What areTrading System of future and option contract.

Trading System.

what is trading system..

In this chapter we shall take a brief look at the trading system of futures and options on exchanges, including various types of orders. However, the best way to develop an understanding of the trading system is to actually watch the screen and observe trading. As stated earlier, futures and options are standardized contracts and like shares, they are traded on exchanges.

Paper Trading

Markets around the world can be classified into two main types based on the methods of booking a trade namely an “open outcry” market and the “electronic” market. Open outcry is the way of communication between professionals on an exchange, which involves shouting, or using hand signals to transfer information about buy and sell orders. In an open outcry markets, usually the trading takes place in a large hall known as “pit” where members are present and contracts are traded through continuous bids and offers. Thus, such a market brings together the buyers and sellers on a platform for trading.

In case of electronic trading, there are screen based broker dealing terminals, instead of the trading pit. Futures and options trading in India is electronic in nature, with the bids and offers, and the acceptance being displayed on the terminal continuously. All the exchanges in India (BSE, NSE ) provide a fully automated screen‐based trading platform for index futures, index options, stock futures and stock options.

Electronic Trading.

Trading system.

These trading systems support an order driven market and simultaneously provide complete transparency of trading operations. Derivative trading is similar to that of trading of equities in the cash market segment. All these exchanges have developed software for the F&O market to facilitate efficient and transparent trading in futures and options instruments.

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The analogy I have used might not be 100% correct but it’s easy to understand things with a simpler analogy.

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