I N D E X
Introduction
1. The Negotiated Dealing System
(NDS) is an electronic platform owned and maintained by RBI. It has been posted
on the Indian Financial Network (INFINET) maintained by
Institute for Development and Research in Banking
Technology (IDRBT), a fully owned initiative of RBI. Originally conceived
to facilitate dealings in government securities – Central/State Government securities
and Treasury Bills (gilts) and money market instruments, NDS was intended to
be mainly used as a trading/reporting system for secondary market gilts transactions
and for electronic submission of bids in primary auctions of gilts by RBI. Over
time, while the nature and scope of activities carried out in NDS has expanded,
as indicated below, its primary focus remains the gilts market.
NDS – Current Activity Scope
2. NDS current activity scope includes
–
- Reporting of all outright and repo gilt trades
concluded in the Over-the-Counter (OTC) secondary market;
- Order entry for quote driven market in gilts;
- Negotiation mode for concluding gilts deals;
- Submission of bids for primary gilts auctions;
- Reporting of call and notice money transactions;
- Reporting of term money transactions;
- Value free transfer of gilts;
- Electronic down-load of security balances in
SGL/CSGL Accounts with PDO
3. NDS operations commenced on
February 15, 2002. Almost all market participants who maintain Current and SGL
Accounts with RBI have joined NDS. Most SGL transactions at the Public Debt
Office (PDO), Mumbai are now on electronic mode through NDS. Similarly, bids
in LAF, gilts auctions are being generally submitted electronically through
NDS resulting in reduced auction bid processing time, besides minimising clerical
errors. To provide wider access to the data on the gilts market, information
on trades captured by the NDS is being disseminated through the RBI’s website
since October 25, 2002 on near real time basis. With mandatory reporting requirement
in respect of all call/notice money and term money market transactions, regulatory
access to such information is now better with reduced reporting time lags. Although
several members fail to report all their money market transactions or report
them with considerable time lags, market players have generally benefited from
the reporting system in that assessment of market trends are now more meaningful.
4. NDS has helped in achieving
paperless and straight through clearing and settlement of secondary market gilts
trades through CCIL as a central counterparty. The system has brought about
significant improvements in transactional efficiency and transparency. Better
dissemination of information on market deals and moves towards deepening the
gilts market have also been facilitated as reflected in the better price discovery
and increased market turnover. NDS has had its share of woes and problems too.
These problems faced by the NDS could be classified into two categories, viz.;
technical issues and business related issues.
5. On the technical front, problems
have largely hovered around the periodic disruptions in NDS usage, loss of network
connectivity, performance related issues, inadequacy of technical/help-desk
support, etc. The common perception on business related issues point largely
to the lack of user-friendly features and functionalities of the NDS. Resultantly,
the core aim of proper development of the domestic gilts market has perhaps
not kept pace with the original intent.
Constitution of the Working Group
6. To review some of these issues
as also to bring more transparency in trading of Gilts RBI constituted a Working
Group headed by Dr R.H.Patil (Chairman, CCIL) and comprising of the following
other members, to study the pertinent issues relating to further development
of the government securities market to help bring about greater degree of transparency
and make appropriate recommendations:
- Dr R. H. Patil - Chairman, CCIL - Chairman
- Shri R.V. Joshi - MD, STCI - Member
- Shri D.G. Kamath - MD, GSTC - Member
- Shri K. Unnikrishnan - IBA Representative - Member
- Shri Jayesh Mehta - PDAI Representative - Member
- Shri P. Mukherjee - FIMMDA Representative - Member
- Shri Jasbir Singh - CGM, IDMD, RBI - Member
- Shri Chandan Sinha - CGM, RBI, Guwahati - Member
- Ms. Kamala Rajan - DIT, RBI - Member
- Shri R. Muralidharan - GM (Banking), RBI,
Mumbai - Member
- Shri B.B. Sangma - DGBA, RBI - Member
- Shri P.J. Thomas - DBOD, RBI - Member
- Shri T Rabi Sankar - IDMD, RBI - Convener
Original Terms of Reference of
the Working Group
7. The original terms of reference
for the Working Group were as under:
- To review the current usage of the real time
on-screen deal negotiation and anonymous trading capability of the NDS and
suggest remedial measures.
- To suggest the appropriate extent to which such
capability should be mandated, as a first step.
- To indicate the time frame to achieve the mandated
use of the facility in stages with a concrete action plan.
- To recommend technical, institutional and other
measures to implement such an action plan.
8. The Group has since submitted
its Interim Report to the RBI in February 2004. In its Interim Report, the Group
examined in detail the present NDS environment. The major observations, based
on the position obtaining currently in the gilts market, were as under:
- Most of the secondary market gilts trades are
effected through brokers. This has resulted in lack of liquidity on NDS, which
has remained merely a reporting system;
- The price discovery process is being achieved
through intermediaries, which apart from being non-transparent, does not provide
pre and post trade transparency;
- The existing OTC market dominated by a few brokers
does not get to adequately reflect plurality of views of all active market
participants;
- It would be desirable to minimize the influence
of brokers on NDS members to mitigate influence in market direction;
- NDS participants do not currently have facility
to gauge market depth in terms of all available quotes;
- Although NDS provides for a negotiation functionality,
deals concluded, if any, have to be re-entered in NDS and are subjected to
a validation/confirmatory process leading to possible errors and delays, which
are major limitations of the NDS;
- These shortcomings can be addressed by a screen
based trading system with features currently not present in NDS.
Expansion of the Working Group’s
Scope of Work
9. While concurring broadly with
the observations contained in the Interim Report as also the expected improvements
and benefits that would accrue from screen based trading, it was felt that the
issue needs to be explored in more detail. The Group has now been requested
by RBI to submit its advices on the following issues:
- The problems faced by market participants and
RBI in operating present NDS system for various purposes and suggestions in
regard to hardware and software to ensure that NDS operates smoothly and efficiently
without delays;
- The specific steps for implementation of an
order driven anonymous screen based gilts trading system;
- The technological requirements for the screen
based trading i.e., both hardware and software including related technological
issues for its integration with existing RBI systems;
- Action plan for migration to screen based trading;
- Issues and steps involved in developing and
improving market making and liquidity in gilts market on the exchanges;
- Issues that need to be addressed to ensure efficient
clearing and settlement of trades on NDS and the exchanges;
- Issues relating to connectivity of depositories
with RBI PDO-NDS for speedier value free transfers etc.;
- Sequencing of steps that need to be taken in
regard to trading on NDS and the stock exchanges.
10. The Group has examined each
of the above issues referred to it, in the light of the earlier study conducted
and the Interim Report submitted by it. While carrying out a comprehensive analysis
and careful consideration of all related aspects, the Group is of the view that
the way forward lies in critically analyzing each of the issues involved and
looking at possible alternatives, timely and cost-effective solutions to them.
As an attempt in this direction, the Group is pleased to submit its Report in
the subsequent paragraphs, which comprises of four Sections –
Section I - NDS
– Technical Issues: Problems and Solutions
Section II - Status
of NDS Gilt Market
Section III - Developing
Retail Gilts Market on the Stock Exchanges
Section IV - Summary
of Conclusions and Recommendations
SECTION I
NDS – TECHNICAL ISSUES: PROBLEMS
AND POSSIBLE SOLUTIONS
The technical problems observed
could be broadly classified into two categories viz., Issues beyond NDS and
NDS related issues.
A. Issues beyond NDS
- NDS is one of the many applications that use
INFINET. Hence problems, if any, in the INFINET have an impact on the performance
of NDS. The users of INFINET use it for several purposes of their own (like
e-mails) as also those relating to the NDS applications. Further, over time,
many RBI applications have been added to INFINET. Some of CCIL’s applications
are also hosted on the INFINET. It is therefore necessary to list all such
applications running on the INFINET so as to determine a hierarchy of priorities
in which such transactions can be handled; this will help in allocating the
highest priority, from the technical angle, to the NDS related transactions.
A periodic review of bandwidth utilizations for different uses should also
be made so that it becomes possible to ensure allocation of required bandwidth
for NDS related activities on a priority basis.
- Another critical issue relating to network that
needs to be examined is why some of the members face inordinately long response
time in their NDS transactions. Particular attention should be given to the
likely problems that may be faced because of combining VSAT traffic with that
of the landline traffic when messages travel on the INFINET. Internal
studies done by CCIL indicate that some of the packets sent on the
INFINET get lost in transit necessitating their re-transmission by CCIL system
to ensure that members do receive the communications sent to them. In
this context it is worth examining the desirability of putting all the NDS
related transactions on another dedicated telecommunication network
within the INFINET framework so that all the problems that NDS members
currently face can be more satisfactorily resolved. This would also eliminate
some of the LAN related problems at the members’ end.
- It may also be desirable to review the existing
technical tools available for network monitoring, their adequacy and scope
for improvements. NSE for example has a network monitoring tool for all its
VSAT operations that helps in tracking functional quality/health of its satellite
communication network as also tracking response time for members when they
are transacting on NSE’s trading system. Similarly, the monitoring of NSE’s
large leased line network is done by MTNL as part of its MLDN service package.
It is desirable that similar services/arrangements are put in place in regard
to the INFINET facilities made available to the members, at least in respect
of their time and mission critical NDS transactions.
- IDRBT/RBI should proactively monitor the network
infrastructure for maximum uptime. They should be able to have remote access
to router at Member end to monitor/test and have control over the network.
Member-end LAN traffic should not be allowed to enter INFINET. IDRBT/RBI should
regularly check bandwidth utilisation of all links. Members should also regularly
monitor their INFINET leased line. Backup leased line should be properly maintained.
