Glossary · 51 terms
Trading & Execution
All trading & execution terms in the EquitiesIndia.com glossary — plain-English definitions written for Indian retail investors.
Algo Trading(Algorithmic Trading)
Algo trading, short for algorithmic trading, is the use of computer programs and pre-defined rules to automatically execute orders in financial markets at speeds and frequencies that are impossible for human traders to achieve manually.
Algorithmic Trading Framework (SEBI)(algo trading rules)
The regulatory structure established by SEBI governing the registration, testing, audit trail requirements, and real-time risk controls applicable to all automated order-generation systems used by brokers and their clients on Indian stock exchanges.
Arbitrage(Cash-Futures Arbitrage)
Arbitrage is the simultaneous purchase and sale of an asset in different markets or forms to profit from a price discrepancy, theoretically providing a risk-free return that also helps bring prices in the two markets into alignment.
Auction Market Trading(Call Auction)
Auction market trading refers to the periodic call auction mechanism used on Indian exchanges for illiquid securities, the pre-open session, and the post-close session, where orders are collected over a defined window and matched at a single equilibrium price rather than continuously.
Best Bid and Offer(BBO)
The Best Bid and Offer (BBO), also known as the National Best Bid and Offer (NBBO) in multi-exchange contexts, represents the highest currently available bid price and the lowest currently available offer price in an order book, defining the inside market and the minimum transaction cost for immediate execution.
Best Execution Policy
A SEBI-mandated framework requiring brokers to demonstrate that client orders are executed on terms most favourable to the client, considering price, cost, speed, likelihood of execution, and order size.
Best Price Guarantee(Price-Time Priority)
Best price guarantee in the context of exchange-traded markets refers to the price-time priority matching algorithm used by NSE and BSE, which ensures every incoming order is executed at the best available price in the order book before moving to less favourable prices.
Broker Risk Management System(RMS)
A Broker Risk Management System (RMS) is the real-time pre-trade and intra-day risk control infrastructure maintained by Indian stockbrokers to enforce margin limits, monitor open position exposures, and trigger automatic square-off of positions that breach defined thresholds.
Circuit Filter Review(price band review)
The process by which NSE periodically evaluates and adjusts the price band limits (circuit filters) applied to individual securities, based on factors including trading volume, volatility history, market capitalisation, and regulatory surveillance findings.
Co-Location(Colo)
Co-location is an arrangement whereby trading firms install their servers in the same data centre as an exchange's matching engine, minimising network latency to microsecond levels and enabling high-frequency and algorithmic trading strategies that depend on speed of execution.
Consolidated Tape(Consolidated Market Data)
A consolidated tape is a centralised, real-time stream of trade and quote data aggregated from all exchanges and trading venues for a given security, providing a unified view of national best bid and offer prices and last sale information.
Dark Pool(Alternative Trading System)
A dark pool is a private, off-exchange trading venue that allows institutional investors to execute large block trades without publicly displaying their orders in real time, thereby reducing market impact and information leakage.
Delivery Percentage(Delivery Volume Percentage)
Delivery percentage is the proportion of total traded shares in a stock on a given day that resulted in actual delivery — i.e., the shares changed hands in demat accounts — compared to shares that were bought and sold within the same trading day (intraday positions that were squared off without delivery).
Delivery vs Intraday Brokerage(CNC vs MIS Brokerage)
Delivery vs intraday brokerage refers to the differential fee structures that Indian stockbrokers apply to CNC (Cash and Carry) trades held overnight versus MIS (Margin Intraday Square-off) trades closed within the session, with discount brokers charging zero delivery brokerage and a flat Rs 20 per executed order for intraday.
Direct Market Access(DMA)
Direct Market Access (DMA) is a facility through which institutional investors can route their orders directly to the exchange's order book using a broker's infrastructure, bypassing manual dealer intervention and achieving faster execution with greater price transparency.
Direct Plan Trading(Execution-Only Trading)
Direct plan trading in the equity context refers to executing stock trades through an execution-only broker or platform without receiving personalised investment advisory, research, or portfolio management services — analogous to the direct plan concept in mutual funds but applied to equity brokerage.
Disclosed Quantity(DQ Order)
Disclosed Quantity (DQ) is the portion of a large order that a participant chooses to display publicly in the exchange's order book, with the remainder hidden as a reserve — a mechanism available on NSE and BSE that allows institutional traders to execute large positions while limiting their visible footprint.
