According to sources, the methodology followed will be in close alignment with online equities trading with the "necessary modifications required due to the inherent differences in the instruments involved".

The intention is to involve greater retail participation in government securities trading and creating a dynamic secondary market for it "and this will only be achieved by replicating the trading framework of the equity market to the debt market," a source said.

Sources said that the clearing and settlement system, at present available at the stock exchanges, can be used to facilitate trading of gilt securities as well with suitable modifications to the software.

In the initial instance it will be an order routing system as in the case of equities but it will soon shift to a seamless trading platform once the central banking authority is ready with a national payments and clearing system and real-time gross settlement system is in place.

Sources said that the model would involve an intermediary in the form of a dealer who would facilitate trades. Primary dealers can also have membership in the secondary market segment, they said.

Managing director of the National Stock Exchange (NSE) RH Patil said that the exchange was waiting for the report to be submitted and the modalities to be worked out as the exchange has the necessary infrastructure in place to facilitate such trades.

It recently announced a joint venture between its subsidiary NSE.IT and i-flex solutions to launch a brokers plaza, a common trading platform for Net trading. While this platform will be used for online trading in equities in the initial phase, it can also be used for derivatives trades, retailing mutual fund units and debt instruments (including government securities).

Sources said that the report, which is being worked out in consultation with the Securites and Exchange Board of India (Sebi), will contain only the broad parameters for the trading system while pricing and the nitty-gritties will be worked out later on. Government securities are heavily traded in the Wholesale Debt Market (WDM) segment of NSE, its share in the total turnover being to the extent of 54 per cent. However retail interest in it (where the trade value is less than Rs 1 crore) is very low and their share in the total trades has actually come down from nearly 2 per cent four years ago to below 0.1 per cent in the previous year.

So far, all the efforts taken by the authorities to broaden the investor base by retailing government securities has not been successful. The effort to take gilts to the retail investor through the Internet route follows the popularity of the gilt funds launched by various mutual funds.