Trading & Broking

1) Order Entry — investor places order in app, 2) Pre-trade risk check — margin, limits, compliance, 3) OMS routing — order sent to exchange gateway, 4) Exchange matching — matched against counterpart order, 5) Trade confirmation — fill sent back via FIX ExecutionReport, 6) Post-trade processing — allocation, position update, trade reporting, 7) Clearing — NSCCL nets positions, calculates obligations, 8) Settlement (T+1) — CDSL/NSDL credits securities, funds settle via clearing bank.

FIX (Financial Information eXchange) is the industry standard messaging protocol for electronic trading. Key messages: NewOrderSingle (place order) — tag 35=D; ExecutionReport (fills, rejections) — tag 35=8; OrderCancelRequest — tag 35=F; OrderCancelReplaceRequest (modify) — tag 35=G; Heartbeat — tag 35=0; MarketDataRequest/SnapshotFullRefresh for quotes. FIX uses tag=value pairs. Important tags: 49=SenderCompID, 56=TargetCompID, 55=Symbol, 54=Side (1=Buy, 2=Sell), 38=OrderQty, 44=Price.

SPAN (Standard Portfolio Analysis of Risk) calculates margin for F&O by scanning 16 risk scenarios (price up/down × 3, volatility up/down, time decay) and takes the worst-case loss. Components: Scanning Risk (worst scenario loss) + Inter-month spread credit + Delivery margin + Net Option Value. SEBI mandates SPAN margins. Example: Buying 1 lot Nifty Call — OTM options have lower SPAN but deep ITM or short positions require higher. Brokers can charge extra 'exposure margin' above SPAN.

Circuit breakers halt trading when indices fall rapidly. Index circuit breakers (NSE): 10% move → 45 min halt (if before 1 PM); 15% move → 1h45m halt; 20% move → rest of day halt. Stock-level circuits: 5%, 10%, or 20% daily bands — trading paused for 15 min on breach. System impact: Pending orders may be cancelled or frozen, risk systems flag exposure, brokers notify clients, square-off may be triggered for leveraged positions. System must handle order status updates correctly post-circuit.

1) Co-location — servers physically located at NSE/BSE data centres, reducing network hops from 10ms to <1ms, 2) Optimised network stack — kernel bypass networking (DPDK/RDMA), 3) Language choice — Go for API servers (low GC pause), C++ for exchange gateway, 4) In-memory state — positions and risk in Redis, avoid DB round-trips, 5) Async processing — Kafka for non-critical paths, synchronous only for order critical path, 6) Pre-allocated memory — avoid GC in hot path, 7) Direct Market Access (DMA) — no broker intervention in order routing.