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Stock ExchangeA place, whether physical or electronic, wherestocks, bonds, and/orderivatives in listed companies

are bought and sold. A stock exchange may be a private company, anon-profit, or a publicly-traded

company (some exchanges have shares that trade on their own floors). A stock exchange provides a

regulated place where brokers and companies may meet in order to make investments on neutral

ground. The concept traces its roots back to medieval France and the Low Countries, where

agricultural goods were traded forcash ordebt. Most countries have a main exchange and many alsohave smaller, regional exchanges. A stock exchange is also called a bourse or simply an exchange

A stock market orequity market is a public (a loose network of economic transactions, nota physical facility or discrete) entity for the trading of companystock(shares) and derivativesat an agreed price; these are securities listed on a stock exchange as well as those only traded

privately.

The size of the world stock market was estimated at about $36.6trillion at the start ofOctober 2008.[1] The totalworld derivatives market has been estimated at about $791trillion

face or nominal value,[2] 11 times the size of the entire world economy.[3] The value of thederivatives market, because it is stated in terms ofnotional values, cannot be directlycompared to a stock or a fixed income security, which traditionally refers to anactual value.Moreover, the vast majority of derivatives 'cancel' each other out (i.e., a derivative 'bet' on anevent occurring is offset by a comparable derivative 'bet' on the eventnotoccurring). Manysuch relatively illiquid securities are valued as marked to model, rather than an actual market

price.

The stocks are listed and traded on stock exchanges which are entities of a corporation ormutual organization specialized in the business of bringing buyers and sellers of theorganizations to a listing of stocks and securities together. The largest stock market in theUnited States, by market capitalization, is theNew York Stock Exchange (NYSE). In

Canada, the largest stock market is theToronto Stock Exchange. Major European examplesof stock exchanges include theAmsterdam Stock Exchange, London Stock Exchange, ParisBourse, and the Deutsche Brse (Frankfurt Stock Exchange). In Africa, examples include

Nigerian Stock Exchange, JSE Limited, etc. Asian examples include the SingaporeExchange, the Tokyo Stock Exchange, the Hong Kong Stock Exchange, the Shanghai StockExchange, and the Bombay Stock Exchange. In Latin America, there are such exchanges as

the BM&F Bovespa and the BMV.

Trading

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The London Stock Exchange

Participants in the stock market range from small individualstock investors to large hedgefundtraders, who can be based anywhere. Their orders usually end up with a professional at astock exchange, who executes the order.

Some exchanges are physical locations where transactions are carried out on a trading floor,by a method known as open outcry. This type ofauction is used in stock exchanges andcommodity exchanges where traders may enter "verbal" bids and offers simultaneously. Theother type of stock exchange is a virtual kind, composed of a network of computers wheretrades are made electronically via traders.

Actual trades are based on an auction market model where a potential buyerbids a specificprice for a stock and a potential sellerasks a specific price for the stock. (Buying or selling atmarketmeans you will accept any ask price or bid price for the stock, respectively.) When the

bid and ask prices match, a sale takes place, on a first-come-first-served basis if there aremultiple bidders or askers at a given price.

The purpose of a stock exchange is to facilitate the exchange of securities between buyersand sellers, thus providing a marketplace (virtual or real). The exchanges provide real-timetrading information on the listed securities, facilitating price discovery.

TheNew York Stock Exchange

TheNew York Stock Exchange is a physical exchange, also referred to as a listedexchange only stocks listed with the exchange may be traded. Orders enter by way of exchangemembers and flow down to a floor broker, who goes to the floor trading post specialist forthat stock to trade the order. The specialist's job is to match buy and sell orders using openoutcry. If a spread exists, no trade immediately takes placein this case the specialist shoulduse his/her own resources (money or stock) to close the difference after his/her judged time.Once a trade has been made the details are reported on the "tape" and sent back to the

brokerage firm, which then notifies the investor who placed the order. Although there is asignificant amount of human contact in this process, computers play an important role,especially for so-called "program trading".

TheNASDAQ is a virtual listed exchange, where all of the trading is done over a computernetwork. The process is similar to the New York Stock Exchange. However, buyers andsellers are electronically matched. One or more NASDAQ market makers will always

provide a bid and ask price at which they will always purchase or sell 'their' stock.[4]

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The Pari B rse, now part ofEuronext, is an order-dri en, electronic stock exchange. It wasautomated in the late 1980s. Priorto the 1980s, it consisted of an open outcry exchange.

Stockbrokers met on the trading floor orthe Palais Brongniart. In 1986, the C TS tradingsystem was introduced, and the order matching process was fully automated.

From time to time, acti e trading (especially in large blocks of securities) have moved away

from the 'active' exchanges. Securities firms, led by UBS AG, Goldman Sachs Group Inc. andCredit Suisse Group, already steer 12 percent of U.S. security trades away from theexchanges to theirinternal systems. That share probably willincrease to 18 percent by 2010as more investment banks bypass the NYSE and NASDAQ and pair buyers and sellers ofsecurities themselves, according to data compiled by Boston-based Aite Group LLC, a

brokerage-industry consultant.[5]

Now that computers have eliminated the need fortrading floors like the Big Board's, thebalance of powerin equity markets is shifting. By bringing more orders in-house, whereclients can move big blocks of stockanonymously,brokers pay the exchanges less in fees andcapture a bigger share ofthe $11 billion a yearthatinstitutionalinvestors pay in tradingcommissions as well as the surplus ofthe century had taken place.

[citation needed].

[edi ] M et parti ipants

A few decades ago, worldwide, buyers and sellers were individualinvestors, such as wealthy

businessmen, usually with long family histories to particular corporations. Overtime, marketshave become more "institutionali ed"; buyers and sellers are largely institutions (e.g.,pensionfunds, insurance companies, mutual funds, index funds, exchange-traded funds, hedge funds,investor groups, banks and various otherfinancialinstitutions).

The rise ofthe institutionalinvestorhas brought with it some improvements in marketoperations. Thus, the government was responsible for"fixed" (and exorbitant) fees being

markedly reduced forthe 'small' investor, but only afterthe large institutions had managed tobreakthe brokers' solid front on fees. (They then wentto 'negotiated' fees, but only forlargeinstitutions.

[citation needed])

However, corporate governance (atleastin the West) has been very much adversely affectedby the rise of (largely 'absentee') institutional 'owners'.[citation needed]

[edit] History

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Established in 1875, the Bombay Stock Exchange is Asia's first stock exchange

In 12th century France the courratiers de change were concerned with managing andregulating the debts of agricultural communities on behalf of the banks. Because these men

also traded with debts, they could be called the firstbrokers. A common misbelief is that inlate 13th century Bruges commodity traders gathered inside the house of a man calledVander Beurze, and in 1309 they became the "Brugse Beurse", institutionalizing what had been,until then, an informal meeting, but actually, the family Van der Beurze had a building inAntwerp where those gatherings occurred;[6] the Van der Beurze had Antwerp, as most of themerchants of that period, as their primary place for trading. The idea quickly spread aroundFlanders and neighboring counties and "Beurzen" soon opened inGhent and Amsterdam.

In the middle of the 13th century, Venetian bankers began to trade in government securities.In 1351 the Venetian government outlawed spreading rumors intended to lower the price of

government funds. Bankers inPisa, Verona, Genoa and Florence also began trading ingovernment securities during the 14th century. This was only possible because these were

independent city states not ruled by a duke but a council of influential citizens. Italiancompanies were also the first to issue shares. Companies in England and the Low Countries

followed in the 16th century. The Dutch East India Company (founded in 1602) was the firstjoint-stock company to get a fixed capital stock and as a result, continuous trade in company

stock emerged on the Amsterdam Exchange. Soon thereafter, a lively trade in variousderivatives, among which options and repos, emerged on theAmsterdam market. Dutch

traders also pioneered short selling - a practice which was banned by the Dutch authorities asearly as 1610.

[7]

There are now stock markets in virtually every developed and most developing economies,with the world's biggest market being in the United States, United Kingdom, Japan,India,China, Canada, Germany's (Frankfurt Stock Exchange), France, South Korea and the

Netherlands.[8]

[edit Importance of stock market

[edit Function and purpose

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The main trading room of the Tokyo Stock Exchange,where trading is currently completedthrough computers.

