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SCREEN BASED TRADING: SBT Features, Benefits, Trends and Issues

BY: P Pirakatheeswari | Category: Business and Finance | Post Date: 2009-08-06
 



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Miss. P. PIRAKATHEESWARI, Lecturer in Commerce,
Sri Sarada College for Women (Autonomous), Salem - 16.


Introduction

SBT (Screen-Based Trading) gives you the ability to click in instantly execute trades when connected to trade execution infrastructure through partner clearing firms and execution providers. SBT, when used alongside helps empower to analyze options, quote markets, and execute orders - all at the same time. With SBT, you can create defaults for a number of contracts, order durations, and order types, and track the status of orders in the SBT Message Log.

Features
Manages multiple order types simultaneously
Routes to major options exchanges
Features customizable settings and logging
Integrates with Micro Hedge Auto-Quote

Benefits

Executes trades instantly
Allows traders on and off the floor to send orders and receive trade confirmations
Helps empower traders to simultaneously analyze options, quote markets and execute orders

From basic order entry tickets to fully licensed Depth of Market (DOM) trading screens, Zen-Fire provides screen based trader's access to the same high-speed market data and order routing used by professional firms and institutions world-wide.

Server-side order handling for order types not natively supported by the exchanges helps reduce delays and complications that may arise from user connectivity, hardware and software failures. With an API available to qualified developers and firms, traders can create proprietary trading screens to accommodate any trading need not met by the available platforms.

Current order entry methods
Dynamic and Static DOMS ,
Chart Trading ,
Order Tickets ,
Keyboard entry and hot-keys
Trading directly on the quote board

Current order Types -

Limit
Stop Market
Stop Limit
Limit if Touched
Market if Touched
OCO (One Cancels Other)
GTC (Good til Cancelled)
GTD (Good til Day)
Trailing Stops
Volume Trigger Stops

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 on 2003.

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 well 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.

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Comments on this article: (2 comments so far)

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Comment Comment By Comment Date
No doubt
No doubt, SBT is an excellent technology. Nice explanation.
Manas Shah 2009-08-11
Very nice article
I read your whole article .. really liked it.
Bharat 2009-08-07



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