- Most members are connected to INFINET through
64 kbps lines. Prima facie, it appears the delays faced by members in respect
of their time critical NDS applications are due to bandwidth constraints.
With the number of applications having increased, there is urgent need to
review the adequacy of this bandwidth and its possible enhancement to 2 mbps
lines. This would need to be mandated as members may come up with the issue
of extra cost burden. Going forward, dependence on this Network is only set
to increase and if adequate bandwidth is not ensured at all times, failures
would be frequent which will have its impact on the system as a whole. Moreover,
all NDS members are institutions who can be persuaded to see the overall cost
benefit analysis of migrating to a higher band-width. Experience suggests
that members who have already installed 2 mbps lines do not have network related
issues. In extremely exceptional cases, the alternative could be the provision
of an exclusive 64k lease line meant only for the NDS operations.
- INFINET uses IBM’s MQ Series for its communication
protocol. The NDS network has suffered in terms of its operational reliability
due to problems associated with the IBM MQ sender/receiver channel issues,
viz., both channels being down, sender channel up but receiver channel down
or vice versa. Due to this, many a time other Queue Managers have been asked
to stop whenever NDS Queue Managers have had problems. Moreover, while IBM
MQ is a standard utility used across various networks, its suitability for
specific applications such as NDS may need to be reviewed. In this context,
it may be appropriate to ascertain global experience with regard to usage
of IBM MQ for dealing applications. CCIL’s experience in IBM MQ’s ability
to support dealing application communication protocol has not been very encouraging.
- Given all these problems/issues vis-à-vis
the INFINET it may be desirable to arrange for an independent technical study
of the operations of INFINET by a reputed and competent agency/body to assess
its reliability, performance, connectivity, bandwidth, communication protocols,
configuration, network monitoring tools deployed/desirable, scalability, current
capacity utilisation, need for augmentation if any for future requirement
etc.
B.NDS Related Issues
1. Help-desk Support
a. The telephone lines at NDS
Helpdesk are inadequate. There are only three lines, out of which one is for
network related problems and the other two for operational/system problems.
Member feedback indicates that there have been many occasions when NDS Helpdesk
phone response time has been long and its manning, especially during business
hours, inadequate. Further, solutions provided from the Helpdesk have at times
failed to resolve the problem reported, when concerned members have been asked
to contact their respective vendors for IBM-MQ series and Oracle related issues.
The help desk should also have proper staff complement conversant with technical
and operational related applications/issues.
b. The commonly reported operational
issues on NDS are –
- Host server not responding;
- Queue Manager receiver channel inactive;
- Automation error received on client while logging
in to application;
- More than one entries of dllhost.exe found in
Task Manager where ever there are more than six NDS clients which increases
server CPU utilisation;
- Inability to generate reports from client workstations;
- Server processes dying
c. There is urgent need to review
the nature and extent of technical support/help-desk available in NDS. Requisite
facilities need to be augmented by providing adequate telephone lines, ensuring
that the desk is always sufficiently manned during critical business hours etc.
Further the Helpdesk services need to be integrated to provide single point
support for both network and operational problems.
d. A structure needs to be formalized
to log member problems/feed-back through a defect tracking mechanism. Logging
of reported problems and solutions offered will be useful for providing uniform/consistent
solutions to similar problems reported by different members. Such documentation
will facilitate further analysis and appropriate responses as also assist in
review/modifications and further development of NDS. These arrangements need
to be built into the NDS application itself.
2. Software Releases/Upgrades
- It is noticed that the compatibility of the
application with latest Windows Service Packs, Windows Operating Systems,
IBM MQ Series etc. are not being constantly monitored on an on-going basis.
It is also observed that there are frequent updates/patches sent for updation.
Problems are generally encountered during major upgrades with some of the
functions not found to be working after major upgrades, for which patches/fixes
are again required.
- The software releases/updates should be comprehensively
tested by installing and checking all system functionalities before it is
sent to Members so that no patch is required to be subsequently released.
Detailed procedure for installation/update should be provided in an Installation
Manual. A comprehensive document detailing new features should be provided
with every release/upgrade.
- Installation/Operations training at regular
intervals should be organised for Member staff. The training should also focus
on problem reporting and resolution.
3. Periodic Audits
- Latest Operations Manual/Guidelines for infrastructure
set up and operation at member’s end need to be provided by RBI.
- Periodic audit of IT infrastructure at member’s
end should be carried out by RBI.
- Hardware, Software, Network requirements, proper
back-ups, updated software for Anti-Virus should be checked.
4. IBM & Unix Servers
- NDS, which comprises of various modules, is
hosted on a single IBM Mainframe Server at RBI. From a technological point
of view, it may not be advisable to have more than one critical system running
on a single server. If any problem develops even for a couple of hours with
such a server that hosts several critical operations, there will be chaos
in the market. In CCIL, for example, the different settlement systems as also
the FX Dealing and CBLO Dealing applications are all placed on different servers;
- It is, therefore, desirable that to begin with
the proposed NDS gilts automated order matching system is placed on a different
server. In this context experience suggests that IBM servers are far more
costly than UNIX servers. The reliability of UNIX servers compares very favourably
with that of IBM servers. Hence IBM itself has started manufacturing UNIX
servers. CCIL relies mainly on the HP UNIX servers, which are significantly
cheaper (capacity-to-capacity basis) than IBM mainframe servers. It is given
to understand that recently, SBI too has opted in favour of HP UNIX servers
for its massive computerization currently under implementation.
- At the member end, with increasing functions
and operating requirements, the present server/client configurations may be
inadequate. It is imperative that certain minimum acceptable server and LAN
configurations, keeping in view both current and future requirements, are
mandated. Prescription of minimum IT configuration standards are essential
for ensuring availability of the system for carrying out vital operations
at all times.
5. Members’ Local Database
The local data base utility currently
available at member end in the current NDS needs to be reviewed and enhancements,
if necessary, planned for implementation. It is possible to consider periodic
polling and population of data at the local data base level instead of every
query travelling from client to the central server. This would help reduce network
traffic helping improve the overall network and system efficiency.
6. Business Contingency Planning
Adequate business contingency planning/redundancies
need to be put in place at member end as part of the technological infrastructure
creation process. This is one area which has not perhaps been given its due
importance. Given the increasing dependence on IT and related technological
capabilities, it is now time that the need for effective fall back measures
being put in place is understood and implemented. There should also be provision
for back-up or Disaster Recovery Plans with periodical testing of live applications
also.
7. Software Issues
- In the area of software, perhaps, the most critical
change immediately required is to review the manner in which business issues
are being handled at NDS. It is imperative that the concerned business departments
in RBI such as IDMD, PDO, MPD etc. lead and drive the software development
in their respective areas with technical support coming from DIT. This would
bring about the necessary ownership and focus required to constantly review
and update requisite processes and features in tandem with changing/emerging
requirements. It may be worthwhile to consider structure of a standing committee
consisting of officials from these departments with some basic knowledge of
software development to ensure that the review or updation takes place without
avoidable delay.
- The settlement processes existing in NDS are
performing reasonably well. The NDS front-end, however, requires urgent attention
and modifications/enhancements as discussed in this Report.
- The most significant module in NDS is the Gilts
Secondary Market Module, which being the main focus of this Report, is discussed
at length separately.
- As for the other modules, it is felt that the
Call/Term Money Module may not be fully achieving its purpose of accurate
real time capture of all trade information in these markets. Even the repo
trades, currently, cannot get reported on the system in a certain time period
(usually 9:30 am to about 11:00 am) on the NDS. This position needs to be
rectified by bringing about the required changes with mandatory prescriptions
and extensive verification as part of the regulatory audit process. The real
time capture of all trades information will be facilitated if the front offices
of members are interfaced with NDS.
- The Auction Modules facilitate submission of
electronic bids by market participants. It is felt that the functionality
scope could be extended further to encompass the auction process itself i.e.,
computation of cut-off, allotment to successful bidders etc. through appropriate
linkages with the Securities Settlement System. These features would further
reduce the time lag between bid submission and announcement of auction results,
allotment of securities to successful bidders. Further, the module should
be in a position to handle both primary and OMO auctions covering both issue
and purchase of gilts by RBI. The ultimate objective should be to build interfaces
between the Auction Module and the NDS secondary market settlement system
(carried out through CCIL) which would bring about significant advantages
to market participants in the form of netting across primary and secondary
market transactions. The present DVP III mode of settlement does call for
this electronic interface to avoid delay in processing of trades.
- As already mandated for Call/Notice and Term
money transactions, compulsory reporting of all OTC interest rate swaps could
be envisaged and requisite facilities developed in NDS to assist better regulatory
supervision of this sensitive and growing market.
8. Modular Software
In the context of reviewing NDS
operations, it may be desirable to individually look at the various modules
of NDS. It is likely that relative software has been developed as a single application.
The best way forward would be perhaps to examine the possibility of looking
at modular software architecture with each different functionality such as Call
Money, Term Money, Gilts Primary Auctions, LAF, Gilts trading etc. being unbundled
and developed as separate modules. This would greatly reduce dependencies, ease
the process of software development/testing, ensure easier scalability of each
of the modules to address emerging requirements etc.
9. Constitution of Formal User-group
There is need for formally constituting
User Group Standing Committees comprising some permanent members nominated by
concerned RBI Departments (such as IDMD, PDO, MPD, DGBA, DIT etc.), CCIL as
also industry bodies such as FIMMDA, PDAI, AMFI etc. to address NDS related
issues on an on-going basis. Such representation should be at the operating
level with sufficient expertise in related domain areas. The User Group should
serve as a forum for free and frank exchange of views on all aspects relating
to the functioning of NDS and the related activities.
