MARKET FOR SECURITIES

PROVIDE MONETARY SUPPORT MARKET IN WHICH MONEY AS WELL AS MONETARY

CLAIMS ARE TRADED IN COMPONENTS ARE: 1. MONEY MARKET – WHERE LIQUID FUNDS (CASH) AS

WELL AS HIGHLY LIQUID SECURITIES ARE TRADED FOR A VERY SHORT TERM PERIOD

PARTICIPANTS – MAINLY BANKS & FINANCIAL INSTITUTIONS; OTHERS – MFs, PF TRUSTS, INSURANCE CO, CORPORATE HOUSES, NBFCs AND RBI

2. CAPITAL MARKET

FINANCIAL MARKETS

• MARKET WHERE COMPANIES RAISE FUNDS DIRECTLY FROM INVESTORS & O/S SECURITIES BOUGHT & SOLD

• UNDER SEBI

• SCRA, COMPANIES ACT, SEBI ACT, FEMA ETC

• TWO TYPES:

• PRIMARY MARKET

• SECONDARY MARKET (STOCK MARKET)

CAPITAL MARKET

• MARKET PROVIDES PLATFORM FOR NEW & OLD COMPANIES TO RAISE FUNDS BY ISSUING SECURITIES (EQUITY SHARES, PREF SHARES, BONDS, DEBENTURES ETC) DIRECTLY TO THE INVESTORS

• BRIDGE BETWEEN SAVINGS AND INVESTMENTS

• ISSUED THRU FOLLOWING MECHANISMS:

PRIMARY MARKET

ISSUE SYSTEM OF PUBLIC LTD CO

GENERAL PUBLIC SUBSCRIBE TOWARDS CAPITAL OF THE COMPANY

GEN PUBLIC – INDIVIDUALS, INSTITUTIONS, MFs, NRIs ETC

SHOULD BE LISTED WITHIN 10 WEEKS FROM CLOSE OF ISSUE & STOCK EXCHANGE NAME IN PROSPECTUS

AT PAR, PREMIUM OR DISCOUNT

ISSUE PRICE DECIDED BY CO

FORMALITIES OF SEBI TO BE COMPLETED

1. PUBLIC ISSUE

• IF EXISTING CO WANTS TO ISSUE SHARES –SHUD BE ISSUED TO ITS EXISTING SHAREHOLDERS ON A PROPORTIONATE BASIS

• IF SUBSEQUENT TO ITS PUBLIC ISSUE

• ONLY IF SHAREHOLDERS DENY – ISSUED TO GENERAL PUBLIC – BUT AFTER PASSING RESOLUTIONS U/S 81 OF COMPANIES ACT

2. RIGHTS ISSUE

• ISSUING COMPANY APPROACHES THE INVESTORS INDIVIDUALLY

• MODE USED BY PVT LTD COMPANIES (SINCE CANT GO FOR ADS FOR SUBSCRIPTION)

