 Good afternoon everyone. Today, this is the second session for technology work stream and I am really glad myself and Rupali will be taking you through the first part of second technology session. Just to recap, we have already completed two modules, the soft skills workplace communication and financial literacy. Specific aspect of financial literacy which is how a stock exchange works and more importantly the technology behind it we left it during the financial literacy course and from today onward we are going to zoom on to that aspect. The reason we have left it out was we will talk about how a stock exchange works and more importantly what is the technology behind it while all of us during our academic sessions we learn various languages, may be Java, may be visual basic, we get exposed to database technologies. However, we do not get end to end project implementation exposure which is critical when you go into a software firm or for that matter whatever area you choose to work on implementing big projects and program is critical right from day one. So, from today and for next lecture we will see how a project is getting implemented. So, for that we have taken a case study for how a stock exchange works for first hour. So, between 2 to 3 o'clock myself and Rupali will take you through that after that we will take a short break and after that between say 3.15 to 3.30 onwards till rest of the day we will invite people who have recorded the sessions for technology and I am sure by now you have gone through those sessions be it Java, be it Python, be it software development, life cycle or cloud whatever doubts you have my colleagues will address them. So, without further delay let us get into the software stock exchange case study. So, this is our agenda today first I will start with journey to stock listing because it is important to understand where the journey starts for a stock exchange it starts with a company getting listed. So, for first 5 minutes or so let us go and understand how a stock getting listed for that and just to make it interactive I would like to invite one volunteer from a college preferably a female volunteer if you can raise hand thank you for volunteering I will just ask couple of questions if you can help answering those. So, for stock to get listed so let us understand a journey for any company any company starts maybe with a idea and let me give you a quick mantra of how you can be a entrepreneur to be a entrepreneur you just need 3 steps 1, 2, 3 if you master these 3 steps I assure you any of us could be a entrepreneur. So, first step is you identify a problem which you face day to day and here I will ask a question to my volunteer the reason I choose a lady volunteer is being this being a international women's day week I thought will acknowledge that with a female volunteer. So, with the first question what is the problem you face if you can mention your name and whatever problem you face if you can mention that that would be helpful hello yes we can hear you yes are you listening to us yes we can hear you hello good morning good afternoon good afternoon. So, Aisuni we can hear you please go ahead and speak do not wait for us yes go ahead Aisuni please I have to answer your question right any problem you see your face. So, sir I think yeah sir I think that to develop the entrepreneur we have think about what is the need of the society and how we can provide the solution the society and for the same we have to give and give the services. So, that can be a service business in terms of the entrepreneur right. So, so you mentioned it right if you can take maybe just one need of the society what is the problem about society about you if you see any problem which you face day in day out. Ok that problem I have to discuss yes just mention it. So, yeah just I am a woman. So, I like to say that I am a working woman. So, in a day to day life I am facing the problem of maid. So, if there is a provision or the entrepreneur that can provide the center in which our maid can be provide. So, that will be the solution for the working man. So, I like to share this problem. Good. So, that is a common problem you have said maybe you know it is a problem across India especially in the urban countries urban cities. The first step you have already done it the next step is while it is a problem for you ask people around you are they facing the same problem. And I am sure the problem which you have mentioned everybody will vehemently agreed especially the working class in the urban cities that this is the problem for them. Everybody try to find a solution may be with their own mechanism with their limited contacts to reach out. So, step number one is identify a problem. Step number two is is it that only you face that problem or is it the large society face that problem. Third and the most important step is how I put a model around it be it a business model be it is a revenue model be it is operational model. So, the problem which you mentioned if you can start thinking further in terms of oh yes it is a problem for everyone how I can address it at a pan India level across India level if I have to address that problem what is the model I can think about. Shall I go online and start creating a web company where people can register there who want to be a maid at the same time who want to. Yes sir. Correct. So, if we so sir if we can make a model in that model means the working people can register their self that they want the people like for working in a home and at the same time those want to want a job like the lower class level they can also register and there will be one model can apply the solution for that people and on the basis of that the lower class people can get the job and we at the class people can get the service from that right. So, thank you. We can make. Yeah. So, we can make a compare absolutely. So, this was a very quick brief about how you can be an entrepreneur you can always think about any problem the key part is what is the model you can put around it and at a what grand scale you can bring it up and while this is a very apt example which you talked about and thank you for that you must have seen many companies who have used similar approach and have made very successful models. So, typically maybe 20 years back somebody who starts a small business he might starts at a small place he it is called as a proprietary business where a individual or a partner tries to run that