SECTION II
STATUS OF NDS GILT MARKET
In India the gilt market continues
to remain a telephone driven OTC market with small number of brokers assisting
in price determination. According to some debt market dealers the OTC market
is quite transparent. They often argue that the gilt markets in most parts of
the world are OTC markets. There is some basis in this argument if it is interpreted
to mean that most of the trading in gilts does not take place on the organised
stock exchanges or a few well organised trading platforms. It should, however,
be noted that the dominant global developments in most of the active gilt markets
are in the direction of moving away from the telephone or voice broking to broker-dealer
screen trading systems. This has happened even in the global foreign exchange
markets where screens are dominating the trading systems. As the trading volumes
and the number of market participants and investors grow financial markets come
to deploy increasingly sophisticated information technology tools in the areas
of both deal matching and clearing and settlements. On account of their inability
to effectively cope up with growing size of the markets, both from the viewpoint
of volumes and geographical coverage, the gilt markets are increasingly moving
towards screen trading.
Global trends towards Screen Based
Trading
Since screen based trading has
been found to be more cost-effective, transparent, and user-friendly it is gaining
increasing foothold. In recent years, many developed markets have been working
to automate and introduce screen based trading systems. The last decade has
witnessed a dramatic increase in both the number and the market share of screen-based
trading systems. The adoption of screen based trading systems has transformed
the economic landscape of trading venues and is proving a force for change in
market architecture and consequential trading possibilities. Electronic trading
has been removing geographical constraints and allowing much higher trade volumes
to be handled, and in customized ways that until recently would have been technically
impossible or prohibitively expensive. Within the fixed income market sector,
electronic trading has made most inroads into many government bond markets.
As per a Survey by the Bond Markets Association of USA, there were 77 electronic,
fixed-income trading systems operating in the U.S. and Europe in late 2003 versus
11 in 1997. Of these 77 electronic trading systems, 46 were based principally
in the USA and 31 in Europe. Information provided by trading platform vendors
suggests that fixed income trading executed electronically has increased in
volume steadily over the past several years, including throughout 2003. The
Survey concluded that online bond trading grew significantly with average growth
of 70 percent 2003.
In Italy about 90 per cent of the
trades in government debt are now conducted on the MTS (Mercato Telematico dei
titoli di Stato) system which was developed in 1988 with the cooperation of
Italian public authorities. The success of MTS has led to cloning of the platform
elsewhere, especially in Europe. EuroMTS was launched in April 1999 as an international
trading system for European benchmark government bonds. In addition, newly established
local electronic trading platforms along the lines of MTS include MTS Amsterdam,
MTS Belgium, MTS France, and MTS Portugal. Brazil and Korea have also adopted
electronic bond-trading systems along the lines of MTS.
In India as well it may be essential
to be proactive and make available screen based trading for efficiency of the
price discovery process.
Gilt Trading on NDS – Evaluation
and Way Forward
From a business perspective, the
gilts market (which constitutes the most important segment of NDS) has developed
reasonably well. However, since efforts to improve the quality of this market
promise to very good yield results with reasonable speed, our attempts should
first be directed to improve efficiency of this market and strengthen it further.
NDS today acts as a reporting platform
wherein members report trades already concluded by them in the OTC market despite
having a direct electronic negotiation facility. But even as a reporting platform,
members do not find it to be highly user friendly, whenever market witnesses
high level of activity. Whenever the gilts market is highly active some members
have complained that they are not in a position to report all their trades to
the NDS because of the inordinate response time delays. An oft-cited reason
why NDS is being used only as a reporting platform is that there are hardly
any quotes on the screen (lack of liquidity). Unlike an order driven system,
NDS participants do not have the facility to see the depth of the market in
terms of all available quotes for a particular security at any given time. The
absence of user friendly features of the NDS (normally associated with electronic
trading platforms), its systems capacity constraints, and its cumbersome confirmation
procedures have discouraged participants from using its quote driven trading
option. Market participants have preferred the easier option of trading through
brokers. Resultantly, there is no liquidity in the NDS. Unfortunately, therefore,
the basic objective of transparency in gilts trading and efficient price discovery
remains unfulfilled.
NDS has provisions for real time
dissemination of price information to the market. However, trades concluded
outside NDS are not reported immediately (NDS stipulates that such trades should
be reported within 15 minutes) leading to delayed transmission of traded prices
to the market. The market is thus still not in receipt of real time trade information.
As opposed to Straight Through
Processing (STP), deals negotiated on NDS have to be inputted again into the
system to facilitate settlement. Except for firm quotes, there is a restriction
that the seller dealer only needs to enter the deal particulars. This puts additional
responsibilities on the dealers which have led to dealers preferring to trade
in the OTC market and the back office personnel completing the data entry and
all NDS related processes. Besides re-entering of deals also increases the potential
of errors in reporting.
It is important that the NDS players
who account for almost all the trading in gilts are accorded a more efficient
and transparent screen based dealing interface which overcomes the above shortcomings.
NDS should function as an anonymous, automated order matching system to be used
by all NDS members for all trades they transact with each other without the
intermediation of a small number of brokers as it happens today. Once the 160
NDS members start trading on the system directly there would be quantum jump
in the efficacy of price discovery process, thereby significantly improving
market efficiency. It will facilitate dissemination of all market information
including the unexecuted order book position and already executed trades on
a real time basis. This will also help RBI to keep a close watch on all market
developments on a continuous basis and take up quick surveillance as and when
necessary.
NDS currently does not have a capability
for cancellation/rejection/return of trades. Such a provision needs to be built.
However, after the introduction of an automated screen matching system the need
for rejecting/cancellation of trades/orders will arise only in extremely rare
circumstances. For example, if there is evidence that two members are trying
to rig up/down prices by entering orders that are very much out of line with
market trends NDS administrator at RBI should have the facility to cancel such
orders/trades. Access to this utility, which should be kept at the NDS Administration,
needs to be controlled and all such actions need to be backed by proper documentation
for audit trail purposes.
On-line transmission of trades
to the settlement system and from thereon to CCIL should be possible via NDS.
Possibility of providing interfaces between NDS and CCIL for on-line position
monitoring will help members in more efficient margin management. This will
help CCIL to extend on-line guaranteeing of trades of NDS members so that they
can derive benefits from the DVP-III facility that RBI has extended recently.
NDS members should be encouraged
to develop their own in-house market study capabilities so that their dependence
on brokers for understanding market trends/movements is minimized. After the
members discontinue their dependence on the voice brokers for their deal matching
they will have to rely on their own in-house information/research base and trading
strategies.
Some of the advantages of migrating
the gilts market to an electronic anonymous order matching mode are discussed
below –
- Access -
Screen Based trading can widen
access to trading systems across several dimensions. Because of its OTC
nature the G-sec market has remained Mumbai-centric. This puts NDS members
with their head offices outside Mumbai in a disadvantageous position. Their
Mumbai based dealing offices cannot get quick decisions from their superiors
whenever there are unexpected market movements. Automated screen trading
will help in putting all market players on par. Moreover, physical limitations
that once rationed access to traditional venues no longer bite, meaning
additional users can now participate at minimal marginal cost. At the same
time remote linkages remove geographic limitations on the pool of potential
users, and continuous multilateral interaction is enabled. This turnaround
in the economics of access means that, in principle, arrangements can be
decided more in response to the needs of the market.
- Intermediation
The greater access possibilities
offered by screen based trading have perhaps most obviously brought into
question the role of intermediaries. An important implication of the automation
of trading market structure is the potential for direct market access on
the part of institutional investors. In an intermediated setting, the broker
determines when execution will take place. If the broker is representing
the best interests of the trader, execution would be rationally based on
best price. This hypothesis appears to be refuted in practice. Secondly,
there are also problems related to confidentiality of the information. Once
an order is placed with a broker, information about the trade is no longer
private, and information leakage can occur. If so, some information is reflected
in quotes prior to trade execution, adversely influencing execution costs
on the part of the original investor. Anonymous automated trading can get
over such problems. Moreover, automated trading also enables institutions
to avoid paying for intermediation services they may not be requiring.
- Transparency
Screen based trading facilitates
greater pre- and post trade transparency. Pre-trade transparency refers
to the availability of information about bids and offers. Post-trade transparency
refers to real time transmission of information on executed trades, including
price and execution time to all concerned. Screen based trading creates
the potential for a very high degree of transparency across the whole trading
process. On an order book, the best bid and offer orders available, the
full depth of the book showing amounts at each price are available to all
participants. In principle, systems can disseminate real-time pre- and post-trade
information market-wide, while ensuring strict anonymity for all market
players. Conversely, they can operate with minimal information leakage,
in a manner that trading based on personal contact can not achieve. As electronic
systems become more sophisticated, they make it more feasible to move along
the multidimensional spectrum of transparency. Even big players find such
transparent trading systems to be of great advantage. The facility of disclosing
only small part of an order to the market helps in minimising impact of
large orders on market prices.
- Trading costs
Screen based trading and associated
computing advances have given new impetus to trading cost reduction across
all fronts. There is now scope to reduce what was once a 'set cost'
of business - one reason for the greater focus by institutions on analysing
and cutting trading costs. The implicit costs of trading include the bid-ask
spread paid to a liquidity provider and the price impact of the trade (i.e.
the extent to which the trade price deviates from the current market price
as a result of the trade). Electronic trading may reduce all these components.
Market impact costs refer to any adverse impact on price as a result of
information associated with the trade leaking ahead of execution, or because
the trade is large enough to affect significantly supply and demand in the
market or signal a predictable trade to come. Screen based electronic trading
should help reduce these market impact costs.