The stock market is one of the most important sources forcompanies to raise money. This

allows businesses to be publicly traded, or raise additional financial capital for expansion byselling shares of ownership of the company in a public market. Theliquidity that an exchangeprovides affords investors the ability to quickly and easily sell securities. This is an attractivefeature of investing in stocks, compared to other less liquid investments such asrealestate.[

citation needed]

History has shown that the price ofshares and other assets is an important part of thedynamics of economic activity, and can influence or be an indicator of social mood. Aneconomy where the stock market is on the rise is considered to be an up-and-comingeconomy. In fact, the stock market is often considered the primary indicator of a country'seconomic strength and development.

[citation needed]

Rising share prices, for instance, tend to be associated with increased business investmentand vice versa. Share prices also affect the wealth of households and their consumption.Therefore, central banks tend to keep an eye on the control and behavior of the stock marketand, in general, on the smooth operation offinancial system functions. Financial stability isthe raison d'tre of central banks.

[citation needed]

Exchanges also act as the clearinghouse for each transaction, meaning that they collect anddeliver the shares, and guarantee payment to the seller of a security. This eliminates the riskto an individual buyer or seller that the counterparty could default on the transaction.[citationneeded]

The smooth functioning of all these activities facilitates economic growth in that lower costs

and enterprise risks promote the production of goods and services as well as employment. Inthis way the financial system contributes to increased prosperity.[

citation needed]

[edit Relation of the stock market to the modern financial system

The financial system in most western countries has undergone a remarkable transformation.One feature of this development is disintermediation. A portion of the funds involved insaving and financing, flows directly to the financial markets instead of being routed via thetraditional bank lending and deposit operations. The general public's heightened interest in

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investing in the stock market, either directly orthrough mutual funds, has been an importantcomponent ofthis process.

Statistics show thatin recent decades shares have made up an increasingly large proportion of

households' financial assets in many countries. In the 1970s, in Sweden, deposit accounts andother very liquid assets with little risk made up almost 60 percent of households' financial

wealth, compared to less than 20 percentin the 2000s. The major part ofthis adjustmentinfinancial portfolios has gone directly to shares but a good deal now takes the form of variouskinds ofinstitutionalinvestment for groups ofindividuals, e.g., pension funds, mutual funds,hedge funds, insurance investment of premiums, etc.

The trend towards forms of saving with a higher risk has been accentuated by new rules formost funds and insurance, permitting a higher proportion of shares to bonds. Similartendencies are to be found in otherindustriali ed countries. In all developed economicsystems, such as the European Union, the United States, Japan and other developed nations,the trend has been the same: saving has moved away from traditional (governmentinsured)

bank deposits to more risky securities of one sort or another

NSE

The National Stock Exchange (NSE) (Hindi: Rasht iya hare Bzar) is astock exchangelocated atMumbai, India. Itis the 9th largest stock exchangein the world bymarket capitali ation and largestin India by daily turnover and number oftrades, for bothequities and derivative trading.[2] NSE has a market capitali ation of around US$1.59 trillionand over 1,552 listings as of December 2010.

[3]Though a number of other exchanges exist,

NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India,and between them are responsible forthe vast majority of share transactions. The NSE's keyindex is the S&P CNX Nifty, known as the NSE NIFTY (National Stock Exchange Fifty), an

index of fifty major stocks weighted by market capitalisation.

NSE is mutually-owned by a set ofleading financialinstitutions, banks, insurance companiesand other financialintermediaries in India butits ownership and management operate asseparate entities.[4] There are atleast 2 foreign investors NYSE Euronext and Goldman Sachswho have taken a stake in the NSE.

[5]As of 2006, the NSE VSATterminals, 2799 in total,

cover more than 1500 cities across India.[6] NSE is the third largest Stock Exchange in theworld in terms ofthe number oftrades in equities.

[7]Itis the second fastest growing stock

exchangein the world with a recorded growth of 16.6%.[8]

[edit] Origins

The National Stock Exchange of India was promoted by leading Financialinstitutions atthebehest ofthe Government of India, and was incorporated in November 1992 as a tax-payingcompany. In April 1993, it was recogni ed as a stock exchange underthe Securities Contracts(Regulation) Act, 1956. NSE commenced operations in the Wholesale DebtMarket (WDM)segmentin June 1994. The Capital market (Equities) segment ofthe NSE commenced

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operations in November 1994, while operations in the Derivatives segment commenced inJune 2000.

[edit]Innovations

NSE pioneering efforts include:

y Being the first national, anonymous, electronic limit order book (LOB) exchange totrade securities in India. Since the success ofthe NSE, existent market and newmarket structures have followed the "NSE" model.

y Setting up the first clearing corporation "National Securities Clearing CorporationLtd."in India. NSCCL was a landmarkin providing innovation on all spot equitymarket (and later, derivatives market) trades in India.

y Co-promoting and setting up of National Securities Depository Limited, firstdepository in India

[9]

y Setting up ofS&P CNX Nifty.y NSE pioneered commencement of Internet Trading in February 2000, which led to the

wide populari ation ofthe NSE in the broker community.y Being the first exchange that, in 1996, proposed exchange traded derivatives,

particularly on an equity index, in India. After four years of policy and regulatorydebate and formulation, the NSE was permitted to starttrading equity derivatives

y Being the first and the only exchange to trade GOLD ETFs (exchange traded funds) inIndia.

y NSE has also launched the NSE-CNBC-TV18 media centre in association withCNBC-TV18.

y NSE.IT Limited, setup in 1999 , is a 100% subsidiary ofthe National Stock Exchangeof India. A Vertical Specialist Enterprise, NSE.IT offers end-to-end InformationTechnology (IT) products, solutions and services.

y NSE (National Stock Exchange) was the first exchange in the world to use satellite

communication technology fortrading, using a client server based system calledNational Exchange for Automated Trading (NEAT). For alltrades entered into NEATsystem, there is uniform response time ofless than one second.

[edit]

Markets

Currently, NSE has the following major segments ofthe capital market:

y Equityy Futures and Optionsy Retail DebtMarkety Wholesale DebtMarkety Currency futuresy MUTUAL FUNDy STOC S LENDING & BORROWING

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August 2008 Currency derivatives were introduced in India with the launch of CurrencyFutures in USD INR by NSE. Currently it has also launched currency futures in EURO,POUND & YEN. Interest Rate Futures was introduced for the first time in India by NSE on31 August 2009, exactly after one year of the launch of Currency Futures.

NSE became the first stock exchange to get approval for Interest rate futures as recommended

by SEBI-RBI committee, on 31 August 2009, a futures contract based on 7% 10 Year GOIbond (NOTIONAL) was launched with quarterly maturities. [10]

[edit Hours

NSE's normal trading sessions are conducted from 9:15 am India Time to 3:30 pm India Timeon all days of the week except Saturdays, Sundays and Official Holidays declared by theExchange (or by the Government of India) in advance.

[11]The exchange, in association with

BSE (Bombay Stock Exchange Ltd.), is thinking of revising its timings from 9.00 am IndiaTime to 5.00 pm India Time.

There were System Testing going on and opinions, suggestions or feedback on the NewProposed Timings are being invited from the brokers across India. And finally on 18

November 2009 regulator decided to drop their ambitious goal of longest Asia Trading Hoursdue to strong opposition from its members.

On 16 December 2009, NSE announced that it would advance the market opening to 9 :00 amfrom 18 December 2009. So NSE trading hours will be from 9.00 am till 3:30 pm India Time.

However, on 17 December 2009, after strong protests from brokers, the Exchange decided topostpone the change in trading hours till 4 Jan 2010.

NSE new market timing from 4 Jan 2010 is 9:00 am till 3:30 pm India Time.

Indices

Graph of S&P CNX Nifty from January 1997 to March 2011

NSE also set up as index services firm known as India Index Services & Products Limited(IISL) and has launched several stock indices, including:[13]

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y S&PCNX Nifty(Standard & Poor's CRISIL NSE Index)y CNX Nifty Juniory CNX 100 (= S&PCNX Nifty + CNX Nifty Junior)y S&PCNX 500 (= CNX 100 + 400 major players across 72 industries)y CNX Midcap (introduced on 18 July 2005 replacingCNX Midcap 200)

Certifications

NSE also conducts online examination and awards certification, under its programmes ofNSE's Certification in Financial Markets (NCFM)[1]. Currently, certifications are availablein 19 modules, covering different sectors of financial andcapital markets. Branches of the

NSE are located throughout India.

