5.3 How are orders executed?
An investor informs a broker to place an order on his behalf. The broker enters the order through his PC, which runs under Windows NT, and sends a signal to the satellite. The signal is directed to the mainframe computer at the office of the NSE or the BSE. A message relating to the order activity is broadcast to the respective member. The order confirmation message is immediately displayed on the PC of the broker. This order matches with the existing passive order(s), or else it waits for the active orders to enter the system. On the matching of orders, a message is broadcast to the respective member.
Active & Passive Order
When any order enters the trading system, it is an active order. It tries to find a match on the other side of the books. If it finds a match, a trade is generated. If it does not find a match, the order becomes a passive order and goes and sits in the order book. The order form for ‘buy’ is in blue / green and ‘sell’ is in red colour with all the details like name or symbol, quantity and price of the share for easy identification. If you put an order and wait for the whole day but cannot get an order, it gets cancelled for the day and you have to post a new order for the next day in order to continue with it.
Whenever you put an order it should be confirmed on the screen immediately through an order number. The trading system operates on a strict price time priority. All orders received on the system are sorted with the best priced order getting the first priority for matching i.e the best buy orders match with the best sell orders. Then similar priced orders are sorted on a time priority basis, i.e the one that came in early gets priority over the later ones and so on.