- Price discovery
Price formation in screen based
trading systems is the outcome of precise order execution algorithms, in
contrast to the trading floor or phone-based systems where relationships
may matter as much as price or size. Furthermore, electronic trading allows
basic algorithms to be extended to better meet trading needs and, for example,
some now permit very detailed trading plans with contingent orders reflecting
the various nuances of preferences. In general, electronic processing allows
orders to reach the market faster because of higher processing speeds than
with manual processes. Prices therefore incorporate information more quickly.
In addition, the investors may enjoy a tighter bid-ask spread on the screen
based system.
Screen based trading systems
automate the collection of pre-trade and post-trade information, e.g. obtaining
quotes and requesting execution. By greatly increasing the amount and timeliness
of information, these systems provide greater efficiency, accuracy and dispersal
of trade relevant information such as best price and/or quantity, traded
volumes etc.
- Straight Through Processing
The automation of the trading
process has important consequences for the operational efficiency of markets.
Increased operational efficiency provides scope for Screen based trading
systems to reduce the cost of trading. A large part of the scope for increased
operational efficiency is due to lower order processing costs. Screen based
trading makes it possible for trades to be passed straight through to the
middle and back offices by linking the execution, confirmation, clearing
and settlement of trades with market risk management and operational risk
management procedures commonly referred to as straight through processing
(STP). Since STP helps to do away with intermediate manual intervention
it minimizes overhead costs for back office handling, risks associated with
errors in trade reporting and record keeping. Thus the greatest advantage
of STP is to make risk management more effective and manageable through
appropriate IT tools.
- Liquidity
Liquidity is essential for
trading systems. It enhances the overall effectiveness of the market, reducing
costs by narrowing spreads and giving depth such that prices are less affected
by particular trades. Liquid markets are typically better placed to absorb
shocks than less liquid ones, contributing to the robustness of financial
systems. Liquidity is an essential ingredient of an efficient price discovery
process and hence price signals for the wider economy. By lowering trading
costs and widening access to market information, screen based trading systems
enable more efficient trading. Assuming that deeper liquidity in markets
means more efficient price discovery, market prices should better reflect
available information about fundamentals, and hence prices adjust more quickly
to (even small) changes in these fundamentals. Greater anonymity may enable
participants to gradually unwind positions in smaller lots without having
to expose their position to other market participants. The view of most
market participants is that anonymity is better assured through electronic
systems than it was in the traditional OTC markets, thereby ensuring liquidity.
- Regulation and Supervision
From a regulatory perspective, financial stability
is enhanced if markets are efficient, liquid, orderly and resilient. Screen
based trading system, while being transparent, more efficient and fair,
greatly facilitates better supervision of relative markets. The efficient
and effective collation of data on a real time basis through electronic
interfaces between the dealing platform and the regulatory systems would
ensure on-going surveillance of critical parameters/indices of abnormal
market behaviour such as erratic price movements, attempts at market manipulation
etc. Erratic market movements, whether due to trader errors or more fundamental
reasons, can be identified rapidly resulting in online real time electronic
surveillance of the markets. Further, constant updation and analysis of
price movements across securities and trading volumes would considerably
enhance prospects of timely interventions/corrective regulatory action -
helping oversight, dynamic understanding of market expectation/sentiment
and providing proper and timely direction.
Implementation of Screen Based
Gilts Trading System on NDS
At the current stage of the G-sec
market it is desirable that an automated screen-based trading system is made
available for the NDS members. The desirable functions and features that would
need to be built into such a System have been examined and the same is contained
in Annexure 'A' appended hereto.
The development and operationalisation
of a fully automated Screen Based Order Matching System may be introduced in
a phased manner so as to build comfort especially among the major players like
banks and primary dealers. Given the criticality of the requirement for the
development of an efficient and healthy gilts market, it would be prudent to
take up this activity in phases.
In view of its domain expertise
and proven competence in this area CCIL may be associated with the task of making
suitable modifications to the NDS to facilitate creation of requisite functionalities
with appropriate linkages to the clearing and settlement processes.
The dealing system should be a
part of the existing RBI NDS set-up. However, the same should be housed on a
different server and should be kept under the direct control and supervision
of IDMD, the RBI Department regulating the gilts market.
Trades could happen in the proposed
system amongst NDS members where the buyers and sellers are all NDS members.
The proposed system should be an anonymous order matching system wherein identity
of parties is not revealed. The order matching should be based on a price-time
priority algorithm, meaning thereby that orders with given price would get matched
based on the basis of time priority.
RBI should specify the roles and
responsibilities of members dealing on the system.
The proposed Order Matching System
should follow some general principles of dealing which should be shared with
the members. NDS members should adhere to these general principles.
Trades done on the proposed system
should flow on-line to the NDS system without any additional confirmation requirement
from either the buyer and/or the seller. The trades should follow the existing
path for clearing and settlement through CCIL. This will ensure that minimum
changes are required at the member end and at the RBI-NDS end while satisfying
the objective of RBI-NDS being the repository of all gilts transactions
CCIL will continue to be the central
counterparty to each trade done on the system and settlements of such trades
would be guaranteed by CCIL subject to members adhering to CCIL’s Bye-Laws,
Rules and Regulations. The comfort of a risk mitigated environment with the
counter-party risk having been eliminated on account of settlement guarantee
provided by CCIL will facilitate such anonymous trading. On the dealing side,
the risk could arise from failure of the system due to technical reasons with
the result that members may not be able to deal or close out. Such risks could
be significantly minimised if a robust and highly reliable communication network
is put in place. Moreover, since the present system of reporting trades on NDS
will continue until all the trades take place on the NDS efficiently to the
satisfaction of all the NDS members, the above problem can be addressed. Besides,
the trading on the system being transparent, it will promote better supervision
and regulation.
To minimize implementation time
for automated screen based trading on NDS the activity can be implemented in
phases as follows:
Phase I
a. Price based order matching
system for top 5/10 liquid Central Government Securities
b. All market participants
to conclude all deals (unto Face Value of Rs. 25 crores) in these securities
on the order matching system. For large deals of more than Rs. 25 crores,
as well as for trades with non-NDS members the market participants may be
given the option of concluding the same in the OTC market if they so desire.
c. Following functionalities/features
should be available in Phase I -
- Place/Modify/Cancel Orders,
- Order Quantity Conditions like All or None/Disclosed
Quantity,
- Market Queries like Market Watch, Market by
Price, Market by Order,
- Customizable Market Watch Screens to monitor
preferred Securities;
- Dealer Queries like Outstanding Orders, Previous
trades, Net position
- YTM Calculator;
- Automatic Deal Ticket Generation and Printing;
- Dealer Blotter Generation and Printing;
- User friendly software with easy navigation
- Generation of .csv files of important outputs
such as Deal Ticket to facilitate electronic feed into proprietary treasury
systems at member-end;
- Provision to generate automatic on-line feeds
to facilitate dissemination of trade information to market
d. Mechanism to be put in
place to facilitate periodic review of securities by IDMD (if necessary
in consultation with FIMMDA/PDAI/CCIL) covered under Order Matching Screen
(at weekly/fortnightly intervals) to ensure liquidity
Phase II (to be operationalised
in about 3 months after Phase I go-live)
Gradual increase in the number
of securities to increase market coverage such that in about three months from
implementation of Phase I, all actively traded Central Government securities
are brought into the ambit of the Order Matching System
Phase III (to be operationalised
in about 3 months after Phase II go-live)
- Yield based order matching system for Treasury
Bills to be part of the existing setup
- Order Matching activity scope to be increased
to cover Treasury Bills and State Government Securities.
- Following advanced functionalities/features
to be introduced in Phase III -
- Customizable Dealer hierarchy set-up,
- Activation of trigger orders viz Stop Loss,
Take Profit orders,
- Interface with proprietary Back office software
- Provision to generate automatic on-line feeds
to facilitate dissemination of outstanding order as well as trade information
to market
- Enhancements and other features as may be required
based on market feed-back
IT Requirements for Screen Based
Trading on NDS and its Integration with existing RBI Systems
The Order matching system will
be a plug-in module to the existing RBI-NDS setup.
Trades done on the system will
flow to RBI-PDO and from thereon to CCIL for settlement as per existing procedures.
Trades done on the system should
be treated as confirmed and not subjected to the current time consuming four-stage
confirmation process as existing in the present NDS environment.
Trades will enter RBI-PDO at the
Ready for Settlement Status.
The file formats and interface
with RBI-PDO will need to be accordingly finalized.
RBI shall specify the hardware
and software configuration for installation of the dealing application at the
member end.
The hardware and software requirements
at RBI and members end for installation of the dealing application are indicated
in Annexure 'B' appended here to.
SECTION III
DEVELOPING RETAIL GILTS MARKET ON
STOCK EXCHANGES
Globally, gilts markets are essentially
wholesale markets (also often referred to as the inter-dealer markets) with
major participants being institutions like banks, primary dealers, financial
institutions, insurance companies, mutual funds, pension funds and provident
funds. Retail participation from individuals and trusts is generally on a very
subdued scale. In India too the scenario is no different. The dynamics of the
two markets viz. wholesale and retail as well as the sentiments underlying trading
in such markets is quite different. The trading parameters like the market lot
size, the price ticks etc also vary across the two markets. It is therefore
desirable to have a clear segmentation of the markets into Wholesale and Retail.
At the current stage of development
of our G-sec market there is a strong case in favour of keeping the wholesale
G-sec market of NDS members separate from the retail or mid segment market.
