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Anonymous Order Matching Trading in Government Securities

Reserve Bank of India has announced the launch of the electronic order matching trading module for Government securities on its Negotiated Dealing System (RBI-NDS-GILTS-Order Matching Segment, NDS-OM in short) on August 1, 2005.

As part of its long term objective of developing the Government securities market, the Reserve Bank had introduced the Negotiated Dealing System (NDS) in February 2002 with the broad objectives of (i) ushering in an automated electronic reporting and settlement process, (ii) facilitating electronic auctions and (iii) providing a platform for trading in Government securities on a negotiated basis as well as through a quote driven mechanism.

NDS has helped in achieving paperless and straight through settlement of secondary market transactions and has brought about significant improvements in transactional efficiency and transparency. However, the trading facilities on the NDS (both negotiated and quote driven) were hardly used, largely because they were not user friendly.

In order to provide NDS members with a more advanced and more efficient trading platform, and as recommended by the Working Group on Screen Based trading in Government Securities, the NDS-OM trading module is now being introduced. NDS-OM will co-exist with the telephone based trading system as well as the exchange based trading mechanism.

The broad features of the NDS-OM system are as follows:

(i). The NDS-OM module is part of Reserve Bank’s Negotiated Dealing System.

(ii). The use of NDS-OM trading module is voluntary and will be available in addition to the existing telephone based trading mechanism on NDS.

(iii). During the first phase, the NDS-OM will serve the trading requirements of all Banks, Primary Dealers and Financial Institutions regulated by RBI that hold current NDS membership. Other NDS members will be extended access in the next phase, as appropriate. The option of extending NDS-OM to non-NDS members will be examined in due course.

(iv). The system will be purely order driven with all orders being matched based on strict price/time priority.

(v). The system will be an anonymous order matching system wherein identity of parties is not revealed before or at the time of trade. The Clearing Corporation of India Limited (CCIL) will become the central counterparty to each trade done on the system.

(vi). The system will allow straight-through processing (STP) and trades executed will flow straight to CCIL in a ready-for-settlement stage.

(vii) The system will provide functionalities for order management (placing, modifying or canceling orders), trade related queries, activity log, market information and analytics.

(viii) The system, to start with, will support dealing in all Central Government and State Government securities for T+1 settlement. The system will be further upgraded later to facilitate trading in discounted instruments like Treasury Bills.

>>> Read more RBI guidelines

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