NISM Series XVI · Chapter 6: Trading Mechanism

L1 · Foundation

Foundation — Membership, the screen-based trading system and trading hours

The separation of the exchange from the clearing corporation; the three membership categories — Trading Member, Self Clearing or Trading cum Clearing Member, and Professional Clearing Member; the end of sub-brokers and the rise of Authorised Persons; the screen-based trading system and price-time priority with its practical consequences; the buy-side and sell-side rules for futures; and the three trading-hour bands with the outage extension procedure.

20 min read · Worth 10% of the paper · Written from pages 119–141 of the official NISM workbook · Updated 18 September 2026

Membership and the trading system

1. Exchange and clearing corporation are different entities

⚠️ "Membership of an Exchange is governed by the SEBI STOCK BROKERS REGULATION. The Regulation prescribes the procedures for the grant of recognition of a member, different types of members, NET WORTH CRITERIA, DEPOSITS, MEMBERS' FEES AND CHARGES."

In plain words: SEBI's Stock Brokers Regulation sets the rules for exchange membership. It covers the kinds of member, net worth, deposits and fees.

⚠️ "Clearing Corporation's MAIN ROLE IS TO CARRY OUT SETTLEMENT OF THE TRADES executed on the Exchange platform. THE ENTITY WHICH GUARANTEES SETTLEMENT IS CLEARING CORPORATION."

In plain words: the exchange is where trades happen. The clearing corporation settles those trades and guarantees that settlement.

That last sentence explains the entire membership structure that follows. Two different functions, two different memberships — and the categories are simply the possible combinations of them.

1.1 What exchanges look at when admitting members

⚠️ "Commodity exchanges generally take into account specific factors such as CORPORATE STRUCTURE, CAPITAL ADEQUACY, TRACK RECORD, EDUCATIONAL LEVELS AND THE EXPERIENCE OF THE PROMOTERS, INFRASTRUCTURE SET-UP, MANPOWER, etc., to ensure that the members are equipped to OFFER QUALITY BROKING SERVICES so as to BUILD AND SUSTAIN CONFIDENCE AMONG INVESTORS."

In plain words: before admitting a member, the exchange looks at its structure, capital, track record, people and set-up. The goal is good broking service that investors can trust.

⚠️ "An applicant must possess THE MINIMUM STIPULATED NETWORTH, WHICH VARIES ACROSS COMMODITY EXCHANGES as per their rules, regulations and bye-laws. The membership CATEGORIES ARE MORE OR LESS SIMILAR ACROSS THE EXCHANGES BUT VARY CONSIDERABLY when we consider the membership criteria in terms of DEPOSIT/NETWORTH REQUIREMENTS, ADMISSION FEES, and other requirements."

In plain words: each exchange sets its own minimum net worth. The types of member look alike across exchanges. The money needed to join can differ a lot.

2. The three membership categories

Category	⚠️ Can TRADE?	⚠️ Can CLEAR?
⚠️ Trading Member (TM)	⚠️ YES — own account and clients	⚠️ NO
⚠️ Self Clearing Member (SCM) / Trading cum Clearing Member (TCM)	⚠️ YES — own account and clients	⚠️ YES — own and clients' trades
⚠️ Professional Clearing Member (PCM)	⚠️ NO	⚠️ YES — for other members' trades

2.1 Trading Member

⚠️ "A Trading Member CAN TRADE EITHER ON THEIR OWN ACCOUNT OR ON BEHALF OF THE CLIENTS. This category entitles a member to EXECUTE TRADES ON HIS OWN ACCOUNT AS WELL AS FOR CLIENTS REGISTERED WITH HIM."

⚠️ "The CLEARING AND SETTLEMENT of the trades done through a trading member IS ACCOMPLISHED THROUGH A CLEARING MEMBER who is a member of the clearing corporation."

In plain words: a trading member trades for itself and its clients. It cannot clear, so a clearing member settles its trades.

2.2 Self Clearing / Trading cum Clearing Member

⚠️ "This category entitles a member to EXECUTE TRADES ON HIS OWN ACCOUNT AS WELL AS FOR HIS CLIENTS, AND ALSO TO CLEAR AND SETTLE TRADES EXECUTED BY HIMSELF AS WELL AS OF HIS CLIENTS."

⚠️ "Clearing members HELP THE CLEARING CORPORATIONS CARRY OUT RISK MANAGEMENT ACTIVITIES EFFECTIVELY and provide for CONFIRMATION/INQUIRY OF TRADES through the trading system."

