The BSE (Bombay stock exchange) and NSE (national stock exchange) could soon face international competition in their backyard. NASDAQ, One of the leading exchanges In U.S., Is planning to enter The Indian equity Exchange space by integrating the networks of regional the stock exchange in the country.
According to sources, NASDAQ has recently made presentation to five regional stock exchanges. Ahmedabad, Bangalore, Kochi, Chennai and Vadodara- For setting up a national level equity exchange.
NASDAQ, which operates through the ‘quote driven trading system’, is planning to introduce the same trading system in the country by integrating RSE’s. Under this system, Market makers are obliged to give too way quotes to the system.
As against this , the country’s premier bourses- NSE and BSE- Have an order driven system that Accept bids and orders From buyers and sellers. In greetings all bids and order in the order book on the price time priority basis.
So, what is the fundamental difference between both systems? Markets work on a simple premise. If you intend to sell a stock, there will be a buyer. What happens when there are no buyers?
To get around the problem, the stock exchange’s like NASDAQ employ market makers. Then there are no buyers for a stock, the market makers step in and compete among themselves to buy the stock. It works the other way around too. If there are no Sellers For a stock and demand is rising, market makers sell the stock from their own reserves.
Market makers make a profit by maintaining a deference at which they buy and sell their stocks. This, in exchange lingo, is called buy-ask spread. Of course, the risk of taking Losses is a very real one. To get around that, these players employ fairly complex hedging Options that attempts to insulate them from the attendant risk. Sources Said entry Through RSE’c Is the only option left with NASDAQ as both N.S.E. And BSE have other exchanges as investors.