BO BAY STOCKEXCHANGE

The Bombay StockE change (BSE) (Marathi:

Bombay hare Bzar)(formerly, The Stock Exchange, Bombay) is a stock exchange located on Dalal Street,

Mumbai and is the oldest stock exchange in Asia. The equity market capitalization of thecompanies listed on the BSE was US$1.63 trillion as of December 2010, making it the 4thlargest stock exchange in Asia and the 8th largest in the world.

[1]The BSE has the largest

number of listed companies in the world.[2]

As of December 2010, there are over 5,034 listed Indian companies and over 7700scrips onthe stock exchange,

[3]the Bombay Stock Exchange has a significant trading volume. The

BSE SENSEX, also called "BSE 30", is a widely used market index in India andAsia.Though many other exchanges exist, BSE and theNational Stock Exchange of India accountfor the majority of the equity trading in India. While both have similar total marketcapitalization (about USD 1.6 trillion), share volume in NSE is typically two times that ofBSE

History

The Phiroze Jeejeebhoy Towers house the Bombay Stock Exchange since 1980.

The Bombay Stock Exchange is the oldest exchange in Asia. It traces its history to the 1850s,when 4 Gujarati and 1 Parsi stockbroker would gather under banyan trees in front of

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Mumbai's Town Hall. The location of these meetings changed many times, as the number ofbrokers constantly increased. The group eventually moved to Dalal Street in 1874 and in1875 became an official organization known as 'The Native Share & Stock BrokersAssociation'. In 1956, the BSE became the first stock exchange to be recognized by the

Indian Government under the Securities Contracts Regulation Act. The Bombay StockExchange developed the BSE SENSEX in 1986, giving the BSE a means to measure overall

performance of the exchange. In 2000 the BSE used this index to open its derivatives market,trading SENSEX futures contracts. The development of SENSEX options along with equity

derivatives followed in 2001 and 2002, expanding the BSE's trading platform. Historically anopen outcry floor trading exchange, the Bombay Stock Exchange switched to an electronic

trading system in 1995. It took the exchange only fifty days to make this transition. Thisautomated, screen-based trading platform called BSE On-line trading (BOLT) currently has acapacity of 8 million orders per day. The BSE has also introduced the world's first centralizedexchange-based internet trading system, BSEWEBx.co.in to enable investors anywhere in theworld to trade on the BSE platform.

[5]The BSE is currently housed in Phiroze Jeejeebhoy

Towers at Dalal Street, Fort area.

Indices

The graph of SENSEX from July 1997 to March 2011

The launch of SENSEX in 1986 was later followed up in January 1989 by introduction ofBSE National Index (Base: 1983-84 = 100). It comprised 100 stocks listed at five major stockexchanges in India - Mumbai, Calcutta, Delhi, Ahmedabad and Madras. The BSE NationalIndex was renamed BSE-100 Index from October 14, 1996 and since then, it is beingcalculated taking into consideration only the prices of stocks listed at BSE. BSE launched thedollar-linked version of BSE-100 index on May 22, 2006. BSE launched two new indexseries on 27 May 1994: The 'BSE-200' and the 'DOLLEX-200'. BSE-500 Index and 5 sectoralindices were launched in 1999. In 2001, BSE launched BSE-PSU Index, DOLLEX-30 andthe country's first free-float based index - the BSE TECk Index. Over the years, BSE shiftedall its indices to the free-float methodology (except BSE-PSU index). BSE disseminatesinformation on the Price-Earnings Ratio, the Price to Book Value Ratio and the DividendYield Percentage on day-to-day basis of all its major indices. The values of all BSE indicesare updated on real time basis during market hours and displayed through the BOLT system,BSE website and news wire agencies. All BSE Indices are reviewed periodically by the BSEIndex Committee. This Committee which comprises eminent independent finance

professionals frames the broad policy guidelines for the development and maintenance of allBSE indices. The BSE Index Cell carries out the day-to-day maintenance of all indices andconducts research on development of new indices.

[8]

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on ti l t on tionof t nt . D nt normallred / arged against t e asset of t e ompany in favour of debenture

older.

y Bond: A negotiable ertifi ate evidencing indebtedness. It is normallyunsecured. A debt security isgenerally issuedbyacompany, municipalityor

government agency. A bond investor lends money to t e issuer and i nexchange, the issuer promises to repay the loan amount on a specifiedmaturity date. he issuer usually pays the bond holder periodic interestpaymentsover the lifeof the loan. hevarious typesof Bondsareas follows -

Zero oupon Bond: Bond issued at a discount and repaid at a facevalue. No periodic interest is paid. he difference between the issuepriceandredemptionpricerepresents thereturn to theholder. hebuyerof thesebondsreceivesonlyonepayment, at thematurityof thebond.

onvertible Bond: A bond giving the investor the option to convert thebond intoequityat a fixedconversionprice.

y Commercial Paper: A short term promise to repay a fixed amount that isplacedon themarket eitherdirectlyor throughaspecialized intermedi ary. Itis usually issued by companies with a high credit standing in the form of apromissory note redeemable at par to the holder on maturity and therefore,doesnt require any guarantee. ommercial paper is a money marketinstrument issuednormally for tenureof 90 days.

y Treasury Bills: Short-term up to 91 days)bearerdiscount security issuedbythe Government asameansof financing itscashrequirements.

7.Wh

atareth

eregulatoryrequirementsspecified by SEBI forcorporatedebtsecurities?

he term orporate Bonds referred here includes all debt securities issued byinstitutions suchas Banks, Public Sector Undertakings, unicipal orporations,bodies corporate andcompanieshaving a tenure of more than 365 days. Suchan issue of bonds, if offered to the public shall be required to comply with theSEBI Disclosure and Investor Protection Guidelines), 2000. Also, a privateplacement of corporate bonds made by a listed company shall be required tocomplywithprovisionscontained in SEBI irculars in thisregard.

he SEBI ircularsdated September30, 2003 and December22, 2003 have laid

out norms pertaining to the disclosure norms on issuance of such securities,which include compliancewith hapter VI of the SEBI Disclosure and InvestorProtection) Guidelines, 2000, ompanies Act, 1956, listing agreement fordebentureswith thestockexchanges, rating tobeobtained froma redit RatingAgency registered with SEBI, requirement for appointing a debenture trusteeregisteredwith SEBI, mandatory trading indematerialized form, etc.

In order to develop an exchange traded market for corporate bonds SEBI videcircularsdated December 12, 2006 and arch 01, 2007 hasauthorized BSE and

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NSE to set up and maintain corporate bond reporting platforms to capture allinformation related to trading in corporate bonds as accurately and as close toexecution as possible. Subsequently, I DA has also been permitted tooperateareportingplatform. Asper thecirculars, all issuers, intermediariesandcontracting partiesaregrantedaccess to the reporting platform for thepurposeand transactionsshall bereportedwithin 30 minutesofclosing thedeal. hedata

reportedon theplatform isdisseminatedonwebsitesof BSE, NSE and I DA.

Asasecondphaseofdevelopment, SEBI vide irculardated April 13, 2007 haspermitted BSE and NSE to have in place corporate bond trading platforms toenableefficient pricediscoveryandreliableclearingandsettlement inagradualmanner. o begin with, BSE and NSE have launched an order driven tradematchingplatform which retainsessential featuresof O market where tradesare executed through brokers. O trades however continue to be reported ontheexchange reportingplatforms. Inorder toencouragewiderparticipa tion, thelot size for trading in bonds has been reduced to Rs.1lakh. Subsequently BSEand NSE may move towards anonymous order matching with clearing andsettlement.

.RoleofBrokerand Sub-brokerinthe Secondary Market

8. Whom should I contact for my Stock Marketrelatedtransactions?

You can contact a broker or asub broker registered with SEBI forcarryingoutyourtransactionspertaining to thecapital market.

9. Whoisa broker?

A broker is a member of a recognized stock exchange, who is permitted to dotradeson thescreen-based trading systemof different stockexchanges. He isenrolledasamemberwith theconcernedexchangeand isregisteredwith SEBI.

10. Whoisasub broker?

A subbrokerisapersonwho isregisteredwith SEBI assuchand isaffiliated toamemberofarecognizedstockexchange.

11. Howdo I knowifthe brokerorsub brokerisregistered?

You can confirm it by verifying the registration certificate issued by SEBI. A

broker'sregistrationnumberbeginswith the letters "INB" and that ofasubbrokerwith the letters INS". or the brokers of derivatives segment, the registrationnumber begins with the letters IN . here is no sub-broker in the derivativessegment.