In plain words: this member does both jobs. It trades and it clears, for itself and its clients.

2.3 Professional Clearing Member

⚠️ "Typically, BANKS AND CUSTODIANS BECOME PROFESSIONAL CLEARING MEMBERS and clear and settle trades done by their trading members or the clients of the trading members. THEY ARE NOT ENTITLED TO EXECUTE ANY TRADES ON THE EXCHANGES UNLESS IT IS FOR THE PURPOSE OF RISK MANAGEMENT."

In plain words: a PCM clears trades for other members but does not trade. Banks and custodians usually take this role. They may trade only to manage risk.

⚠️ In practice: "MOST OF THE MEMBERS operate as TRADING CUM CLEARING MEMBERS (TCMs) OF MORE THAN ONE EXCHANGE. MOST OF THE TRADES OF INSTITUTIONAL PARTICIPANTS ARE DONE THROUGH THE TRADING MEMBERS AND ARE CLEARED BY THE PROFESSIONAL CLEARING MEMBER."

In plain words: most members trade and clear on several exchanges. Institutions usually trade through a trading member and clear through a PCM.

3. Authorised Persons

In plain words: sub-brokers were abolished from 1 April 2019. They had to become authorised persons or trading members.

⚠️ "An ASSOCIATED PERSON is an INDIVIDUAL EMPLOYED BY A SEBI-REGISTERED INTERMEDIARY (stockbroker, investment advisor etc.) WHO INTERACTS WITH THE CLIENTS OR HAS ACCESS TO CLIENT INFORMATION. They are crucial in facilitating securities transactions BUT CANNOT ACT INDEPENDENTLY."

⚠️ "Their responsibilities include SOLICITING CLIENTS FOR SECURITIES TRANSACTIONS AND HANDLING THEIR CLIENT ACCOUNTS AND TRANSACTIONS. They are expected to ROUTE ALL MONETARY TRANSACTIONS OF THEIR CLIENTS DIRECTLY THROUGH THE BROKERS AND NOT TO BE HANDLED BY THEMSELVES. They must be QUALIFIED AND CERTIFIED BY SEBI."

In plain words: an associated person is an employee who deals with clients or client data. Such a person brings in clients and handles their accounts, but cannot act alone. All client money must go straight through the broker.

The rule that client money must never pass through the associated person's own hands is the practical heart of this. It is what separates a legitimate marketing and service function from an unregulated deposit-taking one.

4. The screen-based trading system

⚠️ "Derivative Exchanges offer a NATION-WIDE ONLINE FULLY AUTOMATED SCREEN-BASED TRADING SYSTEM (SBTS). The trading member can PUT IN THE ORDERS AND THE PRICES at which they would like to transact. THE TRANSACTION GETS EXECUTED AS SOON AS A BUY ORDER MATCHES WITH A SELL ORDER IN TERMS OF PRICE."

In plain words: trading is online and automatic across India. A member enters the order and price. A trade happens the moment a buy price meets a sell price.

4.1 Price-time priority

⚠️ "HIGHEST PRICED BUY ORDERS AND LOWEST PRICED SELL ORDERS ARE MATCHED FIRST for trade, after which the next highest buy order or next lowest sell order comes up for trade match."

In plain words: the best price goes first. At the same price, the earlier order goes first. The best bid meets the best offer, then the next best, and so on.

Three practical consequences the workbook spells out:

⚠️ "REDUCING A BUY ORDER LIMIT WILL DELAY EXECUTION"
⚠️ "INCREASING A BUY ORDER PRICE WILL INCREASE THE PROBABILITY OF THE ORDER GETTING MATCHED and converted into trade"
⚠️ "REDUCTION IN QUANTITY OF THE ORDER FROM THE ORIGINAL QUANTITY WILL NOT CHANGE ITS PRICE-TIME PRIORITY"

That last one is the examinable oddity. Price changes cost you your place in the queue; quantity reductions do not.

⚠️ "SBTS enables market participants to SEE THE PRICES ON A REAL-TIME BASIS AND TRADE WITH ONE ANOTHER SIMULTANEOUSLY, IRRESPECTIVE OF THEIR GEOGRAPHICAL LOCATION."

In plain words: everyone sees live prices and can trade at the same time, wherever they are.

4.2 What the system generates and shows

⚠️ "An ORDER NUMBER OR TRADE NUMBER is generated for the orders (that are entered into the system after being accepted) and for the executed trades (as the order gets matched for the price and quantity and becomes a trade)."

