The document discusses the Indian capital markets regulatory framework and some of the key issues faced by investors. It notes that the capital markets are regulated by the Ministry of Finance, Securities and Exchange Board of India (SEBI), and Reserve Bank of India. SEBI was established in 1988 as the main regulator and has objectives of protecting investors, ensuring fair practices, and promoting an efficient securities market. The document also outlines some stock trading procedures and types of members/brokers that operate on the stock exchanges.

1. Tradable
securities in
Secondary
market

2. Problem faced by Investors in Indian Capital
Market
1. Inadequate disclosure
2. Insider trading
3. Price Manipulation
4. Over subscription of shares
5. Lack of transparency
6. Investors Grievance
7. Takeovers and Mergers
8. Problems related to settlement Mechanism

3. Regulatory
framework
• Indian Capital Markets are regulated
and monitored by the I) Ministry of
Finance, ii) The Securities and
Exchange Board of India and The
iii) Reserve Bank of India.

4. The Ministry of Finance
• The Ministry of Finance regulates through the Department of Economic
Affairs - Capital Markets Division. The division is responsible for
formulating the policies related to the orderly growth and development
of the securities markets (i.e. share, debt and derivatives) as well as
protecting the interest of the investors. In particular, it is responsible for
• institutional reforms in the securities markets,
• building regulatory and market institutions,
• strengthening investor protection mechanism, and
• providing efficient legislative framework for securities markets.

5. Securities & Exchange Board of India (SEBI)
• The Securities and Exchange Board of India (SEBI) is the regulatory
authority established under the SEBI Act 1992 and is the principal
regulator for Stock Exchanges in India.
• SEBI’s primary functions include protecting investor interests,
promoting and regulating the Indian securities markets.

6. Reserve Bank of India (RBI)
• The RBI regulates financial markets and systems through different
legislations. It regulates the foreign exchange markets through the
Foreign Exchange Management Act, 1999.
• The RBI is responsible for implementing monetary and credit
policies, issuing currency notes, being banker to the government,
regulator of the banking system, manager of foreign exchange, and
regulator of payment & settlement systems while continuously
working towards the development of Indian financial markets.

7. SEBI

8. ESTABLISHMENT
• In 1988 the Securities and Exchange Board of India (SEBI) was
established by the Government of India through an executive resolution,
and was subsequently upgraded as a fully autonomous body (a statutory
Board) in the year 1992 with the passing of the Securities and Exchange
Board of India Act (SEBI Act) on 30th January 1992.
• Basic functions of the Securities and Exchange Board of India as “…..to
protect the interests of investors in securities and to promote the
development of, and to regulate the securities market and for matters
connected therewith or incidental thereto”

9. 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 should provide protection of their rights and interests
through adequate, accurate and authentic information and disclosure of
information on a continuous basis.
To the intermediaries- it should offer a competitive, professionalized and
expanding market with adequate and efficient infrastructure so that they
are able to render better service to the investors and issuers.

10. OBJECTIVES OF SEBI
• The primary objective of SEBI is to promote healthy and orderly
growth -of the securities market and secure investor protection. The
objectives of SEBI are as follows:
• To protect the interest of investors, so that, there is a steady flow of
savings into the capital market.
• To regulate the securities market and ensure fair practices.
• To promote efficient services by brokers, merchant bankers, and other
intermediaries, so that, they become competitive and professional.

11. FUNCTIONS
OF SEBI
The SEBI Act, 1992 has entrusted
with two functions, they are
¤ Regulatory functions And
¤ Developmental functions

12. REGULATORY
FUNCTIONS
• Regulation of stock exchange and self regulatory
organizations.
• Registration and regulation of stock brokers,
sub-brokers, Registrars to all issues, merchant
bankers, underwriters, portfolio managers etc.
• Registration and regulation of the working of
collective investment schemes including mutual
funds.
• Prohibition of fraudulent and unfair trade
practices relating to securities market.
• Prohibition of insider trading
• Regulating substantial acquisition of shares and
takeover of companies.

13. DEVELOPMENTAL
FUNCTIONS
Promoting investor’s education
Training of intermediaries
Conducting research and publishing
information useful to all market participants.
Promotion of fair practices
Promotion of self regulatory organizations

14. POWERS OF
SEBI
• Power to call periodical returns from recognized stock
exchanges.
• Power to compel listing of securities by public companies.
• Power to levy fees or other charges for carrying out the
purposes of regulation.
• Power to call information or explanation from recognized stock
exchanges or their members.
• Power to grant approval to bye-laws of recognized stock
exchanges
• Power to control and regulate stock exchanges.
• Power to direct enquiries to be made in relation to affairs of
stock exchanges or their members.
• Power to make or amend bye-laws of recognized stock
exchanges.
• Power to grant registration to market intermediaries.

