Stock exchange in indian capital market ICM


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Stock exchange in indian capital market ICM

  2. 2. WHAT IS STOCK EXCHANGE Stock exchange is that place where trading of shares is done in terms of sale and purchase.
  3. 3. HISTORY STOCK EXCHANGE  The first organized stock exchange in India was started in Bombay.  The native share stock brokers association known as the Bombay stock exchange (BSE)  BSE was Asia's oldest stock exchange  Ahmedabad stock exchange was started to facilitate dealings in the shares of textile mills.  The Calcutta stock exchange was started in 1908 to provide a market for shares of plantation and jute mills.  The second world war saw great speculative activity in the country and the number of stock exchanges rose- 7 in 1939 to 21 in 1945.  There where also illegal “dabba’ market in which stocks and shares were also bought and sold
  4. 4.  At present, there are twenty one recognized stock exchanges in India which does not include the Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL).  Government policies during 1980's also played a vital role in the development of the Indian Stock Markets. There was a sharp increase in number of Exchanges
  5. 5. NAME OF INDIAN STOCK EXCHANGES  1.Bombay stock exchange  2.national stock exchange(Mumbai)  3.Banglore stock exchange  4.Utter Pradesh stock exchange(kanpur)  5.Magadh stock exchange(Patna)  6.Ahmedabad stock exchange  7.vadodara stock exchange(Baroda)  8.Bhubaneswar stock exchange  9.Calcutta stock exchange(kolkata)
  6. 6.  10.madras stock exchange  11.Cochin stock exchange  12.coimbatore stock exchange  13.Gauhati stock exchange  14.Hydrabad stock exchange  15.Madhya Pradesh stock exchange(indore)  16.Jaipur stock exchange  17.Ludhina stock exchange  18.Mangalore stock exchange  19.Pune stock exchange  20.saurashtrakutch stock exchange
  7. 7. BSE: THE BOMBAY STOCK EXCHANGE  Mumbai's (earlier known as Bombay), Bombay Stock Exchange is the largest, with over 6,000 stocks listed. The BSE accounts for over two thirds of the total trading volume in the country. Established in 1875, the exchange is also the oldest in Asia. Among the twenty-two Stock Exchanges recognized by the Government of India under the Securities Contracts (Regulation) Act, 1956, it was the first one to be recognized and it is the only one that had the privilege of getting permanent recognition ab-initio.
  8. 8. STRUCTURE OF INDIAN STOCK EXCHANGES National Exchanges  Regional Exchanges BSE NSE 21 Other Regional Exchanges SEBI Stock Exchanges
  9. 9. SECURITIES AND EXCHANGE BOARD OF INDIA PERFORMS Regulatory o Operates the trading of stock exchange o Registration of broker, transfer agents, merchant banks etc o Abolition of internal trading o Auditing of stock exchange o Registration of credit rating agency Development o Research and Development o Publishing of Information o Educates investors o Promoting Self operating organisation o Control over fraud
  10. 10. NSE: NATIONAL STOCK EXCHANGE  The National Stock Exchange (NSE),  location  India's first debt market.  Year of inception - 1993  Year of operation - 1994  The instruments traded  Treasury Bills,  Government Security  Bonds Issued By Public Sector Companies
  11. 11. PURPOSE NSE Establishing a National wide trading facility for all type of securities. Ensuring equal access to investor all over the country through an appropriate communication network
  12. 12. Providing for a Fair, efficient and transparent securities market using electronic Trading system Enabling shorter Settlement cycles. Meeting up with international benchmark and standard
  13. 13. FEATURES OF STOCK EXCHANGE  It is an organized market  It is a securities market  It is an important constituent of capital market i.e., market for long- term finance  It is a voluntary association of persons desirous of dealing in securities  Stock exchange is a voluntary association, its membership is not open to everybody
  14. 14.  In a stock exchange, only the members can deal in i.e., buy & sell securities  The dealings in a stock exchange are under certain accepted code of conduct i.e., rules and regulations  The dealings in a stock exchange are under certain accepted code of conduct i.e., rules and regulations
  15. 15. IMPORTANT FUNCTION OF STOCK EXCHANGE Provide central and convenient meeting places for sellers and buyer of securities Increase the marketability and liquidity of securities Contribute to stability of prices of securities Equalization of price of securities Smoothen price movement
  16. 16. Help the investors to know the worth of their holdings Promote the habit of saving and investment Help capital formation Help companies and government to raise funds from the investors Provide forecasting service
  17. 17. ROLE OF NSE Raising capital for businesses  Mobilizing savings for investment Facilitating company growth Profit sharing Corporate governance Barometer of the economy
  18. 18. NSE - TRADING:  Trading Fully automated screen-based trading mechanism  Strictly follows the principle of an order-driven market  Trading members are linked through a communication network  This network allows them to execute trade from their offices
  19. 19.  The prices at which the buyer and seller are willing to transact will appear on the screen When the prices match the transaction will be completed  confirmation slip will be printed at the office of the trading member
  20. 20. SPECULATION :  Definition : it involves the buying, holding, selling, short- term selling of stocks, bonds. commodities, currencies, collectibles or any valuable financial instrument to profit from fluctuations in its price as opposed to buying it for use or for income via method like dividends or interest.