⚠️ "A trading system also provides other LIVE MARKET INFORMATION such as the LAST TRADED PRICE, TRADED QUANTITY, OPEN, HIGH, LOW, CLOSE PRICE, TOTAL TRADED VALUE, TOTAL TRADED QUANTITY."

⚠️ "Connectivity to SBTS can be accomplished through LAPTOPS, TABLET PCs, DESKTOP COMPUTERS, AND MOBILE PHONES."

In plain words: each accepted order and each trade gets its own number. The screen also shows live prices and volumes. You can connect by laptop, tablet, desktop or phone.

5. Buy side and sell side rules

⚠️ SELL SIDE	⚠️ BUY SIDE
"The seller needs to pay AN UPFRONT INITIAL MARGIN as prescribed by the exchanges to take a SHORT position"	"The buyer needs to pay AN UPFRONT INITIAL MARGIN to take a LONG position"
"The open short position is EXPOSED TO MARK TO MARKET"	"The long position is EXPOSED TO MARK TO MARKET IF KEPT OPEN"
⚠️ "Open short position may result in GIVING PHYSICAL DELIVERY OR CASH SETTLEMENTS on expiry date. QUALITY CERTIFICATION IS A MANDATORY REQUIREMENT"	⚠️ "Open long position may result in AN OBLIGATION TO RECEIVE PHYSICAL DELIVERY OR CASH SETTLEMENTS on expiry, DEPENDING ON THE SETTLEMENT MODE of the derivative contract"
"The sell position CAN BE SQUARED OFF DURING THE SAME DAY OR ANY TIME DURING THE LIFE TIME OF THE CONTRACT"	"The buyer if he desires CAN SQUARE OFF his position DURING THE SAME DAY OR ANY TIME during the period of contract"
⚠️ "THE MARGINS ARE RELEASED IF THE SHORT POSITION IS SQUARED OFF"	⚠️ "THE MARGINS ARE RELEASED IF THE LONG POSITION IS SQUARED OFF"

Note the asymmetry in row three: quality certification is mandatory only for the seller — naturally, since it is the seller who must produce goods meeting the contract's specifications.

6. Trading hours

⚠️ "Trading in the commodity exchanges takes place ON ALL DAYS EXCEPT SATURDAYS AND SUNDAYS and the EXCHANGE-NOTIFIED HOLIDAYS. The holidays are NOTIFIED IN ADVANCE."

In plain words: trading runs Monday to Friday, except holidays announced in advance.

Type of commodity	⚠️ Trading days and time (IST)
⚠️ Domestic Agricultural Commodities	⚠️ Monday to Friday, 9:00 AM – 5:00 PM
⚠️ Agricultural Commodities including agri-processed	⚠️ Monday to Friday, 9:00 AM – 9:00 PM
⚠️ Non-agricultural Commodities	⚠️ Monday to Friday, 9:00 AM – 11:30 PM / 11:55 PM — the later time "after the end of US daylight savings (fall season)"

⚠️ "Exchanges have FLEXIBILITY TO FIX THEIR OWN MARKET TIMINGS WITHIN THE ABOVE TIMING provided by SEBI."

In plain words: SEBI sets the outer limits. Each exchange picks its own hours inside them.

6.1 Why non-agri commodities trade so late

In plain words: gold, silver, oil and metals take their prices from global markets. Indian trading must stay open while those markets are open. Only then can people hedge in real time and get a fair closing price.

6.2 Extension after an outage

⚠️ "As per SEBI Circular dated 27/05/2024, OUTAGE MEANS STOPPAGE OF CONTINUOUS TRADING, EITHER SUO MOTO BY EXCHANGE OR BY VIRTUE OF REASONS BEYOND CONTROL OF STOCK EXCHANGE."

In plain words: an outage is a stop in continuous trading. If the market restarts only within the last 30 minutes before closing, trading can be extended by 30 minutes.

⚠️ "The intimation regarding the extension WOULD HAVE TO BE SENT AT LEAST 15 MINUTES BEFORE THE SCHEDULED CLOSURE — i.e. BEFORE 4:45 PM, 8:45 PM AND 11:10 PM (only if the scheduled market closure is 11:25 PM)."

Check those notice times against the closing times above and the logic is clear: 4:45 for a 5:00 close, 8:45 for a 9:00 close — fifteen minutes in each case.