In India the combined fiscal deficit of the Centre and the States as percentage
of GDP is very high (well in excess of 10%). Having recognised the risks that
the economy faces from continued high level of fiscal deficit GoI is serious
about bringing down the level of fiscal deficit to a reasonable level of about
3% as percentage of GDP in the near future. But until that stage is reached
the outstanding stock of government debt would have grown to significantly much
higher levels. Hence, even after the net fiscal deficit comes down to reasonably
acceptable level, the levels of gross market borrowings on behalf of the government
would continue to remain at relatively very high levels. So long as the gross
levels of government borrowings remain at such high levels the G-sec market
will continue to be in a delicate stage; the regulation of such a delicate market
would have to be done in such a way undue fluctuations in in G-sec prices (consequently
interest rates) are avoided to the maximum extent possible.
As of today, RBI is not only the
regulator but also the merchant banker to the Government, shouldering the onerous
responsibility of ensuring that the required level of borrowings for the Central
and the State Governments are mobilised. So long as the fiscal deficit in India
remains very high it would be too risky to allow the G-sec market to be subjected
to the vagaries/forces of a free market that is often subject to the influence
of high level of speculative activity. Hence the RBI is keeping a tight vigil
on the G-sec market, the trades in which have to be mandatorily reported by
all the RBI regulated entities on the NDS that is being managed by the RBI.
Given the current delicate stage of the G-sec market, movements in interest
rates have to be suitably moderated/calibrated so that RBI is able to satisfactorily
discharge its merchant banking responsibilities in respect of Central and State
Government borrowings. Hence, even after the introduction of the automated screen
based trading on the NDS, RBI should have to closely monitor the G-sec trading,
especially of its regulated entities, all of which belong to the wholesale debt
market segment. The recent turmoil in equity markets, which witnessed a free
and steep fall in equity prices, forcing the exchange authorities to shut down
the markets twice during the trading hours on 17th May 2004, does
lend strong support to the argument that the G-sec market cannot be left to
the mercy of unbridled speculative activity that is frequently observed on the
stock exchanges.
Since movements in G-sec prices
also reflect the level of interest rates in the financial system the G-sec market
should have to remain under the close regulatory scrutiny of RBI on a near real
time basis. Therefore, so long as the gross levels of Government borrowings
remain high it is desirable that management of the NDS and regulation of the
whole sale debt market remains with RBI.
While the wholesale gilts market
should continue to remain with RBI it is desirable to initiate necessary steps
to develop a retail market in gilts for serving the investors who currently
do not belong to the wholesale gilts market. There are a whole range of existing
and potential investors like company managed provident funds, corporates, trusts,
high net-worth individuals, recently set up insurance companies, the proposed
pension funds especially meant for the unorganised sectors of the economy who
are not being served satisfactorily in regard to their investment demands for
gilt securities. Concerted efforts need to be put in to service this class of
investors through the instrumentality of the stock exchanges. The fact that
even after the introduction of retail trading in G-sec on the stock exchanges
there has been negligible trading on the exchanges proves the point that there
are several missing elements in the scheme of things when the gilts trading
was started on the stock exchanges. It is a fact that almost the entire G-sec
trading is concentrated on the NDS which has been designed essentially for the
wholesale G-sec market players, most of which are RBI regulated entities with
the final settlements of their trades taking place in their respective SGL and
current accounts maintained by them with RBI. Other participants in the G-sec
market like provident funds, pension funds, corporates, various trusts, small
cooperative banks, which comprise the middle segment presently depend on the
OTC deals either through brokers or directly with NDS members. Settlement of
securities in respect of the players generally takes place using the CSGL facilities
of the NDS members; all G-sec trades including the CSGL trades are cleared and
settled by CCIL.
Recently, the retail and mid segments
have been extended the facility to trade in government securities on Stock Exchanges
through exchange registered brokers. In so far as the individual retail investors
are concerned they do not appear to have shown much interest in gilts investments.
This is primarily because of the existence of competing instruments which provide
better returns than government securities rather than lack of liquidity on exchanges.
This, however, is not the case in respect of other investors like provident
funds, pension funds, etc. most of whom are obliged to invest in G-secs as part
of their investment strategy. The problem, therefore, is how to ensure that
the stock exchange mechanism emerges as a preferred and cost-efficient
alternative for such class of investors. The exchange platform is best
suited for entities who deal in government securities in smaller lots than are
the usual lots in the wholesale gilts market of the NDS members. In reality,
it is the mid-segment represented by the non-NDS and non-retail players of the
gilts market that has significant growth potential. It is desirable that increasingly
trades of non-NDS members that belong to the mid-segment of the market are encouraged
to shift to the stock exchanges through a well articulated strategy, given the
fact that stock exchanges have much greater nation-wide reach.
There is need to pay much greater
attention to the needs of the mid segment of the market as almost all these
players do not have access to the NDS. It is these players who have to be systematically
attracted to the stock exchange if exchange trading in gilts has to take off.
This middle segment is already a large market and has the potential to grow
at much faster pace than that observed during the recent past. For instance,
the pensions market is poised to grow in a big way as it gets extended to all
those who are currently outside the organized sector. Similarly, as and when
corporates are permitted to enter the repo markets, both for lending and borrowing
of funds, there will be demand for government securities from the corporate
sector for liquidity management. There is scope for increasing the share of
small co-operative banks, NBFCs and other similar players in gilt trading. The
solution, therefore, to the problem of negligible trading in government securities
on the stock exchanges should not be in terms of shifting the NDS trades to
the stock exchanges but to take necessary steps to encourage the non-NDS players
to increasingly meet their requirements through the stock exchange mechanism.
Importance of Market Makers
The current reality is that satisfactory
arrangements do not exist for non-NDS players to buy or sell government securities.
Often they have to undertake trades at prices in great variance with the prices
prevailing on NDS. They are also required to bear higher transaction costs.
The exchanges need to exploit this opportunity to the maximum extent possible.
Orderly development of the middle segment of the gilts market should primarily
be the joint responsibility of SEBI and the stock exchanges. All that the RBI
should be doing is to extend a helping hand to SEBI in this endeavour.
It is desirable that regulatory compulsion be brought to bear upon the debt
market brokers of the Exchanges. They should be mandated to become market makers
on the exchange, to begin with at least in the actively traded gilts.
An important point which is often
missed by students of financial markets and market players is that financial
markets do not grow out of thin air. Conscious and proactive steps have to be
taken before organised markets come into existence, if the desire is to create
them in a relatively short period of time. In the early stages of their development
the securities markets need a class of specialists who are commonly referred
to as the market makers or jobbers. These market makers give two way or buy/sell
quotes for stocks of their choice. They thus create a sense of liquidity in
their chosen stocks to attract investors to the markets. Once the average investors
are assured of an entry/exit route offered by the market makers they may not
mind investing in such stocks. The other important feature of the securities
markets is that liquidity breeds further liquidity. So the question basically
is how to create the initial liquidity. Hence, the crucial importance
of the market makers who help to create or germinate initial liquidity that
helps to build higher and growing level of liquidity over time.
Simultaneously, Exchanges need
to launch awareness programmes to educate the mid segment investors about the
services that can be offered by them through the stock exchange trading mechanism.
The exchanges should also motivate their members to put in sincere efforts in
this direction so that an active market can be developed without much loss of
time. Ironically, all brokers who are very active in the NDS market are all
members of NSE’s wholesale debt market (WDM) segment. None of these brokers
appear to have shown any interest in making NSE’s WDM segment active and provide
their services to non-NDS investors. Since all these brokers are earning huge
amounts of brokerage by concentrating their attention on the OTC market that
serves the NDS members, they have not shown any interest in serving the non-NDS
players through the exchange platform despite having a very good idea of market
movement, sentiment, trading flavour, volumes etc. Moreover, most of them already
employ qualified personnel to provide the requisite services to their principals
in the OTC market.
For undertaking the market making
responsibility, it is not essential for the brokers to hold proprietary stocks
of securities. This issue could be resolved if brokers are permitted to have
arrangements with Primary Dealers and/or Banks for supply of stocks of government
securities at prevailing NDS market prices. The market price risk involved in
market making on the stock exchange would have to be borne by the brokers themselves.
These costs can be factored into the bid/offer quotes made by them on the exchange.
It is felt that the existing expertise available with the brokers could be used
for good measure in developing a gilts market for the mid/retail segment on
the Exchanges through the implementation of the following arrangements:
- All market intermediaries/fixed income brokers
registered with the National Stock Exchange (NSE), having a share of at least
5% of the aggregate market turnover in the wholesale debt market segment of
the NSE during the current year as well as the previous financial year should
be required to provide two-way buy/sell quotes;
- All such entities (hereafter to be referred
to as 'market maker') to be allowed to act as principal counterparties
to trades subject to individual trades not exceeding Rs. 1.00 crore (face
value) initially. This amount could be increased over time based on experience
after ensuring stability of operations and adequacy of requisite surveillance,
control and safeguards;
- Market maker to have not more than say ten trades
remaining uncovered at any point of time;
- Market maker to provide two way quotes in not
more than three liquid securities at any point of time. Exchange to ensure
that their systems do not permit the matching of two counter market making
quotes;
- Market maker to be permitted to open a CSGL
Account and Current Account with an NDS member (preferably one of the PDs)
of its choice subject to extant CSGL guidelines;
- Market maker to be further permitted to open
a CSGL Account with one of the depositories viz., NSDL or CSDL;
- All quotes provided by market maker to be for
T+2 settlement only;
- Market Maker to be permitted to act as counter-party
and finalize trades with a primary NDS member for cover operations in respect
of trades matched on Exchange;
- Such cover trades as per (h) above for values
T+0 up to a maximum of T+2 only
- Settlement of trades as per (h) above to be
settled via the NDS mechanism (directly at RBI PDO outside CCIL settlement
mechanism) through the NDS member with whom market maker maintains CSGL and
Current Account as per (e) above;
- Appropriate funding of securities transactions
to be arranged by market maker
- All trades matched on the Stock Exchanges to
be settled through Clearing Corporations of the respective Exchanges and concerned
Depository where market maker maintains CSGL Account
Detailed flow-charts covering both
dealing/settlement of the exchange trade as well as the relative cover operation
is enclosed at Annexure 'C' appended hereto.