business very soon it can be a private limited where they can reach out to a larger audience. However, it is still the ownership of the company or that limited company is with very few individual and then they can start thinking about when they want to expand further and to generate more money as well as to ensure the ownership of the company is rightly distributed. At that time a private limited company start thinking about going to a public limited. So, we have seen various successful companies here we gave a example of made, but we have seen successful models like Ola, Uber or Oyo hotels. So, all of them have tried to encash on the model where you create a market place where there is a definite demand definite supply. However, the supply and the demand are not talking to each other. So, the market place is what we talked about. So, without further delay I would request Rupali from where I stopped i.e. if a company which is private limited want to go to public limited how we can take that further. Sure thanks Aniruddh and welcome everyone very warm good afternoon. Taking a logical cue from what Aniruddh has discussed so far when it comes to taking your company public there are clearly two routes to the market. So, one is you trade between one party to another party and the other is you trade through the stock exchange and when a company typically goes from private to public they list their shares on the stock exchange which are then subscribed to by retail and institutional investors across the country and then the company receives the funding for the shares that they are putting out in the market and then subsequently the shares start trading on a regular basis on the stock exchange. So, before I kind of go and explain to you how the stock exchange actually works I want to talk a little bit about what do we mean by trading between two parties without the stock exchange which is what is called as trading over the counter and then what does trading through the stock exchange mean. So, I just want to draw a reference to a quick slide here. So, first we will talk about over the counter over the counter would mean that you know the trade happens between two individual parties. So, they are that way customized to the needs of both the parties. So, buyer has a set of requirements and the seller has b set of requirements both buyer and seller come together across the counter to talk about terms negotiate agree on the price and then exchange the products and services for money right. Now, what is important here is to note that the trade is between two parties when we say two parties in historical days it used to happen across the floor. So, in my financial literacy session I have given an example of a movie called Guru not sure how many of you have seen, but there is a specific instance in the movie when the trading of silk is happening. So, it is in a closed room traders are standing on top of bails of the Kera silk cotton and they are negotiating prices and trading that is a classic example of what is meant by a over the counter trading or over the counter market. Now, that is historical these days the same over the counter mechanism has become via telephone telecommunication equipment and computer terminals right, but the important thing to remember when the trade is bilateral between these two parties is that the products are tailor made to the specifications. So, unlike the earlier example where Anirudh was referring that I issue shares to the general public through the IPO those cannot be customized to the needs of let us say A and B differently they all have to be same they all have to be shares of XYZ company they all will trade at a specific price and they all will have the standard requirements which the stock exchange will be dictated that is not like of what is traded on over the counter. So, typically what sort of products get traded here are products which are not listed products on the stock exchange corporate bonds derivative instruments structured products and at times commodities and currency products as well right and mostly trades here happen between institutional parties unlike retail ones where we can transact on the stock exchange through the broker that we have signed up with right. Now taking a look at the exchange traded products clients can only trade on the exchange if you are a member of the stock exchange to be authorized member of the stock exchange you have to fulfill certain norms have certain amount of assets as your net worth pay up membership fees of the exchange and comply with all rules and regulations. So, you would not find retail people who are members of the stock exchange but it will always be institutional clients or companies who will take memberships of the stock exchange. So, how do retail clients like all of us can trade we can trade through these institutional clients who are themselves member of the stock exchange by opening what is called as brokerage accounts with them right. So, one is a brokerage account I instruct my broker that I want to buy 100 shares of XYZ company the broker will place an order to the stock exchange the stock exchange will try and match the order with somebody from the selling side and then they will confirm back to me once the order is confirmed I will pay for the shares and the shares will then be transferred into my DMAT account right. So, there are few parties involved in this whole transaction how the exchange takes place which we will see in a while from now. Now I will just like to jump a little bit in terms of a comparison between these two types of deals now that we understood what is a OTC market and what is a exchange traded transaction this slide really talks about some thin line differences between each of these types. So, as we said exchange direct products are directly between the holder of the product and the exchange exchange acts as the central counterparty. So, as a buyer if I am transacting on the stock exchange I really don't know who the seller is the seller intern doesn't know me as the buyer I will lock in my request with the exchange the seller will also lock in their request with the exchange the exchange will do what is called as matchmaking they will match my buyer request with the sale request from the other side and that's how the price is fixed and agreed upon reverse communicated back to both parties post which I will pay for the purchase and the seller will receive the amount for the sale of the financial