management & organization of stock exchange - mukesh carpenter

8/4/2019 Management & Organization of Stock Exchange - Mukesh Carpenter

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Management &organization of

stock exchange

By- Mukeh Carpenter

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Introduction

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WHAT ISSTOCK EXCHANGE

Stock exchange isthat place wheretradingofshares,stocks,securities,

etc.isdone intermsofsale and

purchase.


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There are 23 stock exchangesinthe India.

Mumbai's (earlierknownas Bombay),BombayStock Exchange isthe largest, withover6,000 stocks listed. The BSE accountsforovertwothirdsofthe total tradingvolume

inthe country. Establishedin 1875,theexchange isalsothe oldestin Asia. Amongthe twenty-twoStock Exchangesrecognizedbythe GovernmentofIndiaundertheSecurities Contracts (Regulation) Act, 1956,it

wasthe firstone tobe recognizedanditisthe onlyone thathadthe privilege ofgettingpermanentrecognitionab-initio.

Introduction

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Name ofIndianstock exchange:

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1.Bombaystock exchange (Mumbai)2.National stock exchange(Mumbai)3.Banglore stock exchange(Banglore)

4.UtterPradeshstock exchange(kanpur)5.Magadhstock exchange(Patna)6.Ahmedabadstock exchange(Gujrat)7.Vadodarastock exchange(Baroda)

8.Bhubaneswarstock exchange(Orissa)9.Calcuttastock exchange(kolkata)10.Madrasstock exchange(Chennai)


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MajorUps & Downsof

Sensex Oct. 2000 Itreachedat 5928

Sept. 2001 ithita low of2594

Till Apr. 2003 itstayedbetween2595-3750

Jan. 2008 21000

Oct. 2008 8700

Oct. 2009 17000

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TodaysStock Market

Easilyaccessible toinvestors

Opportunitytoinvestinvery

transparentmarket

Integratednationwide screen-based

trading

Fullycomputerized High liquidity with large no.of

participants

Multiple level redressal mechanism8/29/2011 6MK


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ROLE PLAYERS

EXTERNAL:----

1.SHAREHOLDER

2.DEBENTURE HOLDER

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SHAREHOLDER

Shareholdersare dividedintotwo parts

1.Preference shareholder: Preference

shareholderare those whichhavepreferential righttothe paymentofdividend

duringthe life time ofthe company,and a

preferential righttothe returnofthe capital

whenthe companyis woundup.

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KINDS OF PREF.SHAREHOLDER

1.Comulative shareholder: These sharesare

entitledtofixeddividends whetherthere are

profitsor loss.Ifprofitsare notsufficientto

payina particularyearthenthat will payon

nextyear.

2.Noncumulative pref.share: These shares

cannotclaimarrearsofdividendsofanyyear(ifnot paiddue toinsufficiencyofprofits)out

ofprofitsofsubsequentyear.

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Cont.

3.Participating pref.Shares: These shares

receivesafixedrate ofdividendin priorityto

ordinarysharesandfurther,the rightto

participate inbalance ofprofitsinanagreed

proportiontogetherwithordinaryshares.

4.Redeemable pref.share: These are shares

whichcanbe purchasedbackbythecompany. The companyreservesitsrightsto

call backorpurchasedthese sharesatany

time .

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EQUITY SHARES

All shares whichare not preference shares

are equityshares. These sharesdonothave

afixedrate ofdividend,theyare always

irredeemable andtheirholdershave normal

votingrights.

Theyare alsothe ownersofthe company.

Theytake dividend.

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DEBENTURES

A documentunderthe companyseal which

providesforthe paymentofa principal sum

andinterestthere onatregularintervals

whichisusuallysecuredbyafixedor

floatingcharge onthe companys propertyor

undertaking whichacknowledgesa loanto

the company.

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INTERNAL PLAYERS

The membersofthe stock exchange canbedividedintotwo parts:

A.Broker: He isacommissionagent whotransactsbusinessinsecuritiesonbehalfofnon-members.Theymayhave numberofsub-brokerstocanvassandsecure businessforthem.

B.Jobber: He isanindependentdealersecurities.He purchase andsellssecuritiesinhisownname. He isnotallowedtodealwithnon-membersdirectly.He worksfor

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Initial public offering

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Aninitial public offering (IPO),referredtosimplyasan

"offering" or"flotation",is whenacompany (calledthe issuer)

issuescommonstockorsharestothe publicforthe firsttime.

Theyare oftenissuedbysmaller,youngercompaniesseeking

capital to expand,butcanalsobe done by large privately-owned

companies lookingtobecome publiclytraded.

InanIPO the issuermayobtainthe assistance ofan

underwritingfirm, whichhelpsitdetermine whattype ofsecurity

toissue (commonorpreferred),bestoffering price andtime to

bringittomarket.