12. Am I requiredtosignanyagreement withthe brokerorsub-broker?

Yes. or thepurposeofengagingabroker toexecute tradesonyourbehalf fromtime to time and furnish details relating to yourself for enabling the broker to

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maintain client registration form you have to sign the ember - lientagreement if you are dealing directly with a broker. In case you are dealingthrough a sub-broker then you have to sign a Broker - Sub broker - lient

ripartite Agreement. odel ripartite Agreement between Broker -Sub brokerand lients isapplicableonly forthecashsegment. he odel Agreement has tobeexecutedon thenon-judicial stamp paper. he Agreement contains clauses

defining the rights and responsibility of lient vis--vis broker/ sub broker. hedocumentsprescribedaremodel formats. hestockexchanges/stockbrokermayincorporateanyadditional clauses in thesedocumentsprovided thesearenot inconflict with any of the clauses in the model document, as also the Rules,Regulations, Articles, Byelaws, circulars, directivesandg uidelines.

13. Whatis Member ClientAgreement Form?

his form isanagreement enteredbetweenclient andbroker in thepresenceofwitnesswhere theclient agrees isdesirous) to trade/invest in thesecurities listedon theconcerned Exchange through thebrokerafterbeingsatisfiedof brokerscapabilities to deal in securities. he member, on the other hand agrees to be

satisfied by the genuineness and financial soundness of the client and makingclient awareofhis brokers) liability forthebusin ess tobeconducted.

14. Whatkindofdetailsdo I havetoprovideinClient Registrationform?

hebrokershave tomaintainadatabaseof theirclients, forwhichyouhave to fillclient registration form. In case of individual client registration, you have tobroadlyprovide following information:

y Permanent Account Number PAN), whichhasbeenmademandatory forallthe investorsparticipating in thesecuritiesmarket.

y Your name, date of birth, photograph, address, educational qualifications,occupation, residential status(Resident Indian/ NRI/others)

y Bankanddepositoryaccount details

y If you are registered with any other broker, then the name of broker andconcerned Stockexchangeand lient ode Number.

orproofofaddress(anyoneof the following):

y Passport

y VoterID

y Driving license

y Bank Passbooky Rent Agreement

y Ration ard

y lat aintenance Bill

y elephone Bill

y Electricity Bill

y Insurance Policy

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Each client has to use one registration form. In case of joint names /familymembers, aseparate formhas tobesubmitted foreachperson.

Incaseof orporate lient, following informationhas tobeprovided:

y Name, addressof the ompany/ irm

y Dateof incorporationanddateofcommencement ofbusiness.

y Registrationnumber(with RO , SEBI oranygovernment authority)y Detailsof PAN

y Details of Promoters/Partners/Key managerial Personnel of theompany/ irm inspecified format.

y Bankand Depository Account Details

y opies of the balance sheet for the last 2 financial years (copies of annualbalancesheet tobesubmittedeveryyear)

y opy of latest share holding pattern including list of all those holding morethan 5% in theshare capital of thecompany, duly certifiedby the ompanySecretary / Whole time Director/ D. (copyofupda tedshareholdingpattern tobesubmittedeveryyear)

y

opiesof the emorandumand Articlesof Association incaseofacompany/ bodycorporate, partnershipdeed incaseofapartnership firm

y opyof the Resolutionofboardofdirectors' approvingparti cipation inequity /derivatives / debt trading and naming authorized persons for dealing insecurities.

y Photographs of Partners/Whole time directors, individual promoters holding5% or more, either directlyor indirectly, in the shareholding of the compa nyandofpersonsauthorized todeal insecurities.

y If registered with any other broker, then the name of broker and concernedStockexchangeand lient ode Number.

15. Whatis meant byUniqueClientCode?

In order to facilitate maintaining database of their clients and to strengthen theknow your client (KY ) norms; all brokers have been mandated to use uniqueclient code linked to the PAN detailsof therespectiveclient whichwill act asanexclusive identification fortheclient.

16. Whatis MAPIN?

APIN (Market Participant Identification Number) is theMarket ParticipantsandInvestors Integrated Database. he SEBI (Central Database of MarketParticipants) Regulations, 2003 were notified on November 20, 2003 underwhich, all the participants in the Indian Securities Market viz., SEBI registeredintermediaries, listed companies and their associates and the investors wererequired to obtain a Unique Identification Number (UIN) in order to enable theregulatortoestablish the identityofperson(s).

In the light of SEBIsorderof making PAN thesole identificationnumber forallparticipants transacting in the securities market, irrespective of the amount oftransaction, it has been decided to discontinue with the requirement of UniqueIdentification Number (UIN) under the SEBI (Central Database of market

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Participants Regulations), 2005 (MAPIN regulations)/circulars . Accordingly,acceptanceofMAPIN cardasoneof thedocuments for thepurposeof ProofofIdentity(POI)hasbeenwithdrawn.

17. Whatisariskdisclosuredocument?

Inorder toacquaint the investors in themarketsof thevarious risks involved intrading in thestockmarket, themembersof theexchangehavebeenrequired tosigna riskdisclosuredocument with their clients, informing themof thevariousrisks likeriskofvolatility, risksof lower liquidity, risksofhigherspreads, risksofnewannouncements, risksofrumoursetc.

18. Howdo I place myorderswiththe brokerorsub broker?

Youcaneithergo to thebrokers / subbrokersofficeorplaceanorderover thephone / internet orasdefined in theModel Agreement givenabove.

19. Howdo I knowwhether myorderisplaced?

he Stock Exchangesassigna Unique OrderCode Number to each transaction,which is intimated by broker to his client and once the order is executed, thisordercodenumber isprintedon thecontract note. hebrokermemberhasalsoto maintain the record of time when the client has placed order and reflect thesame in thecontract notealongwith the timeofexecutionof theorder.

20. Whatdocumentsshould beobtainedfrom brokeronexecutionoftrade?

Youhave toensurereceipt of the followingdocuments forany tradeexecutedonthe Exchange:

a. Contract note in orm A tobegivenwithinstipulated time.

b. In thecaseofelectronic issuanceofcontract notesby thebrokers, theclientsshall ensure that the same isdigitally signedand incaseof inability toviewthesame, shall communicate thesame to thebroker, uponwhich thebrokershall ensure that the physical contract note reaches the client within thestipulated time.

It is the contract note that gives rise to contractual rights and obligations ofparties of the trade. Hence, you should insist on contract note from stockbroker.

21. Whatdetailsarerequiredto be mentionedontheContractnote issued bythe Stock Broker?

A broker has to issue a contract note to clients for all transactions in the formspecified by the stock exchange. he contract note inter-alia should havefollowing:

y Name, addressand SEBI Registrationnumberof theMemberbroker.

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y Nameofpartner/proprietor/Authorised Signatory.y Dealing Office Address/ el No/ axno, Codenumberof themembergivenby

the Exchange.y Unique Identification Numbery Contract number, dateof issueofcontract note, settlement numberand time

period forsettlement.y Constituent (Client)name/Code Number.y Ordernumberandordertimecorresponding to the trades.y radenumberand rade time.y Quantityand Kindof Securitybrought/soldby theclient.y Brokerageand Purchase /Saleratearegivenseparately.y Service taxratesandanyothercharges leviedby thebroker.y Securities ransaction ax(S )asapplicable.y Appropriate stamps have to be affixed on the original contract note or it is

mentioned that theconsolidatedstampduty ispaid.y Signatureof the Stockbroker/Authorized Signatory.

Contract noteprovides for therecourse to thesystemofarbitrators forsettlement

ofdisputesarisingout of transactions. Only thebrokercan issuecontract notes.

22. Whatisthe maximum brokeragethata brokercancharge?

hemaximumbrokerage that canbechargedbyabrokerhasbeenspecified inthe Stock Exchange Regulations and hence, it may differ from across variousexchanges. Asper the BSE & NSE Bye aws, abrokercannot chargemore than2.5% brokerage fromhisclients.

23. Whatarethechargesthatcan beleviedontheinvestor byastock broker?

he tradingmembercancharge:

1. Brokeragechargedbymemberbroker.2. Penaltiesarisingonspecificdefault onbehalfofclient (investor) 3. Service taxasstipulated.4. Securities ransaction ax(S )asapplicable.

hebrokerage, service taxand S are indicatedseparately in thecontract note.

24. Whatis STT?

Securities ransaction ax(S ) isa taxbeing leviedonall transactionsdoneon

thestockexchangesat ratesprescribedby theCentral Government from time totime. Pursuant to theenactment of the inance(No.2) Act, 2004, the Governmentof Indianotified the Securities ransaction ax Rules, 2004 and S came intoeffect from October1, 2004.

