The Hindu Business Line : Matchmaking

If no match is found, the orders are stored in various `books' in price-time priority in the following sequence: Best Price, if two orders having the same price are entered, the order that is entered first gets the higher priority. The equities segment has three main types of books:

The negotiated trade book, the stop-loss book, and the regular lot book.

The negotiated trade book contains orders that specify the counter-party with whom orders for a specified number of shares are to be matched at a specified price. These entries are only matched with the order placed by the specified counter-party.

When the trigger price is reached or surpassed, the order is transferred from the stop-loss book to the regular lot book. A sell order in the stop-loss book gets triggered when the last traded price in the normal market reaches or falls below the trigger price of the order.

A buy order in it gets triggered when the last traded price in the normal market reaches or exceeds the trigger price of the order.

The regular lot book contains orders that do not have conditions attached to them.

The best buy order, the one with the highest price, is matched with the best sell order, the one with the lowest price.

In other words, the system views buy orders from the point of view of a seller.

Similarly, sell orders are viewed from the point of view of buyers. An order may match partially with another, resulting in multiple trades.

Members can enter proactive orders in the system, which remain on the books till the full quantity is matched by one or more counter-orders.

Alternatively, members can place reactive orders for matching with existing orders.

A trading member can enter three types of orders depending upon his/her requirements — those with time-, price- and quantity-related conditions.

Time conditions

Day: A day order is valid only for the day on which it is entered.

GTD: A Good Till Date (GTD) order specifies a date up to which the order should stay in the system.

GTC: A Good Till Cancelled (GTC) order remains in the system until it is cancelled by the trading member. The maximum number of days it can remain in the system is notified by the NSE from time to time.

IOC: If an Immediate or Cancel (IOC) order does not find an immediate match, it is removed from the market. Though partial matching is permissible, the unmatched portion of the order is cancelled immediately.

Quantity Conditions Disclosed Quantity (DQ): An order with a DQ condition allows the trading member to disclose only a part of the order quantity to the market. For example, an order of 1000 with a disclosed quantity condition of 200 will mean that 200 is displayed to the market at a time. After this is traded, another 200 is automatically released and so on till the full order is executed. The exchange may set a minimum disclosed quantity criteria from time to time.

Further details about matchmaking are available on the NSE web site. Details of match-making on the BSE are available at its Investor Service Centres.

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