Think of it like this

The waiter and the cashier

In a restaurant, the waiter takes your order and brings the food. The cashier settles the bill and reconciles the day's cash. In a small dhaba the same person does both. In a large hotel they are entirely different people, and the cashier never takes an order.

⚠️ That is the membership structure. "FOR TRADING PURPOSE, EXCHANGE MEMBERSHIP IS REQUIRED, WHILE FOR CLEARING PURPOSES, MEMBERSHIP OF A CLEARING CORPORATION IS REQUIRED."

A Trading Member is the waiter — "can trade either on their own account or on behalf of the clients", but settlement "is accomplished through a clearing member"
A Trading cum Clearing Member is the dhaba owner doing both
⚠️ A Professional Clearing Member is the hotel cashier: "entitled to CLEAR AND SETTLE TRADES EXECUTED BY OTHER MEMBERS, BUT DOES NOT HAVE THE RIGHT TO EXECUTE TRADES"

And note who takes the cashier's role in practice: "typically, BANKS AND CUSTODIANS become professional clearing members." They have the balance sheet to guarantee settlement without any desire to run a dealing desk.

The queue at the railway counter

At a ticket counter people are served in the order they arrive. If you step out of line to fetch something and come back, you go to the end. But if you simply decide to buy two tickets instead of four, nobody sends you to the back.

⚠️ The order book works exactly this way. "THE ORDER MATCHING IS DONE ON A PRICE-TIME PRIORITY BASIS. Orders are first RANKED ACCORDING TO THEIR PRICES, and SIMILAR PRICED ORDERS ARE THEN SORTED ON A TIME-PRIORITY BASIS."

⚠️ The quantity exception: "Time priority for an order modification WILL NOT CHANGE DUE TO A CHANGE IN QUANTITY OR DISCLOSED QUANTITY. IN CASE OF ALL OTHER CHANGES TO THE ORDER PARAMETER, THE TIME PRIORITY OF THE ORDER WILL CHANGE."

The economics behind the rule: changing your price is a new offer to the market, so you rejoin the queue at the new level. Reducing your quantity only takes something away — it can never disadvantage anyone behind you, so there is no reason to penalise it.

And the practical corollary: "REDUCING A BUY ORDER LIMIT WILL DELAY EXECUTION, WHILE INCREASING A BUY ORDER PRICE WILL INCREASE THE PROBABILITY OF THE ORDER GETTING MATCHED." If you want to be filled, raise your bid — do not shrink it.

The car with a factory-fitted cut-off switch

Modern cars carry a kill switch that cuts the fuel pump in a crash. It is not there for normal driving; it exists because at speed a small fault becomes a large disaster in seconds.

⚠️ Algorithmic trading has the same device. The KILL SWITCH is "AN EMERGENCY FUNCTION AND THE LAST LEVEL OF DEFENCE AGAINST ANY ALGORITHM MALFUNCTION. It is expected to AUTOMATICALLY TRIGGER A HALT ON TRADING ACTIVITY BASED ON PRE-DEFINED CONDITIONS."

Why it is needed: ⚠️ "If Algo trading is used WITHOUT DUE CARE AND DILIGENCE, IT MAY THROW HUGE RISK TO MARKET INTEGRITY EVEN WITH SMALL ERROR."

A human dealer who mistypes a price places one bad order. An algorithm with the same error places ten a second, indefinitely. Speed converts a small mistake into a systemic one — which is why members must also maintain "separate dealer-wise limits, internal price bands so that ordered price doesn't cross a level, and order size limits."

Selling a flat in a busy locality versus a remote one

A flat in a well-known Rajkot colony has ten buyers on any given day; the asking and offering prices sit within a percent of each other. A plot in a remote village may have one buyer whose bid is thirty percent below the asking price. Neither is worth "more" — but the second is far costlier to get out of.

⚠️ That gap is the bid-ask spread, and the cost is impact cost. The workbook's numbers: a gold call quoting Rs 2,014 – Rs 2,187 carries a spread of 8.70%, while the underlying gold futures at Rs 51,560 – 51,570 has a spread of only Rs 10, i.e. 0.02%.

⚠️ "The bid-ask spread tends to be LARGER FOR ILLIQUID DERIVATIVE CONTRACTS which typically have LOWER PARTICIPATION, such as a VERY FAR MONTH FUTURES OR OPTIONS CONTRACT. In the case of options, DEEP OUT OF THE MONEY OPTIONS ADDS THE SECOND DIMENSION to the problem of illiquidity."