  21. 21. KINDS OF SPECULATION :  Bull Market (Tejiwala): In case of that they purchase the shares at current prices to sell at a higher price in the near future and makes a profit if his expectations come true. He is also called a long buyer.  Bear Market (Mandiwala) : He sells security in the hope that he will be able to buy them back at lesser price.It is also called “short selling”.  Lame duck : When a bear has made contracts to sell securities, find it difficult to meet his commitment due to non-availability of security, they always struggling.  Stag : He is that type of speculator who applies for a large number of a shares in a new issue with the intention of selling them at a premium. He is bullish and very cautious.
  22. 22. BENEFITS OF STOCK EXCHANGE : FROM THE POINT OF VIEW OF COMMUNITY:  It assist the economist development by providing a body of interested investors.  It uploads the position of superior enterprises and assist them in raising further funds.  It encourages capital formation  Government can undertake projects of national importance and social value raising funds through the sale of its securities on the stock exchange.  It is the stock exchanges that central bank of a country can control credit by undertaking open market operations (purchase and sale of securities)
  23. 23. FROM THE INVESTORS POINT OF VIEW  Liquidity of the investment is increased  The securities dealt on a stock exchange are good collateral security for loans.  The stock exchange safeguards interests of investors through strict enforcement of rules and regulations.  The present net worth of investments can be easily known by the daily quotations.  His risk is considerably less when he holds or purchases listed securities.
  24. 24. FROM THE COMPANY POINT OF VIEW  A company whose shares quoted on stock exchange they enjoy better reputation and credit  The market for the shares of such a company is naturally widened  The market price of securities is likely to be higher in relation to its earnings, dividends and property values  This raises the bargaining power of the company in the event of a takeover, merger or amalgamation
  25. 25. BROKER AND JOBBER  BROKER: He is one acts as a intermediary on behalf of others. A broker in a stock exchange ,is a commission agent who transacts business in securities on behalf of non members.  JOBBER: He is not allowed to deal with the public directly. He deals with brokers who are engaged with the investors . Thus, the securities is bought by the jobber from members and sells to members who are operating on the stock exchange as broker.
  26. 26. DIFFERENCE BETWEEN A BROKER AND A JOBBER Broker  A broker deals with the jobber on behalf of his clients. in other words, a broker is middleman between a jobber and clients  A broker is merely an agent, buying and selling securities on behalf of his clients  A broker gets only the commission for his dealing  A broker deals in all types of securities Jobber  A jobber is an independent dealer in securities, purchasing or selling securities on his own account  Jobbers deals only with the brokers, does not deal with the general public  A jobber earns profit from his operations i.e., buying and selling securities  Each jobber specializes in certain group of securities
  27. 27. MEMBERS OF STOCK EXCHANGE  Only the members can make transactions on a stock exchange.  A non member can buy or sell securities through a member broker  In order to become a member, a person must satisfy the qualification prescribed by the stock exchange  Members can act as brokers and jobbers
  28. 28. CURRENTLY, NSE HAS THE FOLLOWING MAJOR SEGMENTS OF THE CAPITAL MARKET: Equity  Futures and Options Retail Debt Market Wholesale Debt Market Currency futures MUTUAL FUND STOCKS LENDING & BORROWING
  29. 29.  The Organisation: The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal footing.  Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax- paying company unlike other stock exchanges in the country
  30. 30. oNSE GROUP: 1. India Index Services & Products Ltd. (IISL) 2. National Securities Clearing Corporation Ltd. (NSCCL) 3. NSE.IT Ltd. 4. National Securities Depository Ltd. (NSDL) 5. DotEx International Limited
  31. 31. OTCEI  Over the counter exchange of India was started in 1992  The OTCEI was started with the objective of providing a market for the smaller companies that could not afford the listing fees of the large exchanges and did not fulfill minimum requirements for listing.  It aimed at creating a fully decentralised and transparent market.
  32. 32.  Over the counter means trading across the country in scrips.  The counter refers to the location of the member or dealer of the OTCEI where the deal or trade takes place  Every counter is treated like trading floor for the OTCEI where the investor can buy or sell  The member or dealers of OTCEI counters are linked to the central OTCEI computer  The member should have the computer and telecommunication facility.