product on exchange traded transactions parties need to be a member of the stock exchange if they have to utilize the services on the OTC the transactions happen over the telecommunications and telephone networks they're not required to pay any memberships on exchange traded products there is no underlying contract per se because the exchange acts as the custodian the exchange acts as the regulatory body to ensure that the trade happens properly and is in compliance with the terms that are laid down by the exchange in case of OTC what you have is an underlying contract so if me and Aniruddha have to trade on a particular product there'll be some legal contract which is written between both of us which will specify what's the product what are the terms of the trade when is the exchange going to happen when do I pay for the product when does he transfer the product to me so then honoring the contract really depends upon the performance of both the parties myself and Aniruddha in this case so if either of us fail to perform on our obligations on the contract then the other resulting party is definitely at a loss this doesn't happen in case of an exchange because exchange would guarantee that both parties perform their sides of the obligation pricing is readily available when it comes to exchange traded because there's constant demand and supply of the same product being traded on the exchange so price is a discovery of the demand and supply mechanism and it's readily available at any point in time in case of an OTC the prices is subject to negotiation so therefore what buyer and seller agrees is a negotiated price for the trade of the product and because of the pricing being a little less competitive little less open to more negotiation the liquidity in OTC market is slightly lower than what it is in the exchange traded products in both cases the price movements and the risk is driven by the market movements which will ultimately result in the value of money that I pay out or I receive if I'm either a buyer or a seller to the trade right now what we'll do is we'll quickly jump on to understanding how the exchange works right so if you look at this diagram on the left hand side there is an investor A this person is the buyer on the right hand side you have another person investor B this person is a seller investor A is wanting to purchase some shares and investor B is wanting to sell shares what investor day will do is on today's date which is called T0 trade date 0 in the financial jargon I put the call to my broker and I'll tell him that you know I want to buy let's say 100 shares of reliance my buying broker is in turn a member of the stock exchange so my buying broker is going to log in the request with the server of the stock exchange and there is a interchange of information between the brokers servers and the stock exchange servers exchange receives the request and then tries to find out a match on the other side what is happening is investor B has locked in a request with their broker to sell shares of reliance as an example selling broker is going to log in the request with the database of the server and then the exchange is going to match both these requests I will when I log in the request I will specify a price limit start and what price band I'm willing to buy the share investor B when they log in the request they are also going to set up a equal price band from the selling side exchange then they based on the demand and supply of the reliance shares overall within the stock exchange network will agree on a single price that is matched between me as a buyer and let's say somebody else as a seller on the other side this matching is done by matching algorithms which are residing on the stock exchange servers once the price is matched a reverse communication is sent back to the buying broker saying your request for reliance shares at XYZ price has been finalized and this is the price at which you got to buy the buying broker will in turn communicate back to the buyer investor A saying that your trade has gone through and now on the next date which is t plus one that means tomorrow I have to pay to my broker the price of the share the price for the purchase of the shares plus an amount of brokerage which is an agreed contract between me and the buying broker the buying broker will then retain their brokerage with themselves and then pass on the remainder of the amount to the exchange right now for for the transfer of this money across the system there have there have to be additional parties involved this is what is achieved by participants known as clearing banks and custodians and then there is a concept of clearing house which sits on top of the exchange we will explain some of those things by a by a diagram shortly right so now the exchange receives the money for the purchase the exchange will then transfer that money to the selling broker on the following day which is t plus two that means the third day from the trade date zero the selling broker will then pay the money to the buyer after deducting their commission for soliciting the deal right so that's how the flow of money is going from one side to the other for the buy and the sale of shares similarly you'd appreciate that the transfer of the shares also has to happen from investor b to investor a into their own d-mat accounts so similarly once the trade is confirmed investor b will transfer the shares to the pool of the selling broker selling broker will in turn transfer the shares to the exchange exchange will transfer them to the buying broker and buying broker will then transfer them to the d-mat account of the investor a who's the buyer now again for the exchange of these for those for the transfer of shares from one side to another there are bodies involved which is again the clearing house is the custodians and another participant which is called as your depository participants the people who give you the d-mat accounts to hold the shares in the electronic form right i'll just take a pause at this moment and see if there are any questions before we move further if you if you have any questions please press the hand raise button regarding the current topic anybody having questions please press the hand raise button okay another 10 minutes another 10 seconds or so if you have a question at then we'll otherwise we'll proceed all right it seems all of you are actively into trading so you know the process in and out so looks like there