25. WhatisanAccountPeriod Settlement?

An account period settlement is a settlement where the trades pertaining to aperiodstretchingovermore thanoned ayaresettled. orexample, trades for the

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period Monday to riday are settled together. he obligations for the accountperiod are settled on a net basis. Account period settlement has beendiscontinuedsince January 1, 2002, pursuant to SEBI directives.

26. Whatisa Rolling Settlement?

Ina Rolling Settlement, tradesexecutedduring thedayaresettledbasedon thenet obligations fortheday.

Presently the tradespertaining to therollingsettlement aresettledona +2 daybasiswhere stands for the tradeday. Hence, tradesexecutedonaMondayaretypically settled on the following Wednesday (considering 2 working days fromthe tradeday).

he fundsandsecuritiespay-inandpay-out arecarriedout on +2 day.

27. Whatisthepay-indayandpay-outday?

Pay in day is the day when the brokers shall make payment or delivery ofsecurities to the exchange. Pay out day is the day when the exchange makespayment ordeliveryofsecurities to thebroker. Settlement cycle ison +2 rollingsettlement basis w.e.f. April 01, 2003. he exchanges have to ensure that thepayout of fundsandsecurities to theclients isdoneby thebrokerwithin 24 hoursof thepayout. he Exchangeswill have to issuepressrelease immediatelyafterpayout.

28. Whatare theprescribed pay-inand pay-outdays for fundsand securitiesfor Normal Settlement?

hepay-inandpay-out days for fundsandsecuritiesareprescribedasper theSettlement Cycle. A typical Settlement Cycle of Normal Settlement is givenbelow:

Activity Day

rading Rolling Settlement rading

Clearing Custodial Confirmation +1 workingdays

Delivery Generation +1 workingdays

Settlement Securitiesand undspay in +2 workingdays

Securitiesand undspayout +2 workingdaysPost Settlement Valuation Debit +2 workingdays

Auction +3 workingdays

Bad Delivery Reporting +4 workingdays

Auctionsettlement +5 workingdays

Closeout +5 workingdays

Rectified bad delivery pay-in and +6 workingdays

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pay-out

Re-bad delivery reporting andpickup

+8 workingdays

Closeout ofre-baddelivery +9 workingdays

Note: he above is a typical settlement cycle for normal (regular) marketsegment. he days prescribed for the above activities may change in case offactors likeholidays, bankclosingetc. Youmayrefer toscheduleddatesofpay -in/pay-out notifiedby the Exchange foreachsettlement from time -to-time.

29. Incaseofpurchaseofshares,whendo I makepaymenttothe broker?

hepayment for thesharespurchased isrequired tobedoneprior to thepay indate for the relevant settlement or as otherwise provided in the Rules andRegulationsof the Exchange.

30. Incaseofsaleofshares,whenshouldtheshares begiventothe broke r?

he delivery of shares has to be done prior to the pay in date for the relevantsettlement or as otherwise provided in the Rules and Regulations of theExchangeandagreedwith thebroker/subbroker inwriting.

31. How long it takes to receive my money for a sale transaction and mysharesfora buytransaction?

Brokerswererequired tomakepayment orgivedeliverywithin twoworkingdaysof the pay - out day. However, as settlement cycle hasbeen reduced fromT+3rollingsettlement toT+2 w.e.f. April 01, 2003, thepayout of fundsandsecurities

to theclientsby thebrokerwill bewithin 24 hoursof thepayout.

32. Is there any provision where I can get faster delivery of shares in myaccount?

The investors/clients can get direct delivery of shares in their beneficial owneraccounts. Toavail this facility, youhave togivedetailsofyourbeneficial owneraccount and the DP-ID of your DP to your broker along with the StandingInstructions for Delivery-In toyourDepository Participant foracceptingshares inyour beneficial owner account. Given these details, the ClearingCorporation/Clearing Houseshall sendpayout instructions to thedepositoriessothat youreceivepayout ofsecuritiesdirectly intoyourbeneficial owneraccount.

33. WhatisanAuction?

The Exchangepurchases the requisite quantity in the Auction Market andgivesthem to the buying trading member. The shortages are met through auctionprocessand thedifference inprice indicated incontract noteandpricereceivedthrough auction ispaid by member to the Exchange, which is then liable toberecovered from theclient.

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34. Whathappensifthesharesarenot boughtintheauction?

If thesharescouldnot bebought in theauction i.e. ifsharesarenot offered forsale in theauction, the transactionsareclosedout asperSEBI guidelines.

The guidelines stipulate that the close out Price will be the highest price

recorded in that scripon theexchange in thesettlement inwhich theconcernedcontract wasentered intoandup to thedateofauction/closeout OR 20% abovetheofficial closingpriceon theexchangeon thedayonwhichauctionoffersarecalled for(and in theevent of therebeingnosuchclosingpriceon that day, thentheofficial closingpriceon the immediatelypreceding tradingdayonwhich therewasanofficial closingprice), whichever ishigher.

Since, in the rollingsettlement theauctionand thecloseout takesplaceduringtrading hours, the reference price in the rolling settlement for close outprocedureswouldbe takenas thepreviousdaysclosingprice.

35. Whatis MarginTrading Facility?

Margin Trading is trading with borrowed funds/securities. It is essentially aleveraging mechanism which enables investors to take exposure in the marketover and above what is possible with their own resources. SEBI has beenprescribing eligibility conditions and procedural details for allowing the MarginTrading acility from time to time.

Corporatebrokerswithnet worthofat least Rs.3 croreare eligible forprovidingMargin trading facility to theirclientssubject to theirentering intoanagreement tothat effect. Beforeprovidingmargin trading facility toaclient, thememberand theclient havebeen mandated tosignanagreement for thispur pose in the formatspecified by SEBI. It has also been specified that theclient shall not avail thefacility frommore thanonebrokerat any time.

The facility of margin trading is available for Group 1 securities and thosesecuritieswhichareoffered in the initial publicoffersandmeet theconditions forinclusion in thederivativessegment of thestockexchanges.

or providing the margin trading facility, a broker may use his own funds orborrow from scheduled commercial banks or NB Cs regulated by the RBI. Abroker isnot allowed toborrow funds fromanyothersource.

The "total exposure" of thebroker towards themargin trading facilityshouldnot

exceed theborrowed funds and 50 percent of his "net worth". While providingthemargin trading facility, thebrokerhas toensure that theexposure toasingleclient doesnot exceed 10 percent of the "total exposure" of thebroker.

Initial marginhasbeenprescribedas 50% and themaintenancemarginhasbeenprescribedas 40%.

In addition, a broker has to disclose to the stock exchange details on grossexposure including name of the client, unique identification number under the

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SEBI (Central DatabaseofMarket Participants) Regulations, 2003, andnameofthescrip.

If the broker has borrowed funds for the purpose of providing margin tradingfacility, thenameof the lenderandamount borrowedshouldbedisclosed latestby thenext day.

Thestockexchange, in turn, has todisclose thescrip -wisegrossoutstanding inmargin accounts with all brokers to the market. Such disclosure regardingmargin-tradingdoneonanyday shall be madeavailableafter the tradinghourson the followingday.

Thearbitrationmechanismof theexchangewouldnot beavailable forsettlementofdisputes, ifany, between theclient andbroker, arisingout of themargin tradingfacility. However, all transactions done on the exchange, whether normal orthroughmargin trading facility, shall becoveredunder thearbitrationmechanismof theexchange.

36. Whatis SEBI Risk Management System?

Theprimary focusofriskmanagement by SEBI hasbeen toaddress themarketrisks, operational risks and systemic risks. To this effect, SEBI has beencontinuously reviewing its policies and drafting risk management policies tomitigate these risks, thereby enhancing the level of investor protection andcatalyzingmarket development. Thekeyriskmanagement measures initiatedbySEBI include:-

Categorization of securities into groups 1, 2 and 3 for impositionof marginsbasedon their liquidityandvolatility.