And the remedy is in the workbook too: "a limit order TRANSFERS THE IMPACT COST RISK TO THE SELLER." Market orders pay the spread; limit orders make somebody else pay it.

The emergency exit that only opens outward

A cinema hall's emergency door lets people out during a fire. It does not let anyone in. That restriction is not a defect — it is the entire design.

⚠️ The Investor Risk Reduction Access platform works the same way. It gives investors "AN OPPORTUNITY TO SQUARE OFF/CLOSE THE OPEN POSITIONS AND/OR CANCEL PENDING ORDERS IN CASE OF DISRUPTION OF TRADING SERVICES PROVIDED BY THE TRADING MEMBER."

⚠️ And who may use it: "The IRRA system is EXCLUSIVELY FOR INDIVIDUAL INVESTORS AND DOES NOT CATER TO ALGORITHMIC TRADING OR INSTITUTIONAL CLIENTS."

The reasoning is sound. A trader stranded by his broker's outage needs to get out; letting him also open fresh positions on an emergency channel with reduced controls would create the very risk the facility exists to relieve.

The commodity that must be storable to have a futures market

You can buy wheat futures. You cannot buy futures on a haircut, or on fresh idlis. The reason is not that nobody wants them — it is that nobody can hold them.

⚠️ The workbook makes storability a formal condition: "THE COMMODITY SHOULD BE STORABLE. IN THE ABSENCE OF THIS CONDITION, ARBITRAGE WOULD NOT BE POSSIBLE AND THERE WOULD NOT BE ANY RELATIONSHIP BETWEEN SPOT AND FUTURES MARKETS. IN THE ABSENCE OF SUCH A RELATIONSHIP, THERE IS NO UTILITY OF THE FUTURES MARKET TO A STAKEHOLDER."

Trace the chain backwards and you get the whole logic of the syllabus. Cash-and-carry arbitrage requires buying today and holding until expiry. That arbitrage is what forces futures = spot + cost of carry. That relationship is what makes convergence happen at expiry. And convergence is what makes a hedge work at all.

Remove storability and every link in that chain breaks — which is why it appears alongside the other four tests: large marketable surplus, volatile prices, freedom from substantial government control, and homogeneity or a specifiable standard.

