The document discusses the Indian stock market, including its history and regulatory framework. It provides details on key stock exchanges like BSE and NSE, governing bodies that regulate exchanges, and SEBI's objectives and functions in regulating the market. It also covers concepts like listing of securities, derivatives trading, and types of derivative contracts like futures, options, and swaps.

1. STOCK MARKET
MR. RATHESH J
ASST. PROF,
NEW HORIZON COLLEGE,
KASTURINAGAR

2. STOCK MARKET
 History and background of the study on stock
exchanges

3. Features of Stock Exchange
1. Market for securities
2. Deals in second hand securities
3. Regulates trade in securities
4. Allows dealing only in listed securities
5. Recognition from central Govt.
6. Working as per rules
7. Specific location
8. Financial Barometers

4. Functions of stock exchange
 Liquidity of securities
 Flow of funds
 Marketability of securities
 Safety of funds
 Encourages capital formation
 Investment opportunities
 Availability of information
 Regulates company Management
 Facilitates public borrowing

5. Regulatory framework of Stock Exchange
1. SEBI Act, 1992
2. The Companies Act, 1956
3. The Securities Contract regulation Act, 1956
4. The Depository Act, 1996

6. At present, SEBI recognizes a total of 7
stock exchanges across India. These are:
Sr.
No.
Name
1 BSE Ltd. 1875
2 Calcutta Stock Exchange Ltd. 1908
3 India International Exchange (India INX) Dec 28, 2017
4 Magadh Stock Exchange Ltd. 1986
5 Metropolitan Stock Exchange of India Ltd. 2008
6 National Stock Exchange of India Ltd. 1992
7 NSE International Exchange Ltd November 29, 2016

7. Governing Body
 The Governing Body of Stock Exchange consist of 16 members
 A stock exchange is managed by a governing body consisting
of:
 A president
 A vice-president
 An executive director
 The elected directors
 The public representatives
 The nominees of the Government(s)

8. Governing Body
 Central Government nominates not more than 3 members
 The board nominates 3 public representatives
 SEBI nominates persons not exceeding 3
 Stock exchange appoints 1 Executive Director
One third of members retire at annual general meeting

9. SEBI

10. Objectives of SEBI:
 To regulate the activities of stock exchange
 To protect the interest of investors
 To ensuring safety to investment
 To prevent fraudulent and malpractices
 To regulate and develop a code of conduct

11. Functions of SEBI
Protective
functions
Developmental
functions
Regulatory
functions

12. Protective functions
To protect the interest of investor and provide safety of investment
 Checks Price chains
 Prohibits Insider trading
 Prohibits fraudulent and Unfair Trade Practices
 Educate investors
 Prohibits misleading statements
 Promotes fair practices and code of conduct:
 Protect the interest of debenture-holders
 Investigate cases of insider trading
 Stopped the practice of making preferential allotment

13. Developmental functions
To promote and develop activities in stock exchange and
increase the business in stock exchange
 Promotes training of intermediaries
 Adopting flexible approaches:
Permitted internet trading
Made underwriting optional (reduce the cost of issue)
Initial public offer is permitted.

14. Regulatory functions
To regulate the business in stock exchange following functions are performed:
 Framed rules and regulations to regulate the intermediaries
 Registers and regulates the working of intermediaries
 Intermediaries brought under the regulatory purview &
private placement made more restrictive.
 Registers and regulates the working of mutual funds
 Regulates takeover of the companies
 Conducts inquiries & audit

15. Powers of SEBI
 Power to grant recognition to a stock exchange.
 Power to direct any stock exchange to amend the
rules
 Power to supersede governing body of any stock
exchange.
 Power to suspend business of a recognized
stock exchange.
 Power to prohibit contracts in certain cases

16. Listing of Securities
Listing means admission of securities
of an issuer to trading privileges
(dealings) on a stock exchange
through a formal agreement.