VaR basedmarginingsystem. Specificationofmark toMarket margins Specificationof Intra-day trading limitsand Gross Exposure imits Real timemonitoringof the Intra-day trading limitsand Gross Exposure imits

by the Stock Exchanges Specificationof time limitsofpayment ofmargins Collectionofmarginsonupfront basis Indexbasedmarket widecircuit breakers Automatic de-activation of trading terminals in case of breach of exposure

limits VaR based margining system has been put in place based on the

categorization of stocks based on the liquidity of stocks depending on its

impact cost andvolatility. It addresses 99% of therisks in themarket. Additional margins have also been specified to ad dress the balance 1%

cases. Collectionofmargins from institutional clientsonT+1 basis

The liquidassetsdepositedby thebrokerwith theexchangeshouldbesufficientto cover upfront VaR margins, Extreme oss Margin, MTM (Mark to Market

osses)and theprescribed BMC. TheMark toMarket marginwouldbepayable

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before thestart of thenext days trading. TheMarginwouldbecalculatedbasedongrossopenpositionof themember. Thegrossopenposition for thispurposewould mean the gross of all net positions across all the clients of a memberincluding his proprietary position. The exchanges would monitor the position ofthebrokers online real timebasisand therewouldbeautomaticdeactivationofterminal onanyshortfall ofmargin.

37. Whatis Short Sellingand Securities Lending & Borrowing?

Short Sellingmeanssellingofastock that thesellerdoesnot ownat the timeoftrade. Short selling can be done by borrowing the stock through ClearingCorporation/Clearing Houseofastockexchange which isregisteredas ApprovedIntermediaries (AIs). Short selling can be done by retail as well as institutionalinvestors. Nakedshort sale isnot permitted in India, all short salesmust result indelivery, and informationon short sale has to bediscl osed to the exchange byendofdayby retail investors, andat the timeof trade for institutional investors.The Securities endingand Borrowingmechanismallowsshort sellers toborrowsecurities formakingdelivery. Securities in the &O segment areel igible forshort

selling.

Securities endingand Borrowing(S B) isascheme that hasbeen launched toenablesettlement ofsecuritiessoldshort. S B enables lendingof idlesecuritiesby the investors through the clearing corporation/clearing house of stockexchanges to earn a return through the same. or securities lending andborrowing system, clearing corporations/clearing house of the stock exchan gewould be the nodal agency and would be registered as the ApprovedIntermediaries(AIs)underthe Securities ending Scheme, 1997.

Under S B, securitiescanbeborrowed foraperiodof 7 days throughascreenbasedordermatchingmechanism. Securities in the &O segment areeligible forS B.

38. Whathappensif I donotget my moneyorshareontheduedate?

Incaseabroker fails todeliver thesecuritiesormakepayment on time, or ifyouhavecomplaint against conduct of thestockbroker, youcan fileacomplaint withthe respective stock exchange. The exchange is required to resolve all thecomplaints. Toresolve thedispute, thecomplainant canalsoresort toarbitrationasprovidedon thereverseofcontract note /purchaseorsalenote. However, ifthe complaint is not addressed by the Stock Exchanges or is unduly delayed,then thecomplaintsalongwith supportingdocumentsmaybe forwarded to SEBI.

Your complaint would be followed up with the exchanges for expeditiousredressal.

Incaseofcomplaint against asubbroker, thecomplaint maybe forwarded to theconcernedbrokerwithwhom thesubbrokeris affiliated forredressal.

39.Whatrecoursesareavailableto meforredressing mygrievances?

Youhave followingrecoursesavailable:

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y Office of Investor Assistance and Education (OIAE) : You can lodge acomplaint with OIAE Department of SEBI against companies for delay, non-receipt of shares, refund orders, etc., and with Stock Exchanges againstbrokersoncertain tradedisputesornonreceipt ofpayment/securities.

y Arbitration: If noamicable settlement could be reached, then you can makeapplication for reference to Arbitration under the Bye aws of concernedStock Exchange.

y Court of aw

40. WhatisArbitration?

Arbitration is an alternative dispute resolution mechanism provided by a stockexchange forresolvingdisputesbetween the trading membersand theirclients inrespect of tradesdoneon theexchange.

41. Whatistheprocessforpreferringarbitration?

The byelaws of the exchange provide the procedure for Arbitration. You canprocure a form for filing arbitration from the concerned stock exchange. Thearbitral tribunal has tomake thearbitral awardwithin 3 months from thedateofentering upon the reference. The time taken to make an award cannot beextendedbeyondamaximumperiodof 6 months from thedateofenteringuponthereference.

42. Whoappointsthearbitrators?

Every exchange maintains a panel of arbitrators. Investors may choose thearbitratorof theirchoice from thepanel. Thebrokeralsohasanoption tochooseanarbitrator. Thename(s)wouldbe forwarded to the member foracceptance. Incaseofdisagreement, theexchangeshall decideupon thenameofarbitrators.

43. Whathappensif I am aggrieved bytheawardofthearbitrator?

Incaseyouareaggrievedby thearbitrationaward, youcan takerecourse to theappeal provisionsasgiven in thebye-lawsof the Exchange.

44. Whatis InvestorProtection Fund (IPF) / CustomerProtection Fund (CPF)atStock Exchanges?

Investor Protection und is the fundset upby the Stock Exchanges tomeet thelegitimate investment claimsof theclientsof thedefaultingmembers that arenotofspeculativenature. SEBI hasprescribedguidelines forutilisationof IP at theStock Exchanges. The Stock Exchanges have been permitted to fix suitablecompensation limits, in consultation with the IP /CP Trust. It has beenprovidedthat theamount of compensationavailableagainst asingleclaimof an investorarisingout ofdefault byamemberbrokerofa Stock Exchangeshall not be less

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than Rs. 1 lakh incaseofmajor Stock Exchangesviz., BSE and NSE, and Rs.50,000/- incaseofotherStock Exchanges.

45. Whatis BSE IndoNext?

Regional stockexchanges(RSEs)haveregisterednegligiblebusinessduring the

last fewyearsand thussmall andmedium-sizedcompanies(SMEs) listed therefind it difficult to raise fresh resources in theabsenceof pricediscoveryof theirsecurities in the secondary market. As a result, investors also do not find exitopportunity incaseofsuchcompanies.

BSE IndoNext has been formed to benefit such small and medium sizecompanies (SMEs), the investors in these companies and capital markets atlarge. It hasbeenset upasaseparate tradingplatformunder thepresent BSEOnlineTrading (BO T)systemof the BSE. It isa joint initiativeof BSE and the

ederationof Indian Stock Exchanges(FISE).

INTERNAL AUDIT OF STOCK BROKERS/ TRADING MEMBERS /CLEARINGMEMBERS

46. Whether internal audit is applicable to all the brokers/tradingmembers/clearing membersincludingtheinactive members?

Internal audit is applicable to all the active brokers/trading members/clearingmembers. The in-activebrokers/trading members/clearingmembersshall informthe respective stock exchange through a letter at the end of the respectiveinspection/audit period.Definition of Active broker: A broker who had one or more trades during theinspection/audit period in therespectiveexchange isconsidered tobeanactivebroker.

47. Whatisthetime-limittosubmitthereport?Wheretosubmitthereport?

The internal auditor shall submit the report to the Proprietor / Partner /Boardof therespectivestockbroker/clearingmemberwithin 60 days fromtheendof thehalfyearperiod.

The management of the respective stock broker/clearing member shall

place the report before theboard ofdirectors / Proprietor / Partnerswhoshall forward thesamealong withpara-wise comments to the respectivestockexchangewithin 3 months from theend of thehalfyearperiod.

48.Whetherstatutoryauditorcandotheinternalauditofthesamefirm?

Statutory auditor of the stock broker can not do the internal audit of thesamestockbroker/clearingmember.

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49.Whetheranauditorcando the internalauditofparticularstock brokeroncontinuous basis?

Every 3 years thestockbrokerhas tochange the internal auditor. Further,where, in theopinionof thestockexchange, the qualityof thereport isnotsatisfactory or the audit has not been carried out as per the exchangeguidelines, the stock exchange may advise the concerned member tochange theauditor.

50. Isthereanyassistancefordatafrom Stock Exchanges/Depositories?

Internal auditors are advised to collect all the required data from therespectivestockbroker/clearingmembersonly.

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51. Doesexchange/SEBI planstohaveCA/CS/CMAempanelment?

Currently, neither SEBI nor the exchanges have any plan to haveCA/CS/CMA empanelment.

52.Whatshould betheformatofthereport?

While no specific format is being prescribed, the internal auditor shouldcoverall theareasmentioned in thescope/guidelines forthe internal audit.Further the auditor should give a certificate of audit in the prescribedformat.