Key terms in this chapter

Algorithmic trading: Trading where a computer algorithm automatically determines order parameters such as initiation, timing, price or quantity, with limited or no human intervention. Permitted under SEBI guidelines of 27 September 2016.
Authorised Person: The category that replaced sub-brokers from 1 April 2019, following SEBI's board decision of 21 June 2018. An associated person may solicit clients and handle accounts but cannot act independently, and must route all client money through the broker.
Base price: The price used to set the daily price limit on a contract's first day, determined from trades in the first half hour, extendable to one hour. From the second day it becomes the previous day's official closing price.
Bhav copy: The daily listed closing prices of commodity futures, published by the exchange among its regular disclosures.
Black box algo: An algorithm whose internal workings the user cannot see or replicate. The provider must register as a Research Analyst, maintain a research report for each algo, and register every logic change as a new algo.
Category A, B and C modifications: The three tiers of contract change. A covers non-material items done by the exchange with ten days' notice; B covers expiry, delivery and quality terms needing Product Advisory Committee and Regulatory Oversight Committee approval; C covers material items like DPL and due date rate, requiring SEBI permission.
Circuit filter: Also called the Daily Price Range or Daily Price Limit — the maximum price range within which a contract may trade in a day. It provides a price limit, a cooling off time and, beyond a limit, permanent closure for domestic commodities.
Clearing Corporation: A separate entity from the exchange, governed by SEBI's Stock Exchange and Clearing Corporation Regulations 2012. It settles trades executed on the exchange and is the entity that guarantees settlement.
Commodity Transaction Tax (CTT): A statutory levy — 0.01% on the sale of a commodity derivative and 0.05% on an option premium, both payable by the seller; 0.0001% of settlement price on exercise and 0.125% of the settlement-strike difference where an option in goods is cash settled, both payable by the purchaser.
Compulsory delivery: A delivery logic under which both buyer and seller holding open positions during the tender or delivery period are obliged to take or give delivery of the commodity. The alternative logic is cash settlement.
Daily Settlement Price (DSP): The closing price used to calculate daily mark-to-market profit or loss, so that losses do not accumulate on participants. It is also the FSP for an Option on Futures.
Day order: An end-of-session order that must execute the same trading day, expiring or being cancelled automatically at day end.
Final Settlement Price (FSP): Also called the Due Date Rate — the price at which delivery or final cash settlement occurs at expiry. It also determines the delivery default penalty and the obligations arising from expiring options.
Good-Till-Date and Good-Till-Cancelled: A GTD order stays alive until a specified date; a GTC order stays until executed, cancelled, or the contract expires, whichever is earlier. A GTD order sits passive until prices fall within the day's DPL.
Good-Till-Trigger (GTT): A broker-specific rather than exchange-specific facility. Once the trigger price is touched, the order converts to a normal order and is pushed to the exchange terminal.
High Frequency Trading: The part of algorithmic trading using latency-sensitive strategies and high speed networks. Limited to 120 orders per second measured over a rolling five-second period, with Immediate or Cancel and Market orders barred.
Immediate or Cancel (IOC): An order requiring immediate execution of all or part, with any unfilled portion automatically cancelled. It never rests in the order book, and is not permitted for algorithmic traders.
Impact cost: The implicit cost of crossing the bid-ask spread, measured in rupees per rupee crore of order value. It is an indicator of relative liquidity, and a limit order transfers this risk to the counterparty.
IRRA platform: Investor Risk Reduction Access — the joint exchange facility letting investors square off positions and cancel pending orders when their trading member suffers an outage. It never permits actions that increase investor risk, and serves individual investors only.
iSPOT and LAMA: The Integrated SEBI Portal for Technical Glitches, where preliminary and RCA reports are filed, and the API-based Logging and Monitoring Mechanism operated between exchanges and specified brokers' trading systems.
Kill switch: An emergency function and the last level of defence against algorithm malfunction, automatically halting trading activity on pre-defined conditions.
Last Traded Price: The price of the last contract traded in a session. It may differ from DSP or FSP, which are arrived at by documented methodology rather than by a single trade.
Limit order: An order specifying the price at which the trade should execute — at that price or better, or not at all. A buyer's limit sits below the asking price and a seller's above the bid.
Liquidity Enhancement Scheme: Market making provided for by SEBI's July 2019 circular, to make newly available commodity derivative contracts more liquid.
Lot size: The minimum quantity that must be traded and delivered on expiry — silver 30 kilos, castor seed 5 MT, electricity 50 MWh. It must be equal to or higher than both the minimum trading unit and the minimum order quantity.
Market order: An order executed at the immediately available price — the best ask for a buyer and the best bid for a seller. It pays the bid-ask spread as impact cost.
Physical stocks disclosure: Warehouse stock data showing how far open interest is backed by real goods. Low warehouse stocks suggest open interest is more likely to be squared off before expiry rather than going to delivery.
Price-time priority: The matching rule — orders are ranked first by best price, then among equal prices by time of entry. The highest buy and lowest sell match first.
Professional Clearing Member (PCM): A clearing member who settles other members' trades but has no right to execute trades, except for risk management. Typically banks and custodians, clearing institutional business.
Screen Based Trading System (SBTS): The nation-wide online fully automated system on which orders match as soon as a buy and sell price meet, letting participants trade simultaneously regardless of location.
Staggered delivery period: The window before expiry during which delivery may be tendered. SEBI's circular of 24 May 2024 set a mandatory minimum of three days for any commodity.
Stop loss order: An order placed after entering a trade to limit a probable loss if the price moves adversely. It stays passive until the trigger price is breached, at which point an order is sent to the matching system.
Technical glitch: Any malfunction in hardware, software, networks, processes or services causing stoppage, slowing or variance for five minutes or more. It must be reported to the exchange within one hour, with a preliminary report by T+1 and a root cause analysis within 14 days.
Trading cum Clearing Member (TCM): Also called a Self Clearing Member — entitled both to execute trades for himself and clients and to clear and settle them. Most exchange members operate in this category, often on more than one exchange.
Trading Member (TM): A member entitled to execute trades on his own account and for registered clients, but whose clearing and settlement must be done through a clearing member.
Trading unit: The quantity for which a price is quoted — for example, per 10 grams of gold. Distinct from lot size, which is the minimum quantity actually traded and delivered.
Trailing stop loss: A broker-level stop loss, set in rupees or as a percentage, that moves up as the price rises but never adjusts downwards — locking in gains while capping loss.
White box algo: An execution algorithm whose logic is disclosed to and replicable by the user. No registration or research report is needed, and a change of logic is not treated as a new algo.

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Original explanatory writing based on the official NISM workbook for Series XVI, which is published and copyrighted by NISM. Check figures against the current edition at nism.ac.in.

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