Equity Market: Matching, Price Bands and Settlement
The Equity Market domain of the Capital Market (Dealers) module tests the cash segment: how orders reach the exchange matching engine, how prices are banded, and how trades are cleared and settled. Questions are rule-application rather than theory, so exact numbers and sequencing matter.
Order matching and settlement
- The continuous market matches on price-time priority: best price first, and at the same price the earlier order wins.
- Indian equities run a T+1 rolling settlement cycle, with pay-in and pay-out on T+1; an optional same-day (T+0) cycle exists for a limited set of liquid scrips.
- The market lot in the cash segment is one share, but delivery must be in dematerialised form; obligations are netted per client, not per order.
- Opening and closing sessions use call auctions, where all orders match at a single equilibrium price.
Price bands and circuit breakers
- Individual scrips carry price bands - typically 2%, 5%, 10% or 20% - set by the exchange's surveillance team; some scrips carry no band.
- Exchange-wide circuit breakers trigger on a 10%, 15% or 20% move in the Nifty 50, with halt durations that depend on the time of the trigger.
Worked example. A stock closed at ₹218.50. Its band is 10% and the tick size is 5 paise. Upper limit = 218.50 × 1.10 = 240.35; lower limit = 218.50 × 0.90 = 196.65. Both are exact multiples of 5 paise, so orders may be entered up to ₹240.35 and down to ₹196.65. Had the result been ₹240.352, it would be rounded down to the tick for the upper band and up for the lower band, so the band never widens.
Traps. Do not apply index circuit breakers to a single stock; do not assume every stock has a 20% band; do not confuse the cash-market lot of one share with F&O lot sizes; and remember a price band restricts the price rather than stopping trading altogether.