• SOMETIMES BY PUBLIC LTD CO ALSO

• CANT BE DONE ON A STOCK EXCHANGE

• BUT RULES ARE AMENDED

3. PRIVATE PLACEMENT

SYSTEM OF ISSUING SHARES TO GENERAL PUBLIC

PRICING DONE BY INVITING BIDS FROM THE PUBLIC

FINAL PRICE DECISIONS, BIDS ACCEPTANCE & BOOK RUNNING – AS PER SEBI RULES

DIFFERENT INVESTORS – QIBs, NON-INDIVIDUAL BUYERS & INDIVIDUAL BUYERS

CUT OFF POINT – ONLY IF BID AT OR ABOVE CUT OFF POINT – ALLOTTED; OTHERWISE DISQUALIFIED & MONEY REFUNDED

LISTED ON A RECOGNISED STOCK EXCHANGE

4. PUBLIC ISSUE THROUGH BOOK BUILDING

• THRU OTCEI

• COMPANY NEGOTIATES WITH ATLEAST ONE DEALER TO BUY ENTIRE ISSUE AT A SPECIFIED PRICE

• INTENTION IS DEALERS WILL SELL SHARES TO GENERAL PUBLIC IN FUTURE

• DEALER – NO CONTROL OVER MGMT

• DEALER SELLS – EITHER THRU STOCK EXCHANGE OR DIRECTLY TO PUBLIC

5. BUYOUT DEALS

• MARKET WHERE O/S SECURITIES OF COMPANIES ARE TRADED

• AS PER SCRA ALL TRANSACTIONS IN SECURITIES OTHER THAN SPOT TRANSACTIONS MUST BE DONE IN A RECOGNISED STOCK EXCHANGE

• STOCK EXCHANGE – SECONDARY MARKET

SECONDARY MARKET

REGULATED MARKET PLACE – WHERE LISTED SECURITIES – BOUGHT & SOLD

THRU MEMBERS OF SE (BROKERS), BY TWO-WAY QUOTATION, TRADE SETTLEMENT AS PER BYE-LAWS OF SE

MUST HAVE RECOGNITION OF CENT GOVT UNDER SEC 4 OF SCRA, 1956

AT PRESENT 23 SE IN INDIA (MAJOR TRANSACTIONS IN BSE & NSE)

ALL TRADES ON THE FLOOR OF SE BECOME LEGAL & VALID & NO DEFAULT RISK – BCOS SE ASSUMES AS A COUNTER PARTY

STOCK EXCHANGE

BOMBAY STOCK EXCHANGE (BSE):

FROM 1861 TO 1875 – UNDER BANYAN TREE – SHARES BOUGHT & SOLD THRU OUTCRY

ASSOCIATION OF THESE INDIVIDUALS IN 1875 – NATIVE SHARE AND STOCK BROKERS ASSOCIATION

VOLUNTARY & NON-PROFIT ORGN

REGD AS BSE IN 1887 – AS SE – THE STOCK EXCHANGE, MUMBAI

TILL 1995 – 96 TRADING AS OUTCRY IN TRADING HALL (TRADING RING)

HISTORY OF STOCK EXCHANGE

ONLY REPS INSIDE RING MEMBERS GIVEN CABINS AROUND RING SHOUT FOR QUOTATION – IF NEGOTIATION OVER – ORDER

INTO A TRADE TELECOM FACILITIES & ONLINE FACILITIES COUNTERS FOR PROMINENT SHARES MEMBERS INFORM TRADE TO SE OFFICIALS – FOR SHARE

PRICE DISSEMINATION DISPLAY OF PRICES ON PTI SCREEN REPORTING TO SE OFFICIALS AT THE END OF TRADING

SESSION SETTLEMENT THRU CLEARING HOUSES

• NO PHYSICAL PRESENCE IN RING• SYSTEM, NET CONNECTIVITY & SOFTWARES• EVERY MEMBER HAS COMPUTER SOFTWARE –

TRADERS WORK STATION• ORDERS ON OPEN DISPLAY• COMPUTERS MATCH ORDERS W.R.TO PRICE &

TIME DISPLAY• IMMEDIATE CONFIRMATION• CLEARING HOUSES – DO NETTING FOR TRADE

SETTLEMENTS

NEW SYSTEM OF ONLINE TRADING

• AHMEDABAD STOCK EXCHANGE (1894)

• CALCUTTA STOCK EXCHANGE (1908)

• MADRAS STOCK EXCHANGE (1921)

• HYDERABAD STOCK EXCHANGE

• DELHI STOCK EXCHANGE (1947)

• AND OTHERS

• ALL GIVEN TEMP RECOGNITION FOR FIRST 5 YRS EXCEPT BSE

• INDIA – DIFFERENT ORGN SET-UPS LIKE:

• VOLUNTARY NON-PROFIT ORGN – BSE & ASE

• PVT LTD CO – LTD WITH GUARANTEE – MSE & HSE

• JOINT STOCK CO – CSE, DSE, BANGALORE SE

• BUT NOW SEBI – CORPORATISATION OF SE IE., ALL IN CO FORM

• SEBI – DEMUTILISATION OF SE – IE., MERGING SE – LOSS MAKING WITH PROFIT MAKING

ORGANISATION OF SE

• TRADING THRU MEMBERS / BROKERS –ELIGIBILITY – NET WORTH, INITIAL SECURITY, COLLATERAL SECURITY AND ANNUAL SUBSCRIPTION

• INITIAL SECURITY DIFFERS – FOR CAPITAL MARKET, FUTURES AND OPTIONS, WHOLE DEBT MARKET ETC

• ATLEAST 2 YEARS OF EXPERIENCE IN DEALING SECURITIES

FEATURES OF SE

• LISTING REQUIREMENTS:

• CO – MIN ISSUED & PAID UP CAPITAL OF 3 CR (BSE – 10 CR)

• OUT OF ISSUED CAPITAL – ATLEAST 25% TO GENERAL PUBLIC; NO SINGLE SHAREHOLDER SHUD HOLD MORE THAN 0.5% OF PAID-UP CAPITAL