Banks & Stock Exchange Membership
In this context it is worth examining
whether banks should also take up membership of stock exchanges in addition
to PDs, who have already been permitted to do so. In so far as PDs are concerned
market making in gilts is one of their major responsibilities. Hence it is appropriate
that the market savvy PDs are encouraged to take up membership -preferably through
the subsidiary route - of a stock exchange of their choice and help in building
an active gilts market through market making. Since PDs actively bid in the
primary auctions conducted by RBI they should use a part of the stock of gilts
thus acquired for active market making on the stock exchanges. But as regards
banks taking up membership of stock exchanges there appear to be a number of
strong reasons why banks are not the right type of entities to take up exchange
membership. It may be recalled in this context that RBI took active interest
in creating a totally new type of entities called Primary Dealers basically
for the reason that banks are not at all well suited for taking active interest
in the development of a vibrant and sufficiently broad-based government securities
market.
Because of the high SLR requirements
in India, historically banks have been investing heavily in gilts as an investment
proposition. The core activities of banks all along have been to act as financial
intermediaries to mobilise saving of the community and lend them to a wide range
of borrowers and economic activities. Banks are required to lend sizeable part
of their disposable funds to priority sectors comprising small industry, agriculture,
SRTOs, etc. They continue to be the main source of working capital funds for
all range of industries; they also provide finance to export-import activities,
besides helping their clients to manage their foreign currency transactions.
In so far are the PDs are concerned their core function shall always be to function
as active dealers in gilts and other debt instruments, In contrast the core
activity of banks is to mobilise deposits and lend them to a wide range of economic
activities. Banks are being entrusted with a number of social responsibilities,
all of which are related to their basic lending functions. While the business
goals of the top managements of PDs is to remain active in the primary and secondary
markets in gilts the primary business objectives of the top managements of banks
would and should continue to be with their role as the pre-eminent financial
intermediaries in the Indian economy. In short, it is not desirable to burden
banks with an additional responsibility of stock exchange membership for developing
gilts markets when there are as many as 16 active primary dealers and a couple
of dozen wholesale debt market members of the stock exchanges.
The worries about likely securities
settlement failures if banks do not take up membership of stock exchanges appear
to be misplaced. Since the stock of gilts with the primary dealers at any point
of time is quite large (in relation to the size of the retail and the mid segment
markets for gilts) it is unlikely that there would be settlement failures on
account of security shortages. It would not also be fair to the PDs to assume
that they would enter into sale transactions on the exchanges without having
stocks of relevant securities. Given the relatively large size of the wholesale
gilts market on the NDS the PDs can always cover their security requirements,
if necessary, by entering into purchase transactions on the NDS before becoming
sellers on the exchanges. Development of an active gilts market on the exchanges
should be the primary responsibility of the professional debt market brokers
of the stock exchanges and to some extent also of the PDs who are being actively
encouraged by RBI to build vibrant gilts markets. In view of this there does
not appear to be any justification for persuading banks to take up exchange
membership. So long banks are expected to shoulder the onerous responsibility
of being the primary mobilisers of the savings of the community for deploying
them into a number of priority activities, it would not be desirable to expect
that the banks should also take up membership of stock exchanges for developing
a gilts market for the retail and mid segments.
Any move to either compel or persuade
banks to take up exchange membership for trading in gilts on the exchanges is
not desirable as it would lead to avoidable diversion of the attention of the
top management from their core or basic activities to stock exchange trading.
A number of senior bankers are under the impression that large profits can be
earned through trading on the stock exchanges. Once banks become active on the
stock exchanges RBI’s efficacy to regulate them with reference to its prime
policy concerns will get considerably weakened vis-à-vis banks’ trading
in government securities. With their money power banks may create avoidable
gyrations in interest rates if they join the bandwagon of speculative trades
in G-secs on the stock exchanges. Given the delicate stage in which the G-sec
market is currently placed it would not be desirable to allow banks to get entangled
with speculative trades in gilts on the stock exchanges.
The real worry, however, is that
lured by speculative profits top managements of banks may divert their prime
attention from core banking activities to stock exchange trading. There is also
another risk that needs to be kept in view in so far as the public sector banks
(PSBs) are concerned. Given their HRD policy they are obliged to mandatorily
rotate their staff periodically from one department to the other and from one
geographical location to the other. In the absence of good grounding in stock
exchange trading, staff of PSBs may get unwittingly entangled with manipulative/speculative
trading activities on the stock exchanges. Unless the concerned staff members
are in the market for a long period of time they would not be able to develop
necessary market intelligence about different players in the markets and the
games they play; the PSB staff would have limited time to develop their trading
skills and market intelligence that would help them to keep away from manipulations
that some of the unscrupulous market players may indulge.
Banks’ trading on stock exchanges
should not be merely for generating trading volumes on the stock exchanges as
it would lead to fragmentation of liquidity of the wholesale players between
the two markets, viz., the NDS and the stock exchanges. To borrow the terminology
of the Customs Union literature, the trading volume that is generated on the
stock exchanges should be of the type of trade creation and not trade
diversion. As of today, the wholesale gilts market represents
the most sensitive of all interest rate markets in the country and events in
this market have a significant bearing on the events in all other markets including
equity and currency markets. Market fragmentation and its potential
to unfavourably affect liquidity in the wholesale gilts markets would not have
highly favourable implications for the system as a whole. It will not, therefore,
be desirable to mandate banks to compulsorily operate on the exchange gilts
market.
With the NDS gilt market set to
progressively move to an electronic screen based trading, the WDM brokers currently
active in the OTC market would realize that they have to search for alternate
revenue pastures. This would translate into their evincing real interest in
developing the exchange gilt market. It is therefore recommended that the essential
nature of the wholesale and retail markets need to be preserved. The wholesale
market (also referred to as the inter dealer market) should function on the
NDS as existing now and the mid/retail segment may be gradually shifted to the
exchanges without causing any hardship to any of the mid segment investors like
provident funds, small cooperative banks, etc. in the process. PDs may be expected
to build an umbilical linkage between the two markets by being active on both
of them and exploiting arbitrage opportunities. To ensure that the price variations
and consequential arbitrage opportunities between the NDS and exchange markets
are at an acceptable level, mid-segment investors should also be allowed access
to the wholesale market through NDS members as is allowed currently.
Issues for efficient Clearing &
Settlement of Trades on NDS & the Exchanges
Clearing and settlement of trades
done on NDS will happen as per existing process. Trades done on the order matching
system will enter NDS Settlement Module at the 'Ready for Settlement'
stage and thereafter follow the same settlement process as with other trades.
CCIL will act as the central counterparty
for settlement of all gilt trades on NDS. The guaranteed clearing and settlement
service provided by CCIL is subject to the provisions of its Bye Laws, Rules
and Regulations, as applicable from time to time.
Settlement of trades executed on
the stock exchanges could be done by their respective clearing entities. There
is no need to club the exchange settlements with the settlements of CCIL.
Any attempt at linkage between
the clearing systems of the Exchanges and CCIL through a distribution of clearing
responsibilities between them would create two parallel central counterparties
which bristle with severe operational complications and legal complexities.
The exchanges primarily deal in equities and equity related derivative instruments.
On the other hand, CCIL’s mainstay is clearing and settlement in gilts, currency
and money markets. Apart from significant differences in volatility in the markets
served by the exchanges and that served by CCIL, activities/movements in CCIL
serviced markets are very closely monitored by RBI (as is the practice in most
countries) who may even intervene in situations of extreme volatility. The same
normally does not hold good in respect of equity markets.
Further, CCIL guarantees trades
on the basis of margins maintained by its members. These margins are held by
CCIL directly in the form of cash and/or specified highly liquid government
securities. The clearing corporations of the Exchanges do not receive and maintain
margins exclusively of cash and/or government securities. The credit quality
and liquidity of collateral maintained by them are not of the same high quality.
Moreover, CCIL’s membership comprises
of highly regulated entities who maintain their accounts with RBI. Access to
CCIL is, therefore, restricted to the highest quality from a risk perspective.
Exchange trades on the other hand could flow from all classes of market players.
Treating the entire spectrum of market players with the same risk perspective
would be undesirable.
However, if a linkage between the
settlements in both the wholesale and retail markets are completely unavoidable,
the best possible alternative that could perhaps be considered, if acceptable
to RBI, could be permitting the respective clearing corporations of the Exchanges
to be admitted as members of NDS and CCIL with trades happening on the Exchanges
flowing to the NDS environment for clearing and settlement. The respective clearing
corporations of the Exchanges could act as principals in respect of trades reported
by them for settlement with requisite margins, as prescribed, being required
to be maintained with CCIL. The above would ensure the parallel existence of
both sections of the wholesale and retail markets and relative settlements being
subjected to same quality risk management.
Connectivity of Depositories with
RBI PDO-NDS for Speedier Value Free Transfers etc.
For settlement of trades done on
Exchanges, its members are required to open demat accounts with depository participants
of NSDL/CSDL. RBI has issued guidelines for value free transfer of securities
from SGL/CSGL accounts to the depository accounts. Settlement of trades done
on Exchanges happens on a T+2 basis. The transfer of securities from SGL/CSGL
accounts to demat accounts happen on T+1 day. NDS already provides an electronic
value free transfer module. Proper interfaces need to be built between the exchange
clearing corporation/clearing houses and PDO-NDS for electronic transfer of
pay-in/payout files. Such electronic transfers should be facilitated to be carried
out on on-line basis
SECTION IV
CONCLUSIONS AND RECOMMENDATIONS
1. There is need to urgently
review the existing performance and technical capabilities of INFINET as it
has significant bearing on the performance of NDS. An independent technical
study of INFINET can be entrusted to a corporate Agency or body.
