Indian securities market — structure
In this chapter: Primary vs secondary market · Exchanges, depositories, custodians, clearing corps
The Indian securities market has two primary exchanges (NSE, BSE), two depositories (NSDL, CDSL), and clearing corporations (NSE Clearing/NCL, ICCL for BSE, MCX-CCL for commodities). The primary market is where issuers raise fresh capital (IPOs, FPOs, rights issues). The secondary market is where existing securities trade between investors.
Each role: Exchanges match orders. Clearing corporations net trades and act as central counterparty (assuming counterparty risk via novation). Depositories hold securities in dematerialised form. Custodians hold securities and cash on behalf of FIIs and large institutions, separate from broker custody. Brokers are the agents that interface between investors and the system. Sub-brokers (now Authorised Persons under SEBI 2018) act under broker registration. The system is held together by SEBI registration and NSE/BSE byelaws.
A 2023-25 evolution: T+1 settlement for equity (rolled out fully by 2024) and the move toward T+0 for selected stocks. T+1 means trades on Monday settle Tuesday — funds and shares are exchanged within 24 hours. T+0 (same-day settlement) is now optional for select 25-50 stocks. Operations staff must understand the impact: faster settlement reduces credit risk but compresses operational windows for reconciliation.