Trading & Capital Markets · Chapter 3 of 8
The Indian market: NSE, BSE, SEBI and the plumbing
Two exchanges, two depositories, one regulator that moves faster than most, and the largest derivatives market in the world by contract count.
If you are interviewing in India for anything in capital markets, this chapter is the background everyone assumes you have. It is also genuinely interesting, because the Indian market has features that do not exist elsewhere — and because SEBI has been unusually willing to intervene in market structure, which means the rules you learn have dates attached to them.
The institutions, and what each actually does
| Institution | Role | Note |
|---|---|---|
| NSE | The dominant exchange | Overwhelming share of equity derivatives; the reference market for index products |
| BSE | The older exchange, and a genuine competitor again | Grew its derivatives share materially from 2023 onward with its own index contracts |
| MCX | Commodity derivatives | Crude, natural gas, gold, silver, base metals. Different hours, different margin behaviour |
| NCDEX | Agricultural commodities | Smaller, and periodically subject to trading suspensions by regulation |
| NSE Clearing / ICCL / MCXCCL | Clearing corporations | Novation, margining, settlement guarantee, default waterfall |
| NSDL and CDSL | The two depositories | Shares as book entries. CDSL has more retail accounts; both are systemically important |
| Depository participants | Your interface to a depository | Your broker usually is one, which is why demat and trading accounts are bundled |
| SEBI | The regulator | Rule-maker, supervisor and enforcement authority across all of the above |
| RBI | Currency derivatives and the banking interface | Jointly regulates the currency segment with SEBI |
Segments and hours
| Segment | Trading hours (IST) | Settlement |
|---|---|---|
| Equity cash | 09:15 – 15:30, pre-open 09:00 – 09:08 | T+1, with an optional same-day T+0 mechanism on a defined set of scrips |
| Equity derivatives | 09:15 – 15:30 | Daily mark-to-market; cash-settled index, physical delivery on stock derivatives at expiry |
| Currency derivatives | 09:00 – 17:00 | Cash settled |
| Commodity (MCX) | 09:00 – 23:30 / 23:55 depending on US daylight saving | Aligned to international benchmarks, which is why the session runs late |
The T+1 move, and why it mattered more than it sounds
India moved to T+1 settlement ahead of essentially every other major market, phasing it in through 2022 and early 2023. The US followed in May 2024.
The interesting consequence is not the day saved. It is that a shorter cycle means less outstanding counterparty exposure, therefore lower margin requirements at the clearing corporation, therefore more efficient capital use across the whole market. The cost falls on foreign investors, who now have a compressed window for currency conversion and custody instructions across time zones — which is exactly the friction that made other markets slow to follow.
A same-day (T+0) settlement option was subsequently introduced on a limited set of securities. Treat its scope as something to check rather than assume: this is an area where the rules have been changing every few months.
Margin: the regime that reshaped Indian broking
Between roughly 2020 and 2022, SEBI made a series of changes that fundamentally altered how Indian brokers operate. If you are interviewing at a broker, a clearing member or in risk, these are the changes that define the job:
- Upfront margin collection. The broker must collect the full initial margin before accepting the order, not at end of day. This ended the practice of intraday leverage far beyond exchange-prescribed margins, which is why Indian intraday leverage fell sharply and why several brokers' business models changed.
- Peak margin reporting. Clearing corporations take random intraday snapshots of client positions and margin. The broker must have held sufficient margin at every snapshot, not just at the close — so a position opened and closed within the day still had to be fully margined while it existed. Shortfalls carry penalties.
- Pledge and re-pledge. After the Karvy episode, securities pledged as collateral must remain in the client's own demat account with a pledge marked in favour of the broker, rather than being transferred to the broker. This structurally prevents a broker from using client securities as its own collateral, which is exactly what went wrong.
- Client-level segregation and daily reporting of collateral to the exchanges.
The point worth making in an interview: these were not incremental compliance changes. They moved billions of rupees of float out of broker balance sheets, forced a rebuild of every broker's risk system, and are the reason risk and compliance hiring in Indian broking grew as much as it did.
The derivatives market, and the 2024-25 intervention
India became, by contract count, the largest derivatives market in the world — driven almost entirely by index options, and within that, by weekly expiries and by very short-dated trading on expiry day. Retail participation was extraordinary by any international comparison.
SEBI published research showing that a large majority of individual F&O traders lost money, and in late 2024 introduced a package of measures aimed at the retail options market: larger contract sizes for index derivatives, a reduction in the number of weekly expiries per exchange, upfront collection of options premium, additional margin near expiry, and removal of calendar-spread margin benefit on expiry day.
How to talk about this without taking a side
There is a real argument on both sides and an interviewer will notice which one you have absorbed uncritically.
For intervention: the loss data is the regulator's own, the product is genuinely difficult, the leverage is extreme at expiry, and a market where most participants reliably lose is a consumer-protection question rather than a free-choice one.
Against: derivatives volume provides the liquidity that makes the cash market efficient, the measures push activity toward less-regulated venues, and adults choosing a negative-expectancy activity is not obviously the regulator's business.
The answer that works: state both, then say what you would measure. “The test is whether retail losses fell without cash-market liquidity deteriorating, and both are measurable. I would want to see the data before concluding.”
Algorithmic trading and the API question
Retail algorithmic trading in India runs through broker APIs. SEBI moved to formalise this — broker-provided APIs, registration and tagging of algorithms, exchange approval for strategies offered to clients, and accountability sitting with the broker rather than with an unregulated intermediary. If you build anything that places orders programmatically in India, the compliance surface is the broker's, and that shapes what a fintech can actually offer.
Colocation is available at NSE and BSE and is used by the professional end of the market. The NSE colocation case — concerning preferential access to the tick-by-tick feed in the early 2010s — is worth knowing about, because it is the origin of much of the current regulation around fair access, randomised order dissemination and audit of exchange systems.
Check yourself