Indian Securities Market

1. Indian Securities Market Past, Present & Future May 29, 2012

2. Outline Present 1 On the Origin of Indian Securities Market 3 2 7 Market Development Phase 3 14 4 Regulatory Evolution 11 5 Future 9 2

3. 1 On the Origin of the Indian Securities Market

4. Pre-Independence Corporate stocks and shares in Bank and Cotton presses started in Bombay, trading carried out under Banyan Tree –1830s Stock Trading in Calcutta practiced under Neem Tree – 1830s “Share Mania” in India due to advent of Civil War – 1860-61 Native Share and Stock Brokers’ Association of India formed – July 9, 1875 Membership through Card System Admission Fee (Price of Card) in 1900s – Rs. 51; Annual Subscription Fee – Rs. 5 Committee of Management, Arbitration Committee, Defaulter’s Committee, Corner Committee English translation of Rules available to public for Re. 1 Tentative Scheduled Hours of Operation – 2 hours a day on 144 days and 3 hours a day on 66 days Short Selling allowed vis-à-vis Cash Market in Calcutta and Madras Stock Exchange Admission for Quotations Clearing House – Bank of India Formation of The Calcutta Stock Exchange Association – 1908 Incorporation of Bombay Stock Exchange Limited (not BSE Ltd.) – 1918 Madras Stock Exchange – 1920 Madras Stock Exchange reconstituted – 1938 4

5. Post-Independence • Bombay, Calcutta, Madras, Ahmedabad, Delhi, Hyderabad and Indore Stock Exchanges were recognised under the Securities Contracts (Regulations) Act, 1956, with Bangalore Stock Exchange getting its approval in 1963 • The number of stock exchanges remained 8 till 1980, many stock exchanges set up in the 80s • SENSEX first compiled on January 2, 1986 (Base Year: 1978-79 = 100) • Full Market Capitalisation methodology • Shifted to Free Float methodology on September 1, 2003 • Launch of S&P CNX Nifty – April, 1996 (Base: November 3, 1995 = 100) • Shifted to Free Float methodology on June 26, 2009 • Shift from floor-based to screen-based trading – 1992 in OTCEI, 1994 in NSE and 1995 in BSE • NSDL, the first Depository established in 1996, followed by CDSL in 1999 • Shift from Weekly Settlement to Rolling Settlement • IPF introduced in 1987 in BSE, in 1995 in NSE • SGF / TGF introduced in 1996 in NSE, 1997 in BSE

6. 1992 - A Mixed Bag

7. 2 Market Development Phase: 1999 – 2003

8. Introduction of New Products VaR Model for Margin Calculation - July, 2001

9. 3 Present

10. Highlights 10

11. 4 Regulatory Evolution

12. Acts, Rules and Regulations • Bombay Securities Contracts Control Act – 1925 • The Capital Issues (Control) Act – 1947 • Repealed on May 29, 1992 • Securities Contract (Regulation) Bill – 1954 • Securities Contract (Regulations) Act – 1956 • Bombay Securities Contracts Control Act, 1925 repealed • Securities Contract (Regulations) Rule – 1957 • SEBI Act – May 1, 1992 • Corporatisation & Demutualization Scheme – 2005 • Manner of Increasing and Maintaining Public Shareholding (MIMPS) in recognised stock exchanges, Regulations – 2006

13. SEBI Board Press Release: Regulatory Implications • Final Rules expected in 2-3 months • MIIs must form independent Board Committees for regulatory oversight • Main exchanges already have an independent surveillance committee which can be repurposed • Regulatory Functions of all MIIs must report to independent committees of their Boards • CRC to be formed by SEBI • Handle conflicts of interest • Regular interaction with Independent Committees of MIIs • SEBI proposing future creation of industry-wide SRO along the lines of FINRA in the US 13

14. 5 The Future

15. Future Initiatives • Interoperability of Clearing Corporations • Complete Physical Segregation of Client Securities • Prevent misutilisation of Client securities • Securities of one client not used to offset default of another • Seamless Portability of Client from one member to in case of default of member or otherwise

16. Thank You 16