CorporatisationandDemutualisation

53. Whatisthestructureofthestockexchangesin India?

Thereare 19 recognisedstockexchanges in India. Mangalore Stock Exchange,Saurashtra Kutch Stock Exchange, Magadh Stock Exchange and HyderabadStock Exchangehavebeenderecognisedby SEBI.

In termsof legal structure, thestockexchanges in Indiacouldbesegregated intotwobroadgroups 16 stockexchangeswhichwereset upascompanies, eitherlimitedbyguaranteesorbyshares, and 3 stockexchangeswhichwereset upasassociation of persons and later converted into companies, viz. BSE, ASE andMadhya Pradesh Stock Exchange. Apart from NSE, all stockexchangeswhetherestablishedascorporatebodiesorAssociationof Persons, wereearliernon -profit

makingorganizations. Asper thedemutual isationschememandatedby SEBI, allstock exchanges other than Coimbatore stock exchange have completed theircorporatisation and demutualisation process. Accordingly, out of 19 stockexchanges 18 arecorporatisedanddemutualisedandare functioningas for-profitcompanies, limitedbyshares.

54. Whatis meant bycorporatisationofstockexchanges?

Corporatisation is the process of converting the organizational structure of thestockexchange fromanon-corporatestructure toacorporatestructure.

Traditionally, some of the stock exchanges in India were established asAssociationof persons, e.g. the Stock Exchange, Mumbai (BSE), AhmedabadStock Exchange (ASE) and Madhya Pradesh Stock Exchange (MPSE).Corporatisation of such exchanges is the proce ss of converting them intoincorporatedCompanies.

55. Whatisdemutualisationofstockexchanges?

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Demutualisationrefers to the transitionprocessofanexchange froma mutually -owned association to a company owned by shareholders. In other words,transforming the legal structureofanexchange fromamutual form toabusinesscorporation form is referred to as demutualisation. The above, in effect meansthat afterdemutualisation, theownership, themanagement and the tradingrightsat theexchangearesegregated fromoneanother.

56. Howisademutualisedexchangedifferentfrom a mutualexchange?

Inamutual exchange, the three functionsofownership, management and tradingare intervened into asingle Group. Here, thebroker members of the excha ngeareboth theownersand the traderson theexchangeand they further managetheexchangeaswell. A demutualisedexchange, on theotherhand, hasall thesethree functions clearly segregated, i.e. the ownership, management and tradingare inseparatehands.

57. Currentlyarethereanydemutualisedstockexchangesin India?

18 stock Currently exchanges are demutualised in India, viz. BSE, NSE,Ahmedabad Stock Exchange, Madhya Pradesh Stock Exchange, Madras StockExchange, Cochin Stock Exchange, BhubhaneshwarStock Exchange, BangaloreStock Exchange, OTCEI, Inter-connected Stock Exchange, udhiana StockExchange, Guwahati Stock Exchange, Vadodara Stock Exchange, Delhi StockExchange, Calcutta Stock Exchange, Pune Stock Exchange, Jaipur StockExchangeand Uttarpradesh Stock Exchange.

General Questions

58. Whataretherelevant Rulesand Regulationsandwherecan I findthem?You can browse through the egal Framework section on the SEBI websitehttp://www.sebi.gov.in/Index.jsp?contentDisp=Section&sec_id=1 for completeinformationrelating toacts, rules, regulations, circulars, andguidelinesrelating tosecuritiesmarket.

59.Whatisdaytrading?

Day tradingrefers tobuyingandsellingofsecuritieswithin thesame tradingdaysuch that all positionswill beclosedbefore themarket closeof the tradingday. Inthe Indiansecuritiesmarket onlyretail investorsareallowed today trade.

60.Whatarethe mainthingsaninvestorshould beawareofwhiledealingwitha broker/sub-broker?

Goodunderstandingof investment opportunitiesalonemaynot help the investorin thesecuritiesmarket to trade. It isalso important that the investorunderstandstheprocessof investing, suchas findinganappropriatebroker, handlingbuyingandsellingofsecuritiesandmaintainingrecords.

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Before choosing a broker/sub-broker the investor should be aware of thefollowing things:- From w

erethe roker/sub-brokerhas learntthebusiness? How longhashebeenservingthesecuritiesindustry? Whetherhehaseligible qualificationsasabroker? Howmanyclientsdoesheserve?

Whatfeesandexpensesdoeshecharge?

61.Whatarethe majorobligationsandresponsibilitiesofa broker?

a) Entering intoanagreement withhisclient orwithsubbrokerandclientb) Maintenanceofseparatebooksofaccountsandrecords forclients c) Maintenanceofmoneyofclients inaseparateaccount and their ownmoney

inaseparateaccount.d) Issueofdailystatement ofcollateral utilization toclients e) Appointment ofcomplianceofficerf) Issue of contract note to his client within 24hrs of the execution of the

contract.

g) Delivery / Payment tobemade to theclient within 24 hrsofpayout.h) Otherdutiesasspecified in the SEBI (Stock Brokersand Sub -Brokers) Rules,

1992.

62.Whatarethe majorrightsandobligationsofaninvestor?

a) Before entering into a contract with the broker, ensure that he is registeredwith SEBI.

b) Satisfy yourself about the credentials of the broker by asking forinformation/documentssupportinghisclaims.

c) Keepadocumentaryproofofhavingmadedeposit ofmoneyorsecuritieswiththebroker.

d) Before activating your trading account, obtain cl ear idea from your brokerabout all brokerage, commissions, feesandotherchargeswhichwill be leviedonyourtrades.

e) Furnishdetails in full asarerequiredby thebrokerasrequired in knowyourclient (KYC)norms.

f) Ensure that acontract note is issuedby thebrokerwhichcontains completerecordsofevery transactionwithin 24hrsof theexecutionof thecontract.

g) In case pay-out of money and / or securities is not received on the nextworkingdayafterdateofpay-out, followupwith theconcernedbroker for itsrelease. If it is not released within five working days, ensure to lodge acomplaint immediatelywith the Investors GrievanceCell of theexchange.

h) Ensure to receive a complete Statement of Accounts for both funds andsecuritiessettlement every quarter.

63. What are the various accounts an investor should have for trading insecurities market?

Beneficial owner Account (B.O. account) / Demat Account: It is anaccountopened with a depository participant in the name of client for the purpose ofholdingand transferringsecurities.

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TradingAccount: Anaccount which isopenedby thebroker in thenameof the

respective investor for the maintenance of transactions executed while buyingandsellingofsecurities.

Client Account / Bank Account: A bankaccount which is in thenameof the

respective client and is used for debiting or crediting money for trading in thesecuritiesmarket.

64.Withwhom shouldtheinvestorfilehiscomplaintagainstanintermediary?

Incasean investor feels that his issue/problem/grievance isnot beingsortedoutby concerned intermediary then he may take up the matter with theimmediate/next higher level authority/SRO for theconcerned intermediary. If theinvestor isnot satisfiedwith theresolutionofhiscomplaint thenhecanescalatethe matter to SEBI. Example: for complaint against sub-broker/broker you mayapproach stock exchange. For complaints against DPs, you may approachDepository.

In order to expedite the process of redressel of complaints and to make theprocess of lodging a complaint easier for the complainants, all SEBI registeredintermediaries have been mandated to designatean e-mail ID of thegrievanceredressel division/compliance officer exclusively for the purpose of registeringcomplaints. The intermediaries have also been advised to display the email IDandotherrelevant detailsprominentlyon theirwebsites.

65.Arealltheinvestors mandatedto complywithPAN requirement?

Yes. Witheffect from July 02, 2007, PAN hasbeen mademandatory forall theinvestorsparticipating in the securities market. In order to strengthen the KnowYour Client (KYC) norms and identify every participant in the securities marketwith theirrespective PAN toensuresoundaudit trail ofall the transactions, SEBIhasmandated PAN as thesole identificationnumberforall persons transacting inthesecuritiesmarket, irrespectiveof theamount of transaction .

66.WhatisTradeforTrade Segment?

InaTrade forTradesegment, settlement of trades isdoneon thebasisofgrossobligations for the day. No netting is allowed and every trade is being settledseparately.

67.Howtradingtakesplaceandwh

atisth

eproc essoftrading?