Discount Broker vs Full-Service Broker(Discount Brokerage)
Discount brokers offer execution-only equity trading services at low flat fees or zero delivery brokerage, while full-service brokers combine trade execution with research, advisory, portfolio management, and relationship manager access at higher percentage-based commission structures.
Execution Management System (EMS)(EMS)
A technology platform used primarily by institutional traders to manage the live execution of orders in financial markets, providing real-time market data, smart order routing, algorithmic execution strategies, and transaction cost analysis.
FIX Protocol(FIX)
The Financial Information eXchange (FIX) protocol is an open messaging standard for the electronic communication of trade-related information between financial institutions, enabling standardised order submission, execution reporting, and confirmation across brokers, exchanges, and investment managers globally.
High-Frequency Trading(HFT)
High-frequency trading (HFT) is a form of algorithmic trading that uses powerful computers and extremely low-latency connections to execute a large number of orders in fractions of a second, profiting from tiny price discrepancies and capturing the bid-ask spread.
Iceberg Order(Hidden Order)
An Iceberg Order is a large order on an exchange that is divided into a smaller displayed quantity visible in the public order book and a larger hidden reserve quantity that is automatically refreshed each time the displayed portion is fully executed, concealing the full extent of the participant's interest.
Intraday Margin Leverage(MIS Leverage)
Intraday margin leverage refers to the amplified buying power a broker extends to traders for positions opened and closed within the same trading session, historically available at multiples of 5x to 20x in India before SEBI's peak margin regime reduced it to near-delivery levels.
Kill Switch(Emergency Stop)
A Kill Switch is an emergency mechanism, mandated by SEBI for all algorithmic trading participants, that instantly halts all pending and new orders from an algorithmic system upon activation, serving as a circuit breaker at the algorithm level to prevent runaway automated trading from causing market disruption.
Latency Arbitrage(speed arbitrage)
A trading strategy that exploits differences in the speed at which market participants receive and act on market information, typically requiring co-location at exchange data centres and specialised hardware to achieve microsecond-level execution advantages over slower participants.
Maker-Taker Model(liquidity rebate model)
An exchange fee structure that charges traders who remove liquidity from the order book (takers) and pays a rebate to traders who add resting limit orders to the order book (makers), incentivising the provision of displayed liquidity.
Market Making(Market Maker)
Market making is the practice of continuously quoting both a bid price (to buy) and an ask price (to sell) for a financial instrument, providing liquidity to other market participants and earning the bid-ask spread as compensation for taking on inventory risk.
Market Microstructure Theory(microstructure)
The academic discipline that studies how the trading process itself — the rules, mechanisms, and behaviour of participants — determines price formation, liquidity, and the distribution of trading gains and losses, with particular focus on information asymmetry and the role of market makers.
Order Management System (OMS)(OMS)
A software platform used by brokers and institutional investors to capture, validate, route, and track orders across the full trade lifecycle — from initial order entry through exchange confirmation to post-trade settlement allocation.
Order Rejection Reasons(Trade Rejection)
Order rejection reasons are the specific grounds on which a broker or exchange declines to process a submitted trade order, including insufficient margin, circuit limit breaches, quantity freeze violations, and risk parameter failures.
Order-to-Trade Ratio(OTR)
The Order-to-Trade Ratio (OTR) measures the number of orders submitted to an exchange relative to the number of orders that actually result in executed trades, serving as a metric for identifying potentially manipulative or disruptive algorithmic trading behaviour such as quote stuffing.
Pair Trading(Pairs Trading)
Pair trading is a market-neutral strategy that involves simultaneously taking a long position in one security and a short position in a correlated security, profiting from the convergence of the price spread between the two assets rather than from overall market direction.
Pair Trading (Indian Context)(Statistical Arbitrage India)
Pair trading in India involves simultaneously taking a long position in one stock and a short position in a closely related stock from the same sector, exploiting temporary divergences in their historically co-integrated price relationship using NSE's Securities Lending and Borrowing mechanism.
Pattern Day Trader(PDT Rule)
A Pattern Day Trader (PDT) is a US regulatory designation applied to margin account holders who execute four or more day trades within five consecutive business days, requiring a minimum equity of USD 25,000 — a rule with no equivalent in India.