AnIPO canbe ariskyinvestment. Forthe individual investorit

istoughto predict whatthe stockorshares will doonitsinitial

dayoftradingandinthe nearfuture since there isoften little

historical data with whichtoanalyze the company


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Securitiesand Exchange Board

ofIndia

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The Securitiesand Exchange Boardof

India (frequentlyabbreviatedSEBI)isthe

regulatorforthe securitiesmarketinIndia.It

wasformedofficiallybythe GovernmentofIndiain 1992 withSEBI Act 1992 being

passedbythe Indian Parliament. Chairedby

C B Bhave,SEBIisheadquarteredinthe

popularbusinessdistrictofBandra-Kurlacomplex in Mumbai,andhas Northern,

Eastern,Southernand Westernregional

officesin New Delhi, Kolkata, Chennaiand

Ahmadabad.


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SEBIhastobe responsive tothe needsofthreegroups, whichconstitute the market:

The issuersofsecurities

The investors

The marketintermediaries.

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Organizationstructure

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The Process of Issuing Shares

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The importantstepsinthe procedure of issuingshares are :

Issue of Prospectus: The companyfirstissuesthe prospectustothe

public. Prospectusisaninvitationtothe publicthatanew companyhas

come into existence anditneedsfundsfordoingbusiness.Itcontains

complete informationaboutthe companyandthe mannerin whichthe

moneyistobe collectedfromthe prospective investors

Receipt of Applications: When prospectusisissuedtothe public,

prospective investorsintendingtosubscribe the share capital ofthe

company wouldmake anapplicationalong withthe applicationmoneyand

depositthe same withascheduledbankasspecifiedinthe prospectus. Thecompanyhastogetminimumsubscription within 120 daysfromthe date of

the issue ofthe prospectus.Ifthe companyfailstoreceive the same within

the said period,the companycannot proceedforthe allotmentofshares and

applicationmoneyshouldbe returned within 130 daysofthe date ofissue of

prospectus


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Allotment of Shares:

Ifminimumsubscriptionhasbeenreceived,the company

may proceedforthe allotmentofsharesafterfulfillingcertainother legal formalities. Lettersofallotmentare senttothose

whomthe shareshave beenallotted,and lettersofregretto

those to whomnoallotmenthasbeenmore. Whenallotment

ismade,itresultsinavalidcontractbetweenthe company

andthe applicants whonow became the shareholdersofthecompany.

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Six StepstoIssuing YourFirst

Stock Certificate

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Afteryouhave formedyourcorporation,one ofthe firsttasksisissuingstockto

the shareholdersofthe company. There are six basicstepstoissuingstock

correctly.

Step 1 - Write downortype out eachofthe shareholdersnames,addresses,

and percentage ofthe companythey will own.

Step 2 - Determine how manysharesthe corporationhasavailable toissue.

The numberofsharesauthorizedtoissue are indicatedonthe first page ofyour

ArticlesofIncorporation.Ifyouare unable tofindthemthere,youcangotoyour

corporation's listingatyourSecretaryofState's website andsee how many

sharesare authorized.Ifyouare still unable tofindthe numberofshares,call theSecretaryofState directly.

Step 3 - Calculate the numberofsharesyou will issue to eachindividual

shareholderbasedonthe percentage ownership andnumberofshares. Don't

issue all sharesavailable.Ifyouhave 25,000 sharesavailable forissue,you

may wanttoonlyissue 1,000 or100 sharestostart. This will give youmore

sharestoissue ata latertime ifyouhave additional investorsorstake holderscome intothe company.


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step 4 - Physically write outthe stockcertificates withthe shareholdersname,numberofsharestheyownandthe certificate number.Stockcertificatescan

be purchasedfromoffice supplystores,directlyonline oryoucan purchase a

corporate recordbookthat will typicallycome withyourfirst 10 or20

certificates.

Step 5 - Recordinyourstock ledgereachcertificate thathasbeenissued.In

the stock ledgeryou will recordthe name ofthe shareholder,the numberof

sharesissued,the stockcertificate number,how muchthey paidforthe shares,

the type ofsharesthey were (common, preferred,voting,non-voting, etc.),the

date ofthe transaction,and whosoldthe sharestothe new shareholder.Ifthe

companyissuedthe sharesit wouldbe consideredaninitial offeringofthe

company.

Step 6 - Sendthe stockcertificatesto eachshareholder.

These steps provide aguide forissuingsharesofanew corporation. Additional

tasksthatshouldbe completeduponforminganew corporationare initial

meetingofshareholdersanddirectors, writingresolutionsandopeningabank

account.8/29/2011 21MK


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management & organization of stock exchange - mukesh carpenter

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