Thenormal courseofonline trading in the Indianmarket context isplacedbelow:

Step 1. Investor / traderdecides to trade Step 2. Places order with a broker to buy / sell the required quantity of

respectivesecuritiesStep 3. Best pricedordermatchesbasedonprice-timepriorityStep 4. Orderexecution iselectronicallycommunicated to thebrokers terminal

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Step 5. Tradeconfirmationslip issued to the investor/ traderby thebrokerStep 6. Within 24 hours of trade execution, c ontract note is issued to the

investor/ traderby thebrokerStep 7 Pay-inof fundsandsecuritiesbeforeT+2 day Step 8. Pay-out of fundsandsecuritiesonT+2 day

Incaseofshort orbaddeliveryof funds / securities, theexchangeorders foranauction tosettle thedelivery. If thesharescouldnot bebought in theauction, thetransaction isclosedout asperSEBI guidelines.

68.WhatisDirect MarketAccess (DMA)?

Direct Market Access (DMA) is a facility which allows brokers to offer clientsdirect access to theexchange tradingsystem through thebrokers infrastructurewithout manual intervention by the broker. Some of the advantages offered byDMA are direct control of clients over orders, faster execution of client orders,reducedriskof errorsassociatedwithmanual orderentry, greater transparency,increased liquidity, lower impact costs for large orders, better audit trails and

better use of hedging and arbitrage opportunities through the use of decisionsupport tools / algorithms for trading. Presently, DMA facility is available for

institutional investors.

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Why don't you incorporate fundamental analysis also on your site as it also effects the price of a stock?

Ans. Along with the fundamental factors, at any given point oftime , t here are so many other factors which effectthe price of astock. It might be the newspaper report, the game ofthe operator, the FII buying/selling, fund buying, orthe company coming with

good or bad results. These things confuse a trader. And the techni cal analysis i.e. the graph reflects the effect of allthese factors inthe price of a stock. Thus the price of a stock at any given point oftime reflects everything atthat moment oftime.

3. How can you read the graphs so n icely and it has been seen that at times the technical analysts are totally wrong in their

analysis or it has been seen that two technical analysts are different in their views?

Ans. Well each and every technical analyst has a different way of predicting the graph as per his o r her experience. The way we goby is that we have developed a system where by we see the stocks from a particular angle (which is elaborated on the site), a nd onthe basis ofit we trade.

4. Do you recommend to take deliveries also?

Ans. The short term trader need not buy deliveries but the weekly traders can take deliveries. But for both ofthem, the set ofindicators and timing is different. A daily trader has to monitor his stocks on a daily basis whereas a weekly trader who tak es

deliveries has only to monitor his stocks every week only i.e. on Saturday or Sunday.

5. What is the guarantee that a person will make profit on your advice?

Ans. We don't guarantee anything, but we help you to minimi e yourlosses and try and help you in increasing your profits. Weassume thatinitially every trader goes through three stages. First he has to give losses, second stage he breakseven i.e. no prof it noloss and third stage he starts earning profits. (85 percenttraders finish themselves atthe first stage only). More details on this areon the site.

6. What is Technical Analysis?

Ans. Technical Analysis is the study of market action, primarily through the use of charts, forthe purpose of forecasting futuretrends. Itis an art ofidentifying trend changes at an early stage and to maintain an investment posture untilthe weight of evidenceindicates thattrend has reversed. Technical Analysis is the science of recording, in geographical form, the actual history oftrading

in a certain stock orin the averages and then deducing from that pictured history the probable future trend.

7. What are the Basic Assumptions underlying Technical Analysis?

Ans. The Assumptions are : -

y Market Value is determined solely by interaction of demand and supply.y Demand and Supply are governed by numerous factors, both rational and irrational.

y Ignoring minor fluctuations in the market, stock prices tend t o move in trends which persists for an appreciable lengthoftime.

y Changes in trend are caused by shifts in demand and supply.y Shiftin demand and supply, no matterthey occur can be detected sooner orlaterin charts of market action.

y Some chart patterns tend to repeatthemselves.

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8. What are the main considerations in Technical Analysis?

Ans. The main considerations are as follows : -

y Price: Changes in price reflectin investor attitudes and demand and supply of securities.

y Time: The degree of movements in price is a function oftime. The longer ittakes for a reversalin trend forinstance,the greaterthe price changes that would follow.

y Volume: The intensity of price changes is reflected in the volume transactions that accompa ny the changes. Anincrease is not strong enough.

y Breadth: Study ofBreadth of marketindicators, the extentto which the price changes have taken place in the marketin accordance with a certain overalllimit.

9. What are the four fears that a trader fears most?

Ans. The four fears are:

y Fear of being wrong.

y Fear oflosing money.y Fear of missing out.

y Fear ofleaving money on the table.

These fears account for most of our fears. An opportunity comes every now and then, but our either ofthe fears does notlet ustake full advantage ofit, e g we enterthe trade too soon - before the market generated a signal ortoo late - long afterthe marketgenerated the signal ortaken a largerloss because we moved the stop.

10. What is the worst that can happen to a trader?

Ans. The worstthat can happen is when a trader places too much importance on his presenttrade so much so as to make it a life

and death issue (over exposure). Mosttraders place too much significance and meaning on each trad e, making it difficultto cut

losses or admitthey are wrong.

11. What is the best Trading style you recommend for traders?

Ans. Every trader has his own style oftrading. Some traders take a buy and sell positions as pertheir subjective style, i.e. wit h a

combination of a lot of factors like fundamental, tips , graphs, etc. But I suggest a mechanicaltrading for alltraders who have been

giving losses or are not making profits.

12. What is this Mechanical Style of Trading?

Ans. Here you know whatto do in any situation of yourtrading and you take the position without hesitation. Here you dont decide

the entry and exit, but your You are mentally relaxed in this style oftrading. Here the fear and greed are notthere. Fear a nd Greed

are the two biggest reasons of your giving losses. In the mechanical style, you define your system with the help o f technicaltools

and go on taking the buy and sell signals accordingly. You have to take atleast 10 signals within your system

13. Can I expect 100% return on my investment in on year?

Ans. Yes you may getthis return but only after exercising a lot of control over your your greed and fear. You will have you work

on a proper system and trade on it and believe in yourself. To start with I would recommend you to play injust options only i.e.

buy calls when the trend is up and buy puts when the trend is down. Also remember that to achieve a 100% return per year,

chances are equally strong that you lose your entire capitalif you make more than three mistakes say of not cutting yourtra des

when they are going in a loss.

Also rememberthatto get a good return the market need not go up only. Even a falling market gives good return only a sidewa ys

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marketis troublesome. See track record "Results of Daily Trading" & "Results ofIntraday Trading"

14. Is it not possible for you to give a list of five stocks which i can buy and keep and sell them later at a good price?

Ans. We follow technicals and only go on holding a stockin delivery tillthe trend of cash stocks is up. Butthe momenttrend of

stock market when the trend is up we again buy the stockthough it mig ht come expensive nexttime but who knows ifit had to fall

further from where we sold.

15. Can I make a 100% safe return of 24% in stock market, at present?

Ans. With stock market, the100% safety word can never be used. But when markets are in a bullish mood, one does get a return of

24% annually which is nearly 100% safe. You will have to buy in cash delivery say ACC and sellitin future. Every month you get

a premium in future. But forthis your brokerage cost has to be very low. There are a lot of NSE brokers who give very low

brokerage for arbitrage opportunities. For delivery the y charge 0.10% -0.25% and for future selling buying they charge a

brokerage of .01 %-.03%. These status very with volumes.

16. Why do I get tension sometimes while trading?

Tension occurs mainly when you are overtrading and have no rules and stop losses. Referto Trading Rules

17. Can this site really help me to make money?

Ans. Yes, Certainly help you. But only if we both understand each others needs I will help you to understand my system & you

hel p me to understand your requirements. Then we both can walk togethertowards positive results by controlling our fear & Igreed.

18. Can you give me an entry & exit level?

Ans. Yes, we can give you entry & ejectlevels. To start with we will ask you to starttrading in Nifty Futures as they are less

volatile.

19. What is the support I can expect from you?

Ans. You can gettwo types of support from us 1stis for Intraday Trading which is for very shortterm players sitting in front of

terminals. Forintraday trading we give support on future stocks & not a ca sh stocks.2nd is daily trading where we give you thelevels on various stocks which you can follow as perthe trend ofthe share. And also we generally follow the trend ofthe ma rket.

20. I do not know whether I am a Short term Trader or a Long term Trader?

Ans. Answer to such a question will require a lot ofinteraction between you & me. Forthat we will be provided with personal

consultancy which will help to solve such confusions and many more which come in the mind ofthe trader when he trades in the

volatile market.

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