2. Technical issues relating
to NDS itself as pointed out in the Report need to be urgently examined and
effectively addressed. There are a number of issues as indicated in the report
relating to both Hardware and Software which need to be addressed immediately
to enhance the tradability of the system
3. There is need for the immediate
introduction of a Screen Based anonymous order matching system on NDS, to
ensure transparency, better price discovery among various other things.
4. Operationalisation of NDS
order matching system needs to be spread over sequential phases for proper
implementation and smooth migration, allowing members to gain sufficient experience
in handling an order matching system.
5. Given the situation of very high level of fiscal
deficit in India, there is a strong case
in favour of keeping the wholesale
G-sec market of NDS members separate from the retail/mid segment market that
would be developed on the stock exchanges. Since movements in G-sec prices
reflect the level of interest rates in the financial system the G-sec market
of NDS members should remain under the close regulatory scrutiny of RBI on
a near real time basis. Therefore, so long as the levels of gross government
market borrowings remain high it is desirable that management and regulation
of wholesale debt market remain with RBI.
6. SEBI and Stock Exchanges
need to initiate steps to build awareness especially amongst the mid-segment
investors about the facilities available for gilt trading in the Exchanges.
Brokers of WDM segment of Exchanges should be compelled to engage in market
making of gilts on the Exchanges with appropriate cover operations being permitted
to them through conclusion of deals with NDS members. While PD’s may be asked
to facilitate trading on the exchange for the retail segment (preferably through
their subsidiaries, Banks should confine themselves to the NDS market.
7. Creation of appropriate electronic
interfaces between the Exchanges, Depositories and RBI-PDO is imperative for
speedier value free transfer capabilities to facilitate settlement of securities
trades concluded on Exchanges.
Annexure 'A'
ELECTRONIC SCREEN BASED
PLATFORM FOR GOVERNMENT SECURITIES
ON NDS
DESIRABLE FUNCTIONS/SYSTEM FEATURES
1. INTRODUCTION
The secondary market in Indian
government securities is presently an Over-the-Counter telephone market. Deals
are concluded with the help of brokers and are reported on RBI-NDS. The NDS
is an electronic platform developed by RBI, intended to facilitate dealings
in government securities and money market instruments. In absence of a screen
based order driven system on the NDS, direct dealing on the NDS has failed to
pick up and the market continues to trade in the telephone market.
Introduction of a screen based
Dealing System would facilitate better price discovery, liquidity, efficiency
and transparency. Other benefits include widened geographical access, reduced
intermediation, enhanced pre and post trade transparency, reduced trading costs,
and better regulation and supervision.
The screen based Dealing System
should essentially possess the following broad features:
1. Orders Driven: The Dealing
system should be purely order driven with all orders from market participants
being matched based on strict price/time priority.
2. Anonymous: The Dealing
system should be an anonymous order matching system wherein identity of parties
is not revealed. CCIL will be the central counterparty to each trade done on
the Dealing System.
3. Transparent
The Dealing system should provide
timely information, both pre-trade (for example, bid,
offer and depth) and post-trade
(for example, last trade price and volume), and disseminate it widely real-time
to all market participants.
4. Straight through Processing
The Dealing system should allow
straight-through processing (STP), i.e. the seamless integration of the different
parts of the trading process, starting from displaying pre-trade
Information and ending with settlement
and risk management. Trades done on the system should be treated as confirmed
and not subjected to the four-stage confirmation process as existing in the
present NDS environment.
The Dealing System should provide for the following
functionalities:
- Order Management
Place Bid/Offer
Modify Order
Cancel Order
- Market Query
Market Watch
Market by Price
Market by Order
Snap Quote
- Dealer Query
Outstanding Orders
Previous trades
Dealer Blotter
Net Position
Activity Log
- Reports and Analysis
YTM Calculator
Deal Ticket
Dealer Blotter
Activity Log
The functionalities are explained in detail in
the subsequent chapters.
2. ORDER MANAGEMENT
2.1. PLACE ORDER
The Dealing System should support
dealing in all Central and State government securities for T+0 and T+1 settlement.
Both Proprietary and Constituent deals should be permitted.
A dealer should be in a position
to place an order (Buy/Sell) in a CG/SG instrument specifying the settlement
type, amount (Face value) and price at which trade has to be executed. The dealer
especially market makers should also have the facility to place simultaneous
Bid/Offer (two-way quotes) in the system at a Set Spread. The spread should
be a parameterisable function at the dealer level such that once the dealer
specifies the Bid price, the Offer price is automatically populated on the screen.
The order so placed will be identified
by unique identification number for audit trail purposes. These orders after
validation such as quantity and price ticks will be accepted for matching in
the Dealing system as confirmed orders. In case of unsuccessful validation,
the order will be rejected. Dealer placing the order should get a notification
for either confirmation or rejection.
The system should also allow the
dealer the option to place conditional orders with respect to the amount or
time as follows:
2.1.1. AMOUNT TYPE
a) ALL OR NONE (AON) – By
selecting an AON condition, a dealer specifies that all of the order amount
should be and no partial trades would be acceptable. AON orders are indicated
by a special ‘#’ sign in the system.
b) DISCLOSED QUANTITY (DQ)
– Disclosed Amount is the part of order amount which the Dealer is willing to
disclose to the market. The remaining amount of the order is hidden from the
market and is released to the market only after the first lot is fully traded.
2.1.2. TIME CONDITIONS
a) DAY – By specifying a
Day condition, the dealer agrees that the order can remain in the system till
it finds a match or is cancelled by the dealer or till the end of the day. At
the end of the day all outstanding day orders are cancelled by the system.
b) IOC – Immediate Or Cancel:
An order with an IOC condition scouts the order book for a match. If a match
is found, it gets traded or partially traded as the case may be. The remaining
order gets cancelled immediately and does not remain in the order book.
2.2. MODIFY ORDER
The system should facilitate modifications
of orders which are not fully traded or are partially traded. The dealer should
be in a position to modify the amount, price, special conditions specified,
if any and the constituent name. The dealer should get a notification of the
successful modification of the order.
2.3. CANCEL ORDER
A dealer should be in a position
to cancel his orders which are not fully traded or are partially traded. The
system should provide a facility to cancel a particular order, cancel all orders
in a particular instrument and cancel all outstanding orders across instruments.
The dealer should get a notification of the successful cancellation of the order.
3. MARKET QUERY
3.1. MARKET WATCH
The Market Watch screen should
allow a dealer to continuously monitor his preferred set of securities. The
Market Watch screen should be customizable in the sense that the dealer can
save his set of securities which remains in the Market Watch even after log
off. The dealer can add, Modify or delete any instrument from the Market Watch.
Information such as the Best Bid Price and YTM, Best Offer Price and YTM, Last
traded Price and YTM, Last traded quantity and Total Traded quantity for a particular
instrument should be available on a real time basis to the dealer. The Market
Watch should allow immediate pickup of the Best Bid or Best Offer from the Market
Watch screen. The Market Watch should also allow easy navigation to other Market
Query screens like Market Inquiry, Market by Price, Market by Order and Dealer
Query Screens like Outstanding orders and Previous trades.
The system should also have a facility
which enables a dealer to track instruments not specified in his Market Watch.
The facility should display the same information as the Market Watch and also
provide for order pickup.
3.2. TICKER
There should be an online ticker
which should display the last traded price of each instrument. The display should
include the instrument description, traded price, settlement type and traded
time.
3.3. MARKET DEPTH
The dealer should be in a position
to view the depth of the market in a particular instrument in terms of price
and orders. i.e Market by Price and Market by Order.
3.3.1. MARKET BY PRICE (MBP)
MBP should display atleast best
five prices quoted and outstanding amount available (which are derived by accumulation
of orders at the same price) at each price quoted in the market. MBP should
also display the Open Price/YTM, High Price/YTM, Low Price/YTM, Last Traded
Price/YTM, Last Traded Amount and Total Traded Amount. The total amount of Bids
and Offers should also be displayed. The system should provide the facility
to pick up orders from the MBP screen.
3.3.2. MARKET BY ORDER (MBO)
MBO should enable the dealer to
view atleast best five outstanding orders available in the market arranged in
the price / time priority. The orders with best price are shown first. For orders
with the same price, the orders entered first are displayed first. There is
no aggregation of order amounts as in Marker by Price screen. MBO should also
display the Open Price/YTM, High Price/YTM, Low Price/YTM, Last Traded Price/YTM,
Last Traded Amount and Total Traded Amount. The total amount of Bids and Offers
should also displayed. The system should provide the facility to pick up orders
from the MBO screen.
4. DEALER QUERY AND REPORTS
4.1. OUTSTANDING ORDERS
A dealer should be able to view
his outstanding orders in a particular security as well as all his outstanding
orders across securities. An outstanding security is an order that has been
entered by a dealer but which has not yet been completely traded or cancelled.
The dealer should be above to modify/cancel the orders from the outstanding
orders screen.
4.2. PREVIOUS TRADES
A dealer should be able to view
the trades done by him in a particular instrument. The trade information should
also include the broken period interest and settlement consideration in addition
to price and quantity details. The trade number should be unique and system
generated for facilitating audit trails. The dealer should have the facility
to reprint the deal tickets from the previous trades list. A Flat File (.CSV
file) should also be generated to facilitate interface with dealer’s back office
software.
