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MATHIVANAN K.MBA 2014
SOURASHTRA COLLEGE,MADURAI
WHAT IS STOCK EXCHANGE
Stock exchange is that place where trading of shares is done in terms of sale and purchase.
HISTORY STOCK EXCHANGE
The first organized stock exchange in India was started in Bombay.
The native share stock brokers association known as the Bombay
stock exchange (BSE)
BSE was Asia's oldest stock exchange
Ahmedabad stock exchange was started to facilitate dealings in the
shares of textile mills.
The Calcutta stock exchange was started in 1908 to provide a
market for shares of plantation and jute mills.
The second world war saw great speculative activity in the country
and the number of stock exchanges rose- 7 in 1939 to 21 in 1945.
There where also illegal “dabba’ market in which stocks and shares
were also bought and sold
At present, there are twenty one recognized stock
exchanges in India which does not include the Over The
Counter Exchange of India Limited (OTCEI) and the
National Stock Exchange of India Limited (NSEIL).
Government policies during 1980's also played a vital
role in the development of the Indian Stock Markets.
There was a sharp increase in number of Exchanges
NAME OF INDIAN STOCK EXCHANGES
1.Bombay stock exchange
2.national stock exchange(Mumbai)
3.Banglore stock exchange
4.Utter Pradesh stock exchange(kanpur)
5.Magadh stock exchange(Patna)
6.Ahmedabad stock exchange
7.vadodara stock exchange(Baroda)
8.Bhubaneswar stock exchange
9.Calcutta stock exchange(kolkata)
10.madras stock exchange
11.Cochin stock exchange
12.coimbatore stock exchange
13.Gauhati stock exchange
14.Hydrabad stock exchange
15.Madhya Pradesh stock exchange(indore)
16.Jaipur stock exchange
17.Ludhina stock exchange
18.Mangalore stock exchange
19.Pune stock exchange
20.saurashtrakutch stock exchange
BSE: THE BOMBAY STOCK EXCHANGE
Mumbai's (earlier known as Bombay), Bombay Stock Exchange is the largest, with over 6,000 stocks listed. The BSE accounts for over two thirds of the total trading volume in the country. Established in 1875, the exchange is also the oldest in Asia. Among the twenty-two Stock Exchanges recognized by the Government of India under the Securities Contracts (Regulation) Act, 1956, it was the first one to be recognized and it is the only one that had the privilege of getting permanent recognition ab-initio.
STRUCTURE OF INDIAN STOCK EXCHANGES
National Exchanges Regional Exchanges
BSE NSE 21 Other Regional Exchanges
SEBI
Stock Exchanges
SECURITIES AND EXCHANGE BOARD OF INDIAPERFORMS
Regulatoryo Operates the trading
of stock exchangeo Registration of
broker, transfer agents, merchant banks etc
o Abolition of internal trading
o Auditing of stock exchange
o Registration of credit rating agency
Developmento Research and
Developmento Publishing of Informationo Educates investorso Promoting Self operating
organisationo Control over fraud
NSE: NATIONAL STOCK EXCHANGE
The National Stock Exchange (NSE),
location
India's first debt market.
Year of inception - 1993
Year of operation - 1994
The instruments traded
Treasury Bills,
Government Security
Bonds Issued By Public Sector Companies
PURPOSE NSE
Establishing a National wide trading
facility for all type of securities.
Ensuring equal access to investor all over
the country through an appropriate
communication network
Providing for a Fair, efficient and
transparent securities market using
electronic Trading system
Enabling shorter Settlement cycles.
Meeting up with international benchmark
and standard
FEATURES OF STOCK EXCHANGE
It is an organized market
It is a securities market
It is an important constituent of capital
market i.e., market for long- term finance
It is a voluntary association of persons
desirous of dealing in securities
Stock exchange is a voluntary association,
its membership is not open to everybody
In a stock exchange, only the
members can deal in i.e., buy & sell
securities
The dealings in a stock exchange are
under certain accepted code of
conduct i.e., rules and regulations
The dealings in a stock exchange are
under certain accepted code of
conduct i.e., rules and regulations
IMPORTANT FUNCTION OF STOCK EXCHANGE
Provide central and convenient meeting
places for sellers and buyer of securities
Increase the marketability and liquidity of
securities
Contribute to stability of prices of
securities
Equalization of price of securities
Smoothen price movement
Help the investors to know the worth of their
holdings
Promote the habit of saving and investment
Help capital formation
Help companies and government to raise
funds from the investors
Provide forecasting service
ROLE OF NSE
Raising capital for businesses
Mobilizing savings for investment
Facilitating company growth
Profit sharing
Corporate governance
Barometer of the economy
NSE - TRADING:
Trading Fully automated screen-based trading
mechanism
Strictly follows the principle of an order-driven
market
Trading members are linked through a
communication network
This network allows them to execute trade from
their offices
The prices at which the buyer and seller are
willing to transact will appear on the screen
When the prices match the transaction will be
completed
confirmation slip will be printed at the office of
the trading member
SPECULATION :
Definition : it involves the buying, holding, selling,
short-term selling of stocks, bonds. commodities,
currencies, collectibles or any valuable financial
instrument to profit from fluctuations in its price as
opposed to buying it for use or for income via
method like dividends or interest.
