has been entered by the user, but which has not yet been completely traded or cancelled. The user is permitted to see his orders. Ii.Snap Quote: The snap quote feature allows a trading member to get instantaneous market information on any desired security. This is normally used for securities that are not already set in the Market Watch window. The information presented is the same as that of the Marker Watch window. lii.Previous Trade Window: The purpose of the Previous Trades window Is to provide security-wise information to users for own trades. Trades are displayed in a reverse chronological order. First all buy trades are displayed and then sell trades are displayed. A facility is provided to users to view thelr trades for BUY side or SELL side or ALL by selecting the BUY/SELL/ALL filter in primary window. By default, the filter Is on ALL. Once the query is executed with the filter, the trades are displayed with time sorting for the chosen filter option. This functionality only works for self and not for hierarchal Inquiry. iv.Activity Log: The Activity Log (AL) shows all the activities that have been performed on any order belonging to that user. These activities include order modification/cancellation, partial/ful trade, and trade modification/cancellation. It displays information of only those orders in which some activity has taken place. It does not display thase orders on which no activity has taken place. v.Message Window: This enables the user to view messages broadcast by the exchange such as corporate actions, any market news, auctions related information etc. and other messages like order confirmation, arder modification, order cancellation, orders which have resulted in quantity freezes/price freezes and the exchange action on them, trade confirmation, trade cancellation/madification requests and exchange action on them, name and time when the user logs in/logs off from the system, messages specific to the trading member These messages appear as and when the event takes place in a chronological order.PG-50-59 7. Define Clearing banks and its functions