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Unit 2
Capital Market Operations
Functions of New Issue Market Contents of Offer Document
Methods of Floating New Issue
Procedure for Initial Public Offer (IPO) SEBI Guidelines
Players in New Issue Market
Book Building Process
Secondary Market Operations NSE,BSE,OTCEI
SEBI and Its Role in the capital market
Depository Services
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SEBI and Its Role in the
Capital Market
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SEBI and Its Role in the Capital Market
Securities and Exchange Board of India
was set up on April 12,1988
As an Apex Body
to Develop And Regulate
the Stock Market In India
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Objectives:
1. To Protect The Interest Of Investors so that
there is steady flow of savings into the capital
market
2. To regulate the Securities market and ensure
fair practices by the issuers of securities.
3. To Promote efficient services by brokers ,
merchant bankers and other intermediaries
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Functions:
Section 11 of the SEBI act specifies the functions as follows:
1. Regulatory Functions:
a) Regulation of stock exchange
b) Registration and Regulation of
Stock Brokers, Sub Brokers, Registrar to all Issue,
Merchant Bankers, Underwriters,
Portfolio Managers and such Other Intermediaries
who are associated with Securities Market
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c) Prohibition of fraudulent and unfair trade
practices relating to securities market
e) Regulating substantial acquisition of shares and
take over of companies.
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2. Developmental Functions:
a) Promoting Investors Education
b) Training of Intermediaries
c) Conducting research and publish information
useful to all market participants
d) Promotion of fair practices and code of conduct
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Powers:
1. To call periodical returns from recognized stock
exchanges
2. To call any information or explanation from
recognized stock exchanges or their members
3. To make or amend bye-laws of recognized stock
exchanges
4. To control and Regulate Stock Exchanges
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Depository Services
(Introduction, Role and Importance),
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Definition:
The term Depository is defined as a central
location for keeping securities on deposit
Depository is a place where securities are stored ,
recorded in the books on behalf of the investors.
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A depository can be compared with a bank, which
holds the funds for depositors.
Bank Depository
Hold Funds in an account Hold Securities in an account
Transfers funds between accounts on
the instruction of the account holder
Transfers securities between
accounts on the instruction of the
account holder.
Facilitates transfers without having
to handle money
Facilitates transfers of ownership
without having to handle securities
Facilitates safekeeping of Money Facilitates safekeeping of shares
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A depository can be defined as ,
an institution which transfers the ownership of
securities in electronic mode on behalf of its
members
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Activities of the Depository:
The main activities of the depository are as follows:
1. Accepting deposit of securities for custody.
2. Making computerized book entry of deliveries
of securities
3. Providing for withdrawal of securities
4. Undertaking corporate actions like distribution
of dividend and interest5. Redemption of securities on maturity.
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Benefits of Depository System
1. Immediate Transfer of Securities:
it reduces the time for transfer of securities
(as it eliminates paper work)
2. Reduce cost of Transaction for the investor:
3. Elimination of risk :
it avoids the risk associated with physical certificatessuch as bad delivery , fraud and misplaced, lost share
certificates etc.
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Home Work:
Benefits of Depository System to:
1. to Investors2. to Companies
3. to Capital Market
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Which are the Depositories In India?
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There are Two depositories in India:
1. National Securities Depository Limited(NSDL)
2. Central Depository Services Limited
(CDSL)
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National Securities Depository Limited
(NSDL)
The first Depository in India
It was established in 1996
It has been promoted by the :
Industrial Development Bank of India (IDBI)
Unit Trust of India (UTI)
National Stock Exchange (NSE)
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NSDL performs a wide range of securities related
functions:
1. Maintenance of individual investors holdings in an
electronic form.
2. Dematerialization of securities
3. Allotments in the electronic form in case of Initial
Public offerings, etc.
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Central Depository Services Limited (CDSL)
The CDSL has been set up by Bombay Stock
Exchange and cosponsored by SBI, Bank of India, Bank
of Baroda and HDFC Bank and HDFC bank.
It commenced its operations on March 1999.
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Depository System in India
The stock exchanges in India were characterized byLack of Transparency
Complex trading procedure and
age old settlement systemResulting in delays and various risks
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The share transfer in India used to take place on an
average about two months
The inadequacies of the settlement mechanism
resulted into a pressing demand to modernize the
infrastructure and
To introduce automated trading to bring Indian Capital
Market at par with world standards
Announcement of the Depository Act, 1996
is one of the series of steps taken by the govt. for removing the
shortcomings of the present system.
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The Depository system aims at
replacing the Manual System of
share transfer
Settlement of transactions
and physical delivery of shares
by a method of Simple Book Entries.
The system is for To Reduce The Total Time taken to
Complete A Transaction And To Ensure Greater
Liquidity
