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7/23/2019 Chapter 4 Secondary Market
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Secondary Market
A market for outstanding securities
Facilitates liquidity, marketability, and
valuation of securities
Helps in price discovery
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Stock Market Scenario
The Bombay stock exchange (BSE)
The National Stock Exchange (NSE)
Regional stock exchanges
Inter-connected Stock Exchange
MC stock exchange
!nited Stock exchange
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Regulated by the central governmentunder the Securities Contracts Regulation!Act "#$%& provides for the recognition of stock
exchanges, supervision and control of recognisedstock exchanges, listing of securities etc.
S'() * to protect investors interest in securities
and promote and regulate the securities market
Regulation of Stock'+changes
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(rokerBrokers are the members of stock exchange
They enter trades either on their own account or on behalf of
clientsThey get registered with SEBI after paying a registration fee
Bring buyers and sellers together
Three classes of brokers- proprietary, partnership and corporate
Brokerage aries from broker to broker
!aximum brokerage that can be leied is "#$ per cent of the
contract price
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emutualisation of Stock'+changes
A process by which a member owned organisationbecome a shareholder owned company
Separation of ownership rights and trading rights
Become a prot making and tax paying company Safeguards the interest of investors reater transparency in the functioning of stock
exchange
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A company can seek listing on more than onestock exchange
A company can seek listing if at least !" #shares are o$ered to public
Basic norms for listing are uniform
%ompanies to pay listing fees annually
%ompulsory disclosures &uarterly and half yearly
%entral 'isting Authority (%'A) to ensurecompliance of listing re&uirements
-isting of Securities
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ematerialisation ofsecurities
An electronic book entry form of holding andtransferring securities.
*wo depositories+S-'+ ational Securities -epository 'imited
%-S'+ %entral -epository Service 'imited
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.radingnline screen based electronic trading system
*wo types of systems+ rder driven system and /uote driven
system
*wo types of orders+ 'imit orders and market orders
0argin system+ brokers are levied various margins
1ntra+day trading
%ircuit breakershalt 2suspension in trading to contain volatility in pricesdont halt trading but no order is permitted if it falls out
of the specied price range1ndex +wide circuit breakers
Brokers provide -irect 0arket Access (-0A) to institutionalinvestors
*rading and settlement+ rolling settlement
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Stock Market )nde+
A leading economic indicator.
Serves as barometer of the e&uity market
A good market index incorporates a set of scrips which havehigh market capitalisation and high li&uidity.
%alculated as the percentage of the aggregate market value ofthe set of scrips incorporated in the index to the average market
value of the same scrips during the base period.
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Methodologies for Calculating the
)nde+0arket capitali5ation weighted index
6ull market capitalisation method+S78 %9 ifty in 1ndia and S78 :"" 1ndex in
;SA
6ree+
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/lobal Stock Market )ndiceso0 1ones )ndustrial Average
2asdaq Composite )nde+& all stocks listed
2asdaq "33 )nde+& largest computer, software 7telecom stocks
S 4 5 $33 inde+& :"" biggest mkt cap companies
F.S' "33& largest market value companies
MSC) 0orld inde+& 4> developed country market
indices
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Ma6or )ndices in )ndia(S' Sense+
Comprises 73 shares(ase year is "#89&8# and base value
is "33
S 4 5 C2: 2iftyComprises $3 shares(ase year is "##$ and base value is
"333