15. Limitation of Secondary Market
• Rampant Speculation (Uncontrolled and unwelcome)
• Insider Trading ( Operation info. Not available to the public)
• Oligopolistic market (Dominated by larger financial institutions )
• Limited forward trading (Spot delivery and hand delivery )

16. Tradable securities in Secondary market
I. On the basis of Issuer
• Industrial securities
• Govt. Securities
• Financial Intermediaries securities
II. On the basis of Maturity
Short term ( Money market securities , CD, Commercial Bills)
Long Term & Capital Market Securities (Long term , Pre. Shares and
Debentures)
III. On the basis of settlement of deals
• Forward securities (Settlement date is possible to shift)
• Backward Securities ( Settlement date can’t be shifted )

17. Share trading Procedure

18. Share trading Procedure

19. Method of trading in Stock Exchange
1. Choosing a Broker
2. Opening an account with Broker
3. Placing order
• At best order (Not specify any price / executed at best price)
• Limit order (fix a price)
• Open order or discretionary order (does not specify any time or order)
• Stop order (e.g: sell as soon as the price level fall a level)
4. Execution of order
5.Preparation of contract notes (Authenticated record of purchase and sale
securities)
6. Settlement of transactions
• Spot delivery settlement
• Handy delivery settlement (Settlement in 14days or specified in the agreement)

20. OVER THE COUNTER EXCHANGE OF INDIA
(OTCEI)

21. OVER THE COUNTER EXCHANGE OF INDIA (OTCEI)
• OTCEI, also known as Over The Counter Exchange Of India.
• It is an Electronic Stock Exchange which is comprised of Small and
Medium sized Firms looking to gain access to the Capital Market.
• It was Set-up to access High-Technology Enterprising Promoters.
• It is Promoted by UTI, ICICI, IDBI, IFCI, LIC, SBI and more other
Institutions.
• It was under Securities Contract Regulation Act 1956.

22. Over The Counter Exchange of India (OTCEI)
• Over The Counter Exchange of India (OTCEI) can be defined as a stock exchange
without a proper trading floor.
• All stock exchange have a specific place for trading their securities through
counters. But the OTCEI is connected through a computer network and the
transactions are taking place through computer operations. Thus, the
development in information technology has given scope for starting this type of
stock exchange.

23. HISTORY & ACHIEVEMENTS
• It was Incorporated as a Company at Maharashtra on 20th September
1990 under Section 25 of Companies Act 1956.
• It was Authorized Capital of 10 Crores and Paid-up Capital of 5 Crores.
• It was based on the Model of NASDAQ, USA.
• It is India’s First Exchange for Small Companies.
• It is the First Screen-based Nationwide Stock Exchange in India.
• It is the First Electronic Stock Exchange in India.
• De-recognised by SEBI in 31st March 2015.

24. PLAYERS IN THE OTCEI MARKET
• The players on the OTCEI exchange are the members and dealers. The
activities of members and dealers are:
• Act as broker, buy and sell securities according to the instructions of
investor.
• Market makers in securities, they quote the prices at which members
are willing to buy and sell the specified no. of securities.

25. FEATURES
• Use of Modern Technology
• Restrictions for Other Stocks
• Minimum issued Capital Requirements
• Restrictions for Large Companies
• Base Capital Requirement for Members
• All India Network
• Satellite Facility
• Computerisation for Transactions

26. ADVANTAGES OF OTCEI
• Access to Capital
• Increased Employed Commitment and Recruiting Power
• Complements Product Marketing
• Expands Business Relationship
• Facilitates Merger and Acquisition Activity
• Provides Flexibility in Financing
• It become a Count Driven and Transparent System of Trading
• It provide a Liquid Cash Market

28. Stock Brokers
• A stock broker is an intermediary who arranges to buy and sell
securities on the behalf of clients (the buyer and the seller).
• According to SEBI (Stock Brokers and Sub- Brokers) Regulations, 1992,
a stockbroker is member of a stock exchange and requires to hold a
certificate of registration from SEBI in order to buy, sell or deal in
securities.

30. Full-service broker
• A full-service broker provides a large variety of services to its clients.
Most full-service brokers have offices in major cities where customer
service staff can meet clients in person.
• These brokers offer customized support through tailored brokerage
plans and services for investors with different interests and varying
levels of expertise. Clients with large holdings could even engage
dedicated service managers to handle their portfolios.

31. Discount brokers
• While full-service brokers provide a whole catalogue of services,
discount brokers focus on the basics. Discount brokers carry out buy
and sell orders for their clients but do not offer any additional
services.

32. Jobber
• A Jobber can be defined as a person in stock exchange who sells
securities to the brokers. He will not sell to the public directly.
• E.g: A jobber is someone who has his eyes on a particular
stock,studies its price movements,the highs and lows in intraday and
trades on that stock on intraday basis

33. Advisers (Digital)
• Robo-advisers are automated digital platforms that provide financial
planning services online. They use algorithms to come up with the
financial advice and require with very little human supervision.

34. Eligibility Requirements to become a Stock
Exchange
• Person desiring to become brokers should clear the written test and interview
conducted by the stock exchange
• They should posses the required financial strength to fulfill capital adequacy
norms
• They should have the required infrastructure
• They should have the required manpower to service investors
• They should adhere to the code of conduct and various regulations prescribed
while conducting trade
• They should provide regular updates to the stock exchanges regarding their net
worth , information relating to directors, partners etc.

35. Types of Members or
• Floor Brokers (Execute order and receive a share in brokerage
commission)
• Commission Brokers