National Stock Exchange

Context:

• In recent past the former executives of NSE are in news due to allegations of various malpractices.

About:

• National Stock Exchange of India Limited (NSE) is the leading stock exchange of India, located in Mumbai, Maharashtra.
• It is world’s largest derivatives exchange in 2021 by number of contracts traded based on the statistics maintained by Futures Industry Association (FIA), a derivatives trade body.
• NSE is ranked 4th in the world in cash equities by number of trades as per the statistics maintained by the World Federation of Exchanges (WFE) for the calendar year 2021.
• It is under the ownership of some leading financial institutions, banks, and insurance companies

Background:

• National Stock Exchange was incorporated in the year 1992 to bring about transparency in the Indian equity markets.
• Instead of trading memberships being confined to a group of brokers, NSE ensured that anyone who was qualified, experienced, and met the minimum financial requirements was allowed to trade.
• In this context, NSE was ahead of its time when it separated ownership and management of the exchange under SEBI’s supervision.
• Stock price information that could earlier be accessed only by a handful of people could now be seen by a client in a remote location with the same ease.
• The paper-based settlement was replaced by electronic depository-based accounts and settlement of trades was always done on time.
• One of the most critical changes involved a robust risk management system that was set in place, to ensure that settlement guarantees would protect investors against broker defaults.

Implications of The Malpractices:

• With such issues the credibility of the institute will be lost, this can have serious impact on investments in the country.
• Moreover to improve on the public investment it is the trust that matters, with such trust deficit, the public investments also go down.

Source: THE HINDU

Leave a Comment