Introduction to Indian Financial Markets - Part 1
A primer on the laws, frameworks and technologies enabling Indian Financial Markets
Background:
The functioning of financial markets in India remains opaque to most retail investors in 2025. While many advancements have simplified market access for retail investors, significant aspects still need to be uncovered and understood to grasp the complete picture.
In a series of upcoming posts, I will introduce this complex area to retail investors, providing comprehensive information to help us better understand the evolving dynamics of Indian markets.
The financial market ecosystem in India is enabled through a series of Acts of the Parliament of India. These laws provide a framework with a set of regulations & oversight required to enable the financial infrastructure in India. These laws establish regulatory bodies to act as guardians & watchdogs of the Indian financial markets ecosystem.
A note on SEBI
SEBI (established through the Securities and Exchange Board of India Act, 1992) is a regulatory body for the securities market. SEBI is responsible for protecting investor interests (majorly retail investors), promoting market development and regulating the activities of stock exchanges.
Main acts governing the functioning of securities markets (capital markets) in India are:
Trading is primarily electronic and is contracted on major Stock Exchanges authorised by SEBI
Refer the following Link for more information on the Acts.
A note on RBI
Established by the Reserve Bank of India Act, 1934
RBI has a mandate to regulate the interest rate and foreign exchange markets. As part of this mandate, the RBI is responsible for the regulation of interest rate markets (including government securities market), money markets (including repo markets in government securities), foreign exchange markets, derivatives on interest rates/prices, foreign exchange rates and credit (all these security types will be explained in detail in a later post)
RBI regulates the financial markets within the framework provided by the following Acts.
Trading is primarily electronic and is contracted on major Electronic Trading Platforms (ETPs) authorised by RBI
Refer the following Link for more information on the Acts.
A note on Electronic Trading Platforms
The RBI authorises Electronic Trading Platforms (ETPs) under the Electronic Trading Platforms (Reserve Bank) Directions, 2018. ETPs are any electronic system, other than a recognised stock exchange, on which trading/transactions in eligible instruments like government securities, money market instruments, foreign exchange instruments, derivatives, etc. are contracted.
It is important to understand the major electronic trading platforms that are authorised by RBI and are operating in India. Information on trading activity (volumes and value) gleaned from such ETPs is important to understand the macro picture concerning Indian financial markets. Activity in these markets can be a direct indicator of Banking Liquidity, Forex rates etc.
Note: A lot of the terms used in the following sections are not introduced yet. They will be clarified in a later post in this series.
Major Electronic Trading Platforms (ETPs) in India are:
NDS-OM (Negotiated Dealing System - Order Matching)
Purpose: Electronic trading of government securities. It facilitates anonymous order matching for buying and selling these securities.
Market Segment: Debt markets
Buyers: Primary Dealers, Banks, Institutions
Sellers: Primary Dealers, Banks, Institutions
Regulator: RBI
For additional details: NDS-OM
NDS-CALL (Negotiated Dealing System - Call Money)
Purpose: Trading in call money, notice money, term money. These are short-term money market instruments. It allows participants to borrow and lend funds for very short durations.
Market Segment: Money markets
Buyers: Banks, Primary Dealers
Sellers: Banks, Primary Dealers
Regulator: RBI
For additional details: NDS-CALL
CROMS (Centralised Reporting and Operations Management System)
Purpose: Reporting and post-trade processing of government securities transactions including outright transactions, repos, and reverse repos. It plays a vital role in post-trade processing and settlement.
Market Segment: Debt markets
Buyers: Banks, Primary Dealers, Institutions
Sellers: Banks, Primary Dealers, Institutions
Regulator: RBI
For additional details: CROMS
TREPS (Triparty Repo Dealing and Settlement System)
Purpose: TREPS is a platform for triparty repo transactions. In a triparty repo, a third party (typically a clearing corporation) acts as an intermediary between the borrower and lender, managing the collateral. This enhances efficiency and reduces counterparty risk in the repo market (a crucial part of the money market).
Market Segment: Money markets
Buyers: Banks, Primary Dealers
Sellers: Banks, Primary Dealers
Regulator: RBI
For additional details: TREPS
F-TRAC (Fixed Income Trading and Reporting)
Purpose: Trading and reporting of certificates of deposits (CDs), Commercial Paper (CPs), repos on corporate bonds and other fixed-income securities
Market Segment: Money markets
Buyers: Investors, Traders
Sellers: Issuers, Investors
Regulator: RBI
Operated by: Clearing Corporation of India Limited (CCIL)
For additional details: F-TRAC
FX-Clear
Purpose: Clearing and settlement of foreign exchange transactions. While not directly related to stock, debt, or money markets in the traditional sense, it supports their functioning by facilitating the currency conversion that often accompanies cross-border investments in these markets.
Market Segment: Forex markets
Buyers: Banks, Financial Institutions
Sellers: Banks, Financial Institutions
Regulator: RBI
Operated by: Clearing Corporation of India Limited (CCIL)
For additional details: FX-Clear
CDS (Credit Default Swaps)
Purpose: This is a platform providing market data and analytics related to Credit Default Swaps (CDS). CDS are derivative instruments related to debt markets, used to transfer credit risk.
Market Segment: Debt (Credit Derivatives)
Buyers: Market Participants
Sellers: Market Data Providers
Regulator: SEBI/RBI
Operated by: Clearing Corporation of India Limited (CCIL)
For additional details: CDS
Important Notes
Some platforms may have overlapping functionalities.
The regulatory oversight can vary depending on the specific instrument and market segment.
This information should give you a good overview of the key platforms and terms in the Indian financial markets.