KINDS OF SPECULATION : Bull Market (Tejiwala): In case of that they
purchase the shares at current prices to sell at a higher price in the near future and makes a profit if his expectations come true. He is also called a long buyer.
Bear Market (Mandiwala) : He sells security in the hope that he will be able to buy them back at lesser price.It is also called “short selling”.
Lame duck : When a bear has made contracts to sell securities, find it difficult to meet his commitment due to non-availability of security, they always struggling.
Stag : He is that type of speculator who applies for a large number of a shares in a new issue with the intention of selling them at a premium. He is bullish and very cautious.
BENEFITS OF STOCK EXCHANGE : FROM THE POINT OF VIEW OF COMMUNITY:
It assist the economist development by providing a body
of interested investors.
It uploads the position of superior enterprises and assist
them in raising further funds.
It encourages capital formation
Government can undertake projects of national
importance and social value raising funds through the
sale of its securities on the stock exchange.
It is the stock exchanges that central bank of a country
can control credit by undertaking open market
operations (purchase and sale of securities)
FROM THE INVESTORS POINT OF VIEW
Liquidity of the investment is increased
The securities dealt on a stock exchange are
good collateral security for loans.
The stock exchange safeguards interests of
investors through strict enforcement of rules and
regulations.
The present net worth of investments can be
easily known by the daily quotations.
His risk is considerably less when he holds or
purchases listed securities.
FROM THE COMPANY POINT OF VIEW
A company whose shares quoted on stock exchange they enjoy better reputation and credit
The market for the shares of such a company is naturally widened
The market price of securities is likely to be higher in relation to its earnings, dividends and property values
This raises the bargaining power of the company in the event of a takeover, merger or amalgamation
BROKER AND JOBBER
BROKER: He is one acts as a intermediary on behalf of
others. A broker in a stock exchange ,is a commission
agent who transacts business in securities on behalf of
non members.
JOBBER: He is not allowed to deal with the public
directly. He deals with brokers who are engaged with the
investors . Thus, the securities is bought by the jobber
from members and sells to members who are operating
on the stock exchange as broker.
DIFFERENCE BETWEEN A BROKER AND A JOBBER
Broker A broker deals with the
jobber on behalf of his clients. in other words, a broker is middleman between a jobber and clients
A broker is merely an agent, buying and selling securities on behalf of his clients
A broker gets only the commission for his dealing
A broker deals in all types of securities
Jobber A jobber is an independent
dealer in securities, purchasing or selling securities on his own account
Jobbers deals only with the brokers, does not deal with the general public
A jobber earns profit from his operations i.e., buying and selling securities
Each jobber specializes in certain group of securities
MEMBERS OF STOCK EXCHANGE
Only the members can make
transactions on a stock exchange.
A non member can buy or sell securities
through a member broker
In order to become a member, a person
must satisfy the qualification prescribed
by the stock exchange
Members can act as brokers and
jobbers
CURRENTLY, NSE HAS THE FOLLOWING MAJOR SEGMENTS OF THE CAPITAL MARKET:
Equity
Futures and Options
Retail Debt Market
Wholesale Debt Market
Currency futures
MUTUAL FUND
STOCKS LENDING & BORROWING
The Organisation: The National Stock Exchange of
India Limited has genesis in the report of the High
Powered Study Group on Establishment of New Stock
Exchanges, which recommended promotion of a
National Stock Exchange by financial institutions (FIs) to
provide access to investors from all across the country
on an equal footing.
Based on the recommendations, NSE was promoted by
leading Financial Institutions at the behest of the
Government of India and was incorporated in November
1992 as a tax-paying company unlike other stock
exchanges in the country
oNSE GROUP:
1. India Index Services & Products Ltd. (IISL)
2. National Securities Clearing Corporation Ltd.
(NSCCL)
3. NSE.IT Ltd.
4. National Securities Depository Ltd. (NSDL)
5. DotEx International Limited
OTCEI
Over the counter exchange of India was started in
1992
The OTCEI was started with the objective of providing a
market for the smaller companies that could not afford
the listing fees of the large exchanges and did not fulfill
minimum requirements for listing.
It aimed at creating a fully decentralised and
transparent market.
Over the counter means trading across the country in
scrips.