  33. 33. THE PROMOTERS OTCEI is incorporated as a company under section 25(c) of Indian companies act 1956. As per the registration norms, OTCEI will be obliged to plough back all its profits and will not be allowed to declare dividend on its share capital. The promoters are as follows UTI GIC ICICI SBI capital market IDBI Canbank financial services IFCI LIC
  34. 34. PLAYERS IN THE OTCEI MARKET  The players on the OTCEI exchange are the members and dealers.  The activities of members and dealers are 1. Act as broker, buy and sell securities according to the instructions of investor 2. Market makers in securities, they quote the prices at which members are willing to buy and sell the specified no. of securities.
  35. 35. MEMBERS  Members may be public financial institutions, scheduled banks, mutual funds , SEBI approved merchant bankers, banking subsidiaries, venture capital funds and other non-banking financial companies with minimum net worth of Rs 2.5 crores
  36. 36.  Members pay a one time non-refundable admission fee of rs 10 lakh and rs 5 lakh after one year.  The annual subscription fee is rs 1 lakh. DEALERS  The dealers are individuals, partnership firm, and corporate entities with a minimum net worth of Rs 5 lakh.  They should have adequate office space and telecommunication facilities
  37. 37.  They have to pay one time non-refundable fee of Rs 2 lakh and annual subscription fee of Rs 5000.  OTCEI may collect additional security deposit if it considers necessary, depending upon the business experience of applicant.
  38. 38. SCRIPS TO BE TRADED  The minimum capital requirement for a company to be listed on the OTCEI is Rs 3 crores and the maximum is Rs 50 crore.  For companies with an issued capital of more than 30 lakh but less than 300 lakhs, the minimum public offer should be 25% of the issued capital or 20 lakhs worth of shares in face value, which ever is higher
  39. 39.  Companies with an issued capital of more than Rs 30 crores seeking to be listed have to comply with listing requirements and guidelines that are applicable to such companies in other stock exchanges.
  40. 40. SEBI – THE SECURITIES AND EXCHANGE BOARD OF INDIA The Securities and Exchange Board of India was established by the government of India on 12 April 1988 as an interim administrative body to promote orderly and healthy growth of the securities market and for investor protection. It was to function under the overall administrative control of the Ministry of Finance of the GOI.
  41. 41. HISTORY  The SEBI was given a statutory status on 30 Jan 1992 through an ordinance.  The ordinance was later replaced by an Act of Parliament known as the Securities and Exchange Board of India Act 1992.
  42. 42. REASONS FOR ESTABLISHMENT OF SEBI  The capital market had witnessed a tremendous growth during the 1980·s characterized by the increasing participation of the public.  This ever expanding investor population and market capitalization led to a variety of malpractices on the part of companies, brokers, merchant bankers, investment consultants and others involved in the securities market.
  43. 43.  The glaring examples of these malpractices include existence of self styled merchant bankers, unofficial private placements, rigging of prices, unofficial premium on new issues, non adherence of provisions of The Companies Act , violation of rules and regulations of stock exchanges and listing requirements, delay in delivering shares etc.  These malpractices and unfair trade practices have eroded investor confidence and multiplied investor grievances  The government and the stock exchanges were rather helpless in redressing the investors problems because of lack of proper penal provisions in the existing legislation.
  44. 44.  Therefore the GOI decided to set up SEBI a separate regulatory body PURPOSE & ROLE OF SEBI :  To the issuers it aims to provide a market place in which they can confidently look forward to raising finances they need in an easy fair and efficient manner.  To the investors it provides protection of their rights and interests through adequate accurate and authentic information and disclosure of information on a continuous basis.
  45. 45.  To the intermediaries it offers a competitive, professionalized and expanding market with adequate and efficient infrastructure so as render better service to investors and issuers.
  46. 46. OBJECTIVES  To regulate stock exchanges and the securities industry and to promote their orderly functioning.  To guide , educate and protect the rights and interests of individual investors.  To prevent trading malpractices and achieve a balance between self regulation by the securities industry and its statutory regulation
  47. 47.  To regulate and develop a code of conduct and fair practices by brokers , merchant bankers with a view to make them competitive and professional. FUNCTIONS OF SEBI  REGULATORY FUNCTIONS  Registration of brokers and sub brokers and other players in the market  Registration of collective investment schemes and Mutual Funds  Prohibition of fraudulent and unfair trade practices
  48. 48.  Controlling insider trading and takeover bids and imposing penalties for such practices DEVELOPMENT FUNCTIONS  Investor education  Training of intermediaries  Promotion of fair practices and code of conduct of all SROs  Conducting research and publishing information useful to all market participants