are no questions at this point in time okay so i would like to now spend a little bit of time in terms of drawing out on a piece of paper and explaining you know how connections are happening between parties that are involved when an exchange trading transaction has to flow through right okay so at the center of the story is what is called as the exchange right now let me take the india india example here so a typical indian example is what is called as a national stock exchange here you have the buyer and i'm just replicating bits and pieces of the diagram here here you have the seller right obviously attached to the seller is the selling broker attached to the buyer is the buying broker and then they connect to the exchange this was a diagram we saw earlier right now i'll just add on bits and pieces to these diagram in terms of the parties that i spoke of earlier clearing houses depositories and so on and so forth so now what happens is there is a central depositories security agency which sits on top of the exchange india examples of such a type of body are what is called as nsdl and cdsl they are the ones who govern the transfer of funds from one side to the other and from securities from the other side to the buyer side right again closely connected to the exchange is what is called as a clearing house clearing house is a rbi authorized mechanism that will ensure the movement of funds from one side to the other as well as securities from one side to the other so they all pass through the clearing house supporting the clearing house are what is called as clearing banks so there are clearing banks and why i've mentioned two here is because you have one on the buyer's side you have one on the seller's side these are the banks which receive instructions from the cdsl and the nsdl to transfer the money from one side to the other and securities from the other side to the buyer side once the trade goes through so once the trade goes through exchange is going to send out instructions to nsdl cdsl that this is the trade the role of nsdl and cdsl is to determine the obligations underlying the trade so what i mean by obligations is what has the buyer to pay for to whom and what are all the other details surrounding the transaction accordingly the nsdl and cdsl will reverse transmit messages to the clearing house here who will then in turn connect with the clearing banks on the buyer's side for movement of money out of the buyer's account and then on the selling side for credit of money into the seller's banking account right and what you have here is what is called as depository participants so you have one on the buyer's side and you will similarly have another on the selling side depository participants are institutions who provide you with demat accounts so once the money has gone through from the clearing house mechanism from the buyer to the seller a reverse instruction to transfer the securities will be sent by nsdl cdsl to the depository participant and then shares will be moved out of the seller's bank account seller's demat account and transferred to the buyer's demat account typical examples of demat account are at times the same brokers who also provide the demat account facility so for example hdfc securities is is also a designated broker of the exchange hdfc securities also provides buyers and sellers with demat account so then the process becomes even more seamless right so typically this is the flow of a transaction when actually a trade goes through from the stock exchange and you would appreciate that if i have to have all these movements happen there has to be a robust technology base underneath each of these to make some of these things possible electronically right so what you see is an amount being debited out of your bank account on the following day you make a trade and on the third day from the trade you see the shares being credited in your demat account so that's something which is visible to us but what's not visible to us is the behind the scene activity which i just put out in front of you in this diagram and then each of these people will have the technology platforms below beat database beat your servers beat your algorithms beat your messaging systems beat your payment gateways to make all of these exchanges possible all right so taking a pause here again to see if there are any questions coming by so we have one from aks university aks university no audio video from your side if you have any questions please press the hand raise button below the user list yes aks we can hear you but you can't see you but please go ahead we can hear you okay ma'am how nsdl and cdsl are different among itself they are two both different institutions so some exchanges may use the nsdl network some exchanges may use the cdsl so in india typically you know you have nsc you also have bsc so it really depends on which authority the exchange has signed up with and ma'am is it required that both buyer and seller should understand the not required not required they can have different if depository participants your nsdl and cdsl are the custodians of transfer from one participant to the other so it's not required to have with the same party thank you ma'am any other center having any questions okay all right so then we will proceed to the last part of the session which is now by now you would know that exchange they act as the central counterparty which means as I mentioned they would have a central server which has a matching algorithm that runs that matches the trade from the buy side as well as the sell side so now Anirudhu will again take all back from me and talk to specifically about the matching engine which runs you know behind the stock exchange and what are some of the components involved therein before that we just saw a hand raised again from wal chand institute of technology so if you have a question please do ask ma'am is the broker really required in the system exchange and what does the role he plays they are absolutely required because retail investors like all of us cannot be members of the stock exchange to be a member of the stock exchange the stock exchange has got stringent guidelines so you need to be a institutional party you need to have asset base of xyz there are heavy membership fees that you have to pay every year to the exchange and memberships of the exchange are not not granted to retail people now you can transact through the stock exchange only if you're a member or you