4.3. DEALER BLOTTER
A dealer blotter should be provided
containing details of orders placed by the dealer, the trade details and other
relevant information. The dealer blotter should be across instrument types and
contain all data for audit and reconciliation purposes. A Flat File (.CSV file)
should also be generated to facilitate interface with dealer’s back office software.
4.4. NET POSITION
A dealer should be able to view
his net position (Total Buy – Total Sell) in a particular instrument. Net position
should be displayed for all instruments. This would indicate as to whether a
dealer is holding a long or short position on a security.
4.5. DEAL TICKET
A Deal Ticket should be printed
immediately on the matching of an order. The Deal Ticket should contain details
about the security traded, the unique order and trade number, settlement date,
the quantity and price details, the broken period interest, the settlement consideration
and the constituent name, if any. A Flat File (.CSV file) should also be generated
for each trade to facilitate interface with dealer’s back office software.
4.6. ACTIVITY LOG
Activity Log gives the details
of all the order and trade related status that an order undergoes throughout
its life, like order entry, modification and cancellation that dealer has performed
for an instrument or the trade execution resulted by order match. This will
facilitate audit trails. Activity log should be available for a particular instrument
and across instruments. A Flat File (.CSV file) should also be generated to
facilitate interface with dealer’s back office software.
4.7. YTM CALCUALTOR
There should be a provision of
a YTM Calculator in the system to facilitate pre-order analysis by dealers.
The YTM Calculator should follow the market bond conventions for various instruments.
For e.g for instruments with less than six months to maturity, the yield should
be calculated following the money market convention.
5. ADMINISTRATION
The ADMIN will be responsible for
maintaining the Dealing System including instrument and member creation, setting
up of operational parameters and managing trading sessions. The ADMIN Terminal
will be accessible to authorized users only. The following functionalities will
have to be provided in the ADMIB terminal:
5.1. INSTRUMENT CREATION AND MAINTENANCE
The ADMIN will create the instruments
to be made available for trading. This would involve capture of information
about ISIN ID, description, maturity date, coupon, coupon date, shut period,
etc. Suspension/Termination of an instrument on account of shut period/maturity
should be automatically done by the ADMIN system.
5.2. MEMBER/USER CREATION AND MAINTENANCE
The ADMIN will add new members
and users to the Dealing System. This would involve capture of information about
Member NDS ID, CCIL Member ID. ADMIN would also be responsible for suspension/termination
of a Member.
5.3. OPERATIONAL PARAMETERS
The ADMIN will have to set up dealing
parameters that would be applicable to members. This would include setting up
the minimum lot size, the quantity tick size, the price tick size and the maximum
and minimum price range.
5.4. TRADING SESSION
The ADMIN will manage the trading
sessions applicable to the system. There will be different trading sessions
for T+0 and T+1 settlement. There should also be a facility to extend the session
timings whenever required.
5.5. CANCELLATION OF ORDERS
There could be instances of technical
failures of the Dealing system in which case the dealer would require the ADMIN
to cancel his outstanding orders. The ADMIN should have the facility to view
all outstanding orders of a member and cancel orders as instructed by the dealer.
5.6. REPORTS
The ADMIN should have the facility
to generate all member related reports when required. The reports would include
Previous trade reports and Activity Log as well as the Daily Market update of
all trades.
Annexure 'B'
Hardware and Software Requirements
for Gilts Screen based
Trading System on NDS
1. Introduction
The Application Software for
GILTS trading platform shall be client server based architecture with Oracle
9i as back-end database and VB as front-end. The architecture of the proposed
GILTS trading platform and the interfaces with other applications is given
in Annexure – I.
2. Hardware Requirement
The hardware for the GILTS system
shall be based on open system like, Unix operating system and related layered
software. The hardware shall have clustering and redundancy features to ensure
high availability. It is suggested that there should be a disaster recovery
(secondary) site in order to handle any eventuality of disaster at the primary
site. Also, there should be separate environments for production, mock-testing
and user acceptance testing to facilitate smooth release of new versions/upgrades.
The suggested specification for the hardware is given in Annexure – II.
3. Software Requirement
The proposed GILTS platform shall
be developed using 3-tiered architecture viz. Oracle database at the back-end,
VB at front-end and IBM MQ series at middle as communication layer. The details
of software requirements at Member location and Host location for GILTS trading
platform are given in Annexure III.
4. Application Architecture
The application architecture for
the proposed GILTS platform will be the trading terminals and member server
at member end connecting to the host at RBI end via INFINET. Hence, the users
of GILTS trading platform would necessarily be a member of INFINET with a 2
mbps lease link connectivity to the nearest node and with backup communication
line. It may also be ensured, incase of failure of the primary site, the members
transparently changeover to the DR server without affecting their business operations.
Annexure – 'B (I)'
Annexure 'B (II)'
Hardware Requirement:
Host End Server : ( Production/Mock)
Sr. No.
|
Parameter
|
Specification
|
1
|
No. of Servers
|
2 Clustered
|
2
|
No. of Partitions per server
|
2 ( One partition for production,
other partition will for Mock)
|
3
|
Type of partition
|
Physical
|
4
|
Processor
|
>= 750 Mhz, hot CPU Upgradeability
|
5
|
No. of Processors per server
|
4 (2 CPU per Partition)
|
6
|
Memory per server
|
8 GB, upgradable to >=64GB
(4GB per Partition)
|
7
|
Disk Storage
|
2*73GB per server with full
fault tolerance.
|
9
|
Aggregated I/O channel Bandwidth
|
>8 GB
|
10
|
Redundant Power + Fans
|
Yes
|
11
|
IO slots per server
|
> 15, hot swap.
|
12
|
Ports per server
|
1 serial, 1 parallel port
& 1 server management port.
|
13
|
Ethernet CARD per server.
|
6x100/1000 Mbps PCI based
Ethernet Cards. (3x100/1000Mbps per partition).
|
14
|
No. of LVD SCSI card per
server
|
2 (1 per partition)
|
15
|
No. of FC card per server
|
4 (2 per partition)
|
16
|
External Storage
|
500GB on SAN
|
17
|
Storage switches
|
2 x 8 ports SAN switches.
|
18
|
Tape Drives
|
To backup 100 GB in an hour.
|
19
|
Warranty
|
3 years comprehensive on
site warranty
|
Report Server:
Sr. No.
|
Parameter
|
Specification
|
1
|
Type of Server
|
Intel Xeon based
|
2.
|
Clock Speed
|
>= 2.5 Ghz, FSB – 533
MHz
|
3.
|
Cache Memory
|
L2 Cache – Minimum 512 KB
|
4
|
No. of Processors per server
|
1 (upgradable to 2)
|
5
|
RAM
|
2 GB (upgradable to 8 GB)
|
6
|
Disk Storage
|
4*72GB (SCSI)
|
7
|
RAID Controller
|
ServRAID 4Mx with 64 MB battery
backed cache
|
8
|
Ports per server
|
1 serial, 1 parallel port
& 1 server management port, USB Ports – 3
|
9
|
Ethernet CARD.
|
10/100 Mbps PCI based Ethernet
Cards.
|
10
|
Power Supply
|
2X 560 W redundant with voltage-sensing,
auto restart
|
11
|
Warranty
|
3 years comprehensive on
site warranty
|
Member Server:
Sr. No.
|
Parameter
|
Specification
|
1
|
Type of Server
|
Intel Pentium IV (Server
class)
|
2.
|
Clock Speed
|
>= 2.5 Ghz, FSB – 533
MHz
|
4
|
No. of Processors
|
1
|
5
|
RAM
|
Min 1 GB
|
6
|
Disk Storage
|
2x40 GB
|
Dealer Workstation :
Sr. No.
|
Parameter
|
Specification
|
1
|
Type of Server
|
Intel Pentium IV (PC)
|
2.
|
Clock Speed
|
>= 2.0 Ghz
|
3
|
No. of Processors
|
1
|
4
|
RAM
|
Min 512 MB
|
5
|
Disk Storage
|
40 GB
|
Note : The above does not cover the requirements
for DR site.
Annexure 'B (III)'
Software Requirement :
a) Front-End Application Requirements
at Member’s Location
1. Dealer Workstation
i. Operating System |
: Windows 2000 Professional |
ii. Database |
: Microsoft Access 2000 |
iii. Messaging |
: IBM MQ Series Client (Version 5.3) |
2. Member Server
i. Operating System |
: Windows 2000 Server with Service
Pack 3 |
ii. Messaging |
: IBM MQ Series Server (Version 5.3)
|
b) Host-End Application Requirements
at RBI Location
1. Host Server
Operating System |
: Unix |
Database |
: Oracle 9i Enterprise Edition (Version
9.0.1.4) , Oracle RAC |
MQ |
: IBM Websphere MQ Series Server (Version
5.3) |
Development Tools |
1. C++ Softbench (Version E.06.80)
2.Pro*C++ (Version 9.0.1.4.0)
3. Perl (Version 5.8.0)
4. C++ compiler
5. Crystal Reports |
2. Administrator Workstation
i. Operating System |
: Windows 2000 Professional |
ii. Database |
: Microsoft Access 2000 |
iii. Messaging |
: IBM MQ Series Client (Version 5.3) |
iv. Other Software |
: Oracle Client (Version 9.0.1.1)
Crystal Reports Runtime |
3. Report Server
Operating System |
: Windows 2000 Server |
Web server |
: ISS |
Other Software |
: Crystal Reports
Internet Connect License |
Annexure 'C'
Flowchart of Gilts Dealing/Settlements
on Exchanges including Cover Operations
Dealing Flow Chart
Settlement Flow Chart
Cover Operation for Broker – Market Maker – NDS
Dealing
NDS Deal Settlement Operations Flow Chart with
linkage to Depository for ultimate settlement of Exchange Deal