Position Trading(Position Trader)
Position trading is a long-term trading approach in which a trader holds positions for weeks, months, or even years, relying primarily on fundamental analysis and long-term technical trends to identify opportunities rather than reacting to short-term price fluctuations.
Post-Trade Transparency(Trade Reporting)
Post-trade transparency refers to the public dissemination of information about completed transactions — including price, volume, time of execution, and counterparty type — after a trade has been executed, enabling market participants to assess prevailing market conditions and regulators to monitor trading activity.
Pre-Open Order Matching(pre-open session)
The NSE session from 9:00 AM to 9:08 AM during which orders are collected and stored without matching, followed by a call auction that determines the opening price based on equilibrium supply and demand, designed to reduce the volatility and price manipulation that plagued the old at-open market order system.
Pre-Trade Risk Controls(Pre-Trade Controls)
Pre-trade risk controls are automated checks applied to orders before they are submitted to an exchange's matching engine, designed to prevent erroneous, excessive, or rule-violating orders from entering the market — a core component of SEBI's algorithmic trading regulatory framework.
Quantity Freeze(Order Quantity Limit)
Quantity freeze is an exchange-mandated maximum order size limit per single order submission for each listed security on NSE and BSE, designed to prevent erroneous large orders from destabilising the order book.
Scalping(Scalp Trading)
Scalping is a short-term trading strategy that seeks to profit from small, rapid price movements by executing a large number of trades throughout the trading session, each targeting a minimal price change with strict risk management.
Short Selling(Shorting)
Short selling is the practice of selling shares that the seller does not currently own, with the intention of buying them back later at a lower price — profiting from a decline in the stock's price. In India, short selling in the equity cash market is permitted for institutional investors on a delivery basis via the Securities Lending and Borrowing Mechanism (SLBM).
Smart Order Routing(SOR)
Smart Order Routing (SOR) is an automated process used by brokers and trading systems to analyse multiple trading venues in real time and direct orders to the location offering the best available price, liquidity, and execution quality.
Sponsored Access(Broker-Sponsored Access)
Sponsored Access is a form of market access in which a registered broker provides a client — typically a proprietary trading firm or hedge fund — with the broker's exchange membership credentials to submit orders directly to the exchange, with the broker bearing regulatory responsibility for those orders.
Surveillance Systems(SEBI Surveillance)
Surveillance Systems in the Indian capital markets context refers to the automated and human-assisted monitoring infrastructure operated by SEBI and stock exchanges to detect anomalous trading patterns, potential market manipulation, insider trading, and rule violations in real time and historically.
Swing Trading(Swing Trader)
Swing trading is a medium-term trading strategy that seeks to capture price moves lasting several days to several weeks, using technical analysis to identify entry and exit points within established trends or at anticipated reversals.
Systematic Internaliser(SI)
A regulated status under European MiFID II for investment firms that execute client orders against their own proprietary book on a systematic, frequent, and organised basis outside a trading venue — a concept with no direct equivalent in Indian market structure.
Tick Data vs OHLC(tick data)
A comparison of two fundamental data granularity levels in financial markets: tick data captures every individual trade and quote change in sequence, while OHLC (open-high-low-close) data aggregates price information into fixed time intervals, sacrificing granularity for compactness and ease of analysis.
Tick-by-Tick Data(TBT Data)
Tick-by-tick data is the most granular form of market data, providing a record of every individual trade and quote change as it occurs in real time, including each executed price, quantity, and the full order book depth at every update — enabling Level 3 analysis and microsecond-resolution market structure research.
Time and Sales(tape)
A real-time data feed — also called the tape — that shows every executed trade for a security in chronological order, displaying the timestamp, price, volume, and exchange for each transaction as it occurs.
Trade Cancellation(Erroneous Trade Cancellation)
Trade cancellation in India refers to the exchange-level process of annulling one or more executed trades in cases of demonstrable error — such as erroneous prices generated by a technical fault or fat-finger trades — a facility invoked rarely and governed by NSE and BSE circulars.
Trade Modification(Client Code Modification)
Trade modification refers to changes made to an executed trade's parameters — such as client code, settlement date, or internal booking — within the narrow post-trade window permitted by Indian exchanges, a facility with strictly limited scope compared to order-level amendments.