17. Rules for listing of securities
Copies of MOA & AOA
Prospectus
Specimen copies of Shares & debentures
certificates
Letter of Allotment, Acceptance
Particulars of capital structure

18. Cont.
Statement of distribution of shares
Particulars of dividends & cash bonus in last 10
years
Brief history of the company’s activities
Minimum issued capital should be 3cr
Minimum public offer is 75 lakh

19. Advantages of listing on stock exchange
 Detailed info is available.
 Increase the value of security
 Safety in dealing
 Ensures creditworthiness

20. procedure of Online trading
1. Placing the Order
2. Conveying the message to computer
3. Starting of Matching process
4. Accepting the order
5. Delivery & Payment
SCMHow The Stock Exchange Works (For Dummies).mp4

21. BSE

22.  The Bombay Stock Exchange Established in 1875 is Asia's first stock
exchange
 located at Dalal Street, Mumbai.
 The BSE is the world's 10th largest stock exchange with an overall market
capitalization of more than $4.9 trillion on as of April 2018.
 Bombay stock Exchange was founded by Premchand Roychand.
 earliest stock broker meetings in the 1850s was in rather natural environs -
under banyan trees - in front of the Town Hall
 On August 31, 1957, recognized by the Indian Government under the Securities
Contracts Regulation Act.

23. Features of BSE
 Known as BSE Ltd.,
 Largest no. of companies of the world listed
 SENSEX is indices of BSE
 Recognized as the first stock exchange of India under the Securities
Contracts Regulation Act. 1956
 BOLT is the electronic trading system stated in 1995
 SCMThe History of Bombay Stock Exchange.mp4

24. NSE

25.  The National Stock Exchange of India Limited (NSE)
is the leading stock exchange of India, located in
Mumbai.
 The NSE was established in 1992 as the first
demutualized electronic exchange in the country.
 NIFTY 50 is the Indices of NSE

26. Derivatives
 Derivatives refers to financial instruments which derive
their values from some underlying assets.
 Underlying assets could be equities, debt, currencies,
various assets.
 Derivatives comprise 4 basic contracts:
 Forwards
 Futures
 Options
 Swaps

27. Derivatives in India
 In November 18, 1996 L C Gupta Committee set up to draft a
policies for introduce Derivatives.
 In May 11, 1998 L C Gupta Committee submits the report.
 Derivatives trading was introduced in India in June 2000
 In May 25, 2000 SEBI allows exchange to trade in Index futures
 In July 2, 2001 NSE allows trading in Stock options
 In August 2008 Currency derivatives trading introduced.
 In august 2013 Interest rate derivatives trading introduced.

28. Forwards Contracts
Forwards Contracts are promise to deliver an
asset at a pre- determined date in future pre-
determined price.
These are highly popular on currencies & interest
rates.
These contracts are traded over the counter
directly between the parties.

29. Futures Contract
It is an agreement between to parties to buy or
sell an asset at a certain time in future date at a
certain price.
These contracts are traded in exchanges.
These are standardized contracts
Counterparty risk is largely eliminated.

30. Option Contracts
 Option contracts give the buyer a right but not an obligation to buy or sell
an asset in future.
 Types of options
Call options
Calls give the buyer the right but not the obligation to buy a given quantity of
asset at a given price on or before given future date.
Put options
Puts give the buyer the right but not the obligation to sell a given quantity of
assets at a given price on or before a given date.

31. Swap Contracts
 Swap are private agreements between 2 parties of
exchange cash flows in the future according to a
prearranged formula.
 In short, parties agree to exchanging cash flows on a future
date.

32.  For example: Assume that Charlie owns a $1,000,000 investment that pays him
LIBOR + 1% every month. As LIBOR goes up and down, the payment Charlie receives
changes.
 Now assume that Sandy owns a $1,000,000 investment that pays her
1.5% every month. The payment she receives never changes.
 Charlie decides that that he would rather lock in a constant payment and
Sandy decides that she'd rather take a chance on receiving higher
payments. So Charlie and Sandy agree to enter into an interest rate
swap contract.
 Under the terms of their contract, Charlie agrees to pay Sandy LIBOR +
1% per month on a $1,000,000 principal amount (called the "notional
principal" or "notional amount"). Sandy agrees to pay Charlie 1.5% per
month on the $1,000,000 notional amount.