Order and Trade Management in stock exchange

Using the Screen Based Trading System (SBTS), an Investor enters a trade in the computer system. Depending on the type or order the order gets stacked in the corresponding Order book. If a perfect match is found the order gets executed which results in a trade. Let’s understand the entire process after Order placement.

Order Modification

  • All orders can be modified in the system until 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.
  • Order modification is rejected if it results in a price freeze, message displayed is ‘CFO request reject’.

Order Cancellation

Order cancellation functionality 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 a pre-open period.

Order Matching

The buy he and sell orders are matched on Book type, Symbol, Quantity and Price.

Matching Priority:

The best sell order is the order with the lowest price and the best buy order is the order with the highest price. The unmatched orders are queued in the system by the following priority:

a) By Price:

A buy order with a higher price gets a higher priority and similarly, a sell order with a lower price gets a higher priority.

E.g. consider the following buy orders:

1)100 shares @ Rs. 35 at time 10:30 a.m.

2) 500 shares @ Rs. 35.05 at time 10:43 a.m.

     The second order price is greater than the first order price and therefore is the best buy order.

b) By Time:

If there is more than one order at the same price, the order entered earlier gets a higher priority.

    E.g. Consider the following sell orders:

1) 200 shares @ Rs. 72.75 at time 10:30 a.m.

2)300 shares @ Rs. 72.75 at time 10:35 a.m.

       Both orders have the same price but they were entered in the system at different time. The first order was entered before the second order and therefore is the best sell order.

  • As and when valid orders are entered or received by the system, they are first numbered, time-stamped and then scanned for a potential match.
  • This means that each order has a distinctive order number and a unique time stamp on it.
  • If a match is not found, then the orders are stored in the books as per the price/time priority
  • An active buy order matches with the best passive sell order if the price of the passive sell order is less than or equal to the price of the active buy order.
  • Similarly, an active sell order matches with the best passive buy order if the price of the passive buy order is greater than or equal to the price of the active sell order.

Trade Management

  • A trade is an activity in which a buy and a sell order match with each other.
  • Matching of two orders is done automatically by the system. Whenever a trade takes place, the system sends a trade confirmation to each of the users involved in the trade.
  • The trade confirmation slip gets printed at the work station of the user with a unique trade number.
  • The system also broadcasts a message to the entire market through the ticker window displaying the details of the trade.

Trade Verification

  • Trade details are available for verification on the same day (i.e. T-day itself) after 19:00 hrs.
  • As well as trade details of all trades for last 5 trading days are available on the website of Exchanges.
  • The investor needs to put client code, security details, order number, trade number, trade quantity and price to verify the trade.
  • If the match is not found, investors are advised to contact their trading member for verification.
  • The trader can use trade cancellation screen for canceling trades done during the day.
  • The trade cancellation request is sent to the Exchange for approval and message to that effect is displayed in the message window.
  • The counter-party to the trade also receives the message.
  • Once both the parties to trade send the trade cancellation request, the exchange either approves it or rejects it.

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