• CO SHUD DEPOSIT 1% OF ISSUE AMOUNT WITH REGIONAL SE AS SECURITY DEPOSIT (REGIONAL SE – NEAREST & REGD)

TRADING IN LISTED SECURITIES ONLY

• INITIAL & ANNUAL LISTING FEE TO BE PAID

• TO FINALISE ALLOTMENT WITHIN 30 DAYS FROM ISSUE CLOSURE

• PROVIDE DIRECTORS’ & SHAREHOLDERS’ MEETING INFO IF HELD

• PREVIOUSLY RATES GIVEN BY OPEN OUTCRY

• NOW ONLINE TRADING SYSTEM

• OPEN SYSTEM – TO PROVIDE COMPETITIVE RATE TO BUYERS AND SELLERS

OPEN SYSTEM OF QUOTATION

COMPLETELY REGULATED

• ALL TRANSACTIONS TO BE REPORTED TO SE & SETTLED ACCORDING TO THE RULES OF THE EXCHANGE

• SE REGULATES TRADE TIMINGS, TYPES OF TRADES, ORDER AND TRADE SYSTEM, SETTLEMENT PROCEDURE, MARGIN SYSTEM AND ACTIVITIES OF MEMBER BROKERS

SETTLEMENT THROUGH SE

• EVERY SE HAS A DEPT CALLED ‘CLEARING HOUSE’ – RESPONSIBLE FOR CARRYING OUT SETTLEMENT OF TRADES

• SETTLEMENT – EXCHANGE OF MONEY VALUE AND SECURITIES BETWEEN BROKERS

FUNCTIONS OF THE SE

• ENROLMENT OF MEMBERS – QUALIFICATION, INITIAL DEPOSIT, ANNUAL MEMBERSHIP FEE

• MAKE BYE-LAWS OF THE SE: FOR LISTING & DE-LISTING, MEMBERSHIP, TRADING RULES & PROCEDURES, RULES FOR MARGINS, SETTLEMENT RULES FOR CLEARING HOUSE, ARBITRATION RULES, CHECK FOR GOOD-BAD DELIVERIES, MISCELLANEOUS

• PROVIDE FOR LISTING OF SECURITIES – MIN ISSUE SIZE, MIN PUBLIC OFFER, MANNER OF ALLOTMENT ETC

• PROVIDE FACILITIES FOR TRADING – EVERY SE HAS OBJECTIVES TO PROVIDE FOR TRADING

• PROVIDE CLEARING SERVICES – ALL TRADES TAKEN PLACE ON THE FLOOR OF SE TO BE SETTLED THRU INTERVENTION OF SE

– SE ASSUMES AS COUNTER PARTY – SO THAT NONE OF THE PARTY SUFFER LOSS DUE TO DEFAULT

– THRU DEPT – CLEARING HOUSE – DO NETTING OF TRADES

• PUBLICATION OF INFO – DISSEMINATION TO HELP MEMBERS & INVESTORS TO TAKE EFFECTIVE DECISION; INFO LIKE:

– DAILY RATE LIST, CORP ACTION INFO, LISTING RULES, TRADING RULES, MEMBERSHIP RULES, CO INFO RECEIVED (MERGER, MEETING, BOOK CLOSURE), INDEX, GUIDELINES FOR GOOD-BAD DELIVERIES AND OTHER EXCHANGE-SPECIFIC INFO

• ARBITRATION – SEPARATE CELL FOR DISPUTER SETTLEMENT B/W MEMBERS OR B/W MEMBERS AND INVESTORS/CLIENTS – CELL FINAL DECISION & BINDING ON MEMBERS

• INVESTOR EDUCATION AND INVESTOR PROTECTION – CLASSES OR PUBLISH INFO IN NEWSPAPERS TO EDUCATE & FOR INVESTOR PROTECTION; ‘INVESTOR PROTECTION FUND’ BY ALL SE – PROVIDE FOR LOSS OF BROKERS’ DEFAULT

TOPICS FOR SEMINAR

• MARKET MECHANISM• FUNCTIONAL SPECIALISATION OF BROKERS• CAPITAL MARKET REGULATOR

– CCI– SEBI

• DEPOSITORY SYSTEM – RECENT DEVELOPMENT IN THE STOCK MARKET

• DEPOSITORIES IN INDIA• OTCEI• FOREIGN STOCK EXCHANGES