The counter refers to the location of the member or
dealer of the OTCEI where the deal or trade takes
place
Every counter is treated like trading floor for the OTCEI
where the investor can buy or sell
The member or dealers of OTCEI counters are linked
to the central OTCEI computer
The member should have the computer and
telecommunication facility.
THE PROMOTERS
OTCEI is incorporated as a company under section 25(c)
of Indian companies act 1956. As per the registration
norms, OTCEI will be obliged to plough back all its
profits and will not be allowed to declare dividend on its
share capital.
The promoters are as follows
UTI GIC
ICICI SBI capital market
IDBI Canbank financial services
IFCI LIC
PLAYERS IN THE OTCEI MARKET
The players on the OTCEI exchange are the
members and dealers.
The activities of members and dealers are
1. Act as broker, buy and sell securities
according to the instructions of investor
2. Market makers in securities, they quote the
prices at which members are willing to buy
and sell the specified no. of securities.
MEMBERS
Members may be public financial institutions,
scheduled banks, mutual funds , SEBI
approved merchant bankers, banking
subsidiaries, venture capital funds and other
non-banking financial companies with
minimum net worth of Rs 2.5 crores
Members pay a one time non-refundable admission fee of
rs 10 lakh and rs 5 lakh after one year.
The annual subscription fee is rs 1 lakh.
DEALERS
The dealers are individuals, partnership firm, and
corporate entities with a minimum net worth of Rs 5 lakh.
They should have adequate office space and
telecommunication facilities
They have to pay one time non-refundable fee of Rs 2
lakh and annual subscription fee of Rs 5000.
OTCEI may collect additional security deposit if it
considers necessary, depending upon the business
experience of applicant.
SCRIPS TO BE TRADED
The minimum capital requirement for a company to
be listed on the OTCEI is Rs 3 crores and the
maximum is Rs 50 crore.
For companies with an issued capital of more than 30
lakh but less than 300 lakhs, the minimum public offer
should be 25% of the issued capital or 20 lakhs worth
of shares in face value, which ever is higher
Companies with an issued capital of more than Rs 30
crores seeking to be listed have to comply with listing
requirements and guidelines that are applicable to such
companies in other stock exchanges.
SEBI – THE SECURITIES AND EXCHANGE BOARD OF INDIA
The Securities and Exchange Board of India
was established by the
government of India on 12 April 1988 as an interim
administrative body to promote orderly and healthy
growth of the securities market and for investor
protection.
It was to function under the overall administrative
control of the Ministry of Finance of the GOI.
HISTORY
The SEBI was given a statutory status on 30 Jan 1992
through an ordinance.
The ordinance was later replaced by an
Act of Parliament known as the Securities and
Exchange Board of India Act 1992.
REASONS FOR ESTABLISHMENT OF SEBI
The capital market had witnessed a tremendous growth
during the 1980·s characterized by the increasing
participation of the public.
This ever expanding investor population and
market capitalization led to a variety of malpractices on
the part of companies, brokers, merchant bankers,
investment consultants and others involved in
the securities market.
The glaring examples of these malpractices
include existence of self styled merchant bankers,
unofficial private placements, rigging of prices,
unofficial premium on new issues, non adherence of
provisions of The Companies Act , violation of rules
and regulations of stock exchanges and
listing requirements, delay in delivering shares etc.
These malpractices and unfair trade practices have eroded
investor confidence and multiplied investor grievances
The government and the stock exchanges were
rather helpless in redressing the investors problems
because of lack of proper penal provisions in the
existing legislation.
Therefore the GOI decided to set up SEBI a
separate regulatory body PURPOSE & ROLE OF SEBI :
To the issuers it aims to provide a market place in which
they can confidently look forward to raising finances they
need in an easy fair and efficient manner.
To the investors it provides protection of their rights and
interests through adequate accurate and authentic
information and disclosure of information on a continuous
basis.
To the intermediaries it offers a
competitive, professionalized and expanding market
with adequate and efficient infrastructure so as to
render better service to investors and issuers.
OBJECTIVES
To regulate stock exchanges and the securities industry
and to promote their orderly functioning.
To guide , educate and protect the rights and interests
of individual investors.
To prevent trading malpractices and achieve a balance
between self regulation by the securities industry and
its statutory regulation
To regulate and develop a code of conduct and
fair practices by brokers , merchant bankers with
a view to make them competitive and professional.
FUNCTIONS OF SEBI
REGULATORY FUNCTIONS
Registration of brokers and sub brokers
and other players in the market
Registration of collective investment schemes and Mutual
Funds
Prohibition of fraudulent and unfair trade practices
Controlling insider trading and takeover bids
and imposing penalties for such practices
DEVELOPMENT FUNCTIONS
Investor education
Training of intermediaries
Promotion of fair practices and code of conduct of
all SROs
Conducting research and publishing information useful
to all market participants