STOCK EXCHANGES IN INDIA

1. STOCK EXCHANGES IN INDIA INTRODUCTION The existence of capital markets in india can be traced back to the 18th century when the securities of east india company were traded in the country. The growth of capital market can be linked to the growth of the corporate sector. The first stock exchange was set up in Bombay in 1887 and is followed by another stock exchange at Ahemdabad 1894.

2. Meaning and Definition MEANING: “As an association,organisation or body of individuals,whether incorporated or not, established for the purpose of assisting,regulating and controlling business in buying, selling and dealing in securities”.

3. Nature of STOCK EXCHANGE • It is a place where securities are purchased and sold. • A stock exchange is an association of persons whether incorporated or not. • Both genuine investors and speculative buy and sell shares. • The trading is strictly regulated by rules and regulations.

4. FUNCTIONS OF STOCK EXCHANGE • ENSURE LIQUIDITY OF CAPITAL • REGULAR MARKET FOR SECURITIES • EVALUATION OF SECURITIES • MOBILISING OF SURPLUS SAVINGS • HELPFUL IN RAISING CAPITAL • SAFETY IN DEALINGS • LISITING OF SECURITIES • PLATFORM FOR PUBLIC DEBT • CLEARING HOUSE FACILITY • SMOOTHENS THE PRICE MOVEMENTS

5. BENEFITS TO THE INVESTORS • LIQUIDITY OF INVESTMENTS • NEGOTIABILITY OF SECURITIES • ASSSURES SAFETY • KNOWLEDGE OF TRUE VALUE • MINIMIES RISK • EDUCATES INVESTORS

6. BENEFITS TO THE COMPANY • EHANCES THE CREDIT STANDING • WIDENS THE MARKET • REDUCE THE DANGER • MINIMIES THE RISK • MINIMIES THE PRICE FLUCTUATIONS • BETTER BARGAINING POWER • ENJOY SEVERAL TAX ADVANTAGES

7. BENEFITS TO THE COMMUNITY • STIMULATES INVESTMENT • HELPS THE GOVERNMENT • ASSIST IN THE BEST UTILIZATION • SMOOTHENS THE PROCESS CAPITAL FORMATION • REFELECTS BUSINESS CONDITIONS

8. ORGANISATION OF STOCK EXCHANGES IN INDIA

9. The stock exchanges are the exclusive centres for trading of securities. At present, there are 23 operative stock exchanges in India. Most of the stock exchanges in the country are incorporated as ‘Association of Persons’ of Section 25 companies under the Companies Act. These are organized as ‘mutuals’ and are considered beneficial in terms of tax benefits and matters of compliance. The trading members, who provide brooking services also own, control and manage the stock exchanges. They elect their representatives to regulate the functioning of the exchange, including their own activities. Until recently, the area of operation/jurisdiction of an exchange was specified at the time of its recognition, which in effect precluded competition among the exchanges. The stock exchanges need to be recognized under the Securities Contracts (Regulation) Act, 1956. There are 19 stock exchanges in India. The Securities and Exchange Board of India (SEBI), has approved and notified the Corporatisation and Demutualization Scheme of 19 Stock Exchanges. BSE has successfully completed the process of Demutualization in terms of The BSE (Corporatisation and Demutualization) Scheme, 2005 on May 16, 2007. NSE since inception has adopted a demutualised structure and its model of demutualization compares well with the international models of demutualised stock exchanges as seen from.

10. MANAGEMENT A stock exchange is managed by a governing body consisting of: 1. a president, 2. a vice-president, 3. an executive director, 4. the elected directors, 5. the public representatives, and 6. the nominees of the Government(s)  REGULATION The Securities Contracts (Regulation) Act, 1956 “Act” was enacted in order to prevent undesirable transactions in securities and to regulate the working of stock exchanges in the country. The provision of the Act came into force with effect from 20th February, 1957 vide Notification No. SRO 528 dated 16th February, 1957. The Securities Contract (Regulation) Act, 1956 deals with stock exchanges, contracts in securities, and listing of securities on stock exchanges, and keeps a vigil over all the stock exchanges of India and prevents undesirable contracts in Securities market through a process of recognition and continued supervision.

11. Recognition of stock exchanges • Application for recognition of stock exchanges • (1) Any stock exchange, which is desirous of being recognized for the purposes of this Act may make an application in the prescribed manner to the Central Government. • (2) Every application under sub- section (1) shall contain such particulars as may be prescribed, and shall be accompanied by a copy of the bye- laws of the stock exchange for the regulation and control of contracts and also a copy of the rules relating in general to the constitution of the stock exchange and in particular, to- • the governing body of such stock exchange, its constitution and powers of management and the manner in which its business is to be transacted; • the powers and duties of the office bearers of the stock exchange; • the admission into the stock exchange of various classes of members, the qualifications, for membership, and the exclusion, suspension, expulsion and re-admission of members there from or there into; • the procedure for the registration of partnerships as members of the stock exchange in cases where the rules provide for such membership; and the nomination and appointment of authorized representatives and clerks.

12. 1. Minimum Listing Requirements for New CompaniesThe following eligibility criteria have been prescribed for listing of companies on BSE, through Initial Public Offerings (IPOs) & Follow-on Public Offerings (FPOs): The minimum post-issue paid-up capital of the applicant company (hereinafter referred to as "the Company") shall be Rs. 10 crore for IPOs & Rs.3 crore for FPOs; and The minimum issue size shall be Rs. 10 crore; and The minimum market capitalization of the Company shall be Rs. 25 crore (market capitalization shall be calculated by multiplying the post-issue paid-up number of equity shares with the issue price). 2. Minimum Requirements for Companies Delisted by BSE seeking Relisting on BSECompanies delisted by BSE and seeking relisting at BSE are required to make a fresh public offer and comply with the existing guidelines of SEBI and BSE regarding initial public offerings. 

13. 3. Permission to Use the Name of BSE in an Issuer Company's ProspectusCompanies desiring to list their securities offered through a public issue are required to obtain prior permission of BSE to use the name of BSE in their prospectus or offer for sale documents before filing the same with the concerned office of the Registrar of Companies. BSE has a Listing Committee , comprising of market experts, which decides upon the matter of granting permission to companies to use the name of BSE in their prospectus/offer documents. This Committee evaluates the promoters, company, project , financials, risk factors and several other aspects before taking a decision in this regard. Decision with regard to some types/sizes of companies has been delegated to the Internal Committee of BSE. 

14. 8. Payment of Listing FeesAll companies listed on BSE are required to pay to BSE the Annual Listing Fees by 30th April of every financial year as per the Schedule of Listing Fees prescribed from time to time. The schedule of Listing Fees for the year 2011-12, is given here under: Securities *other than Privately Placed Debt Securities and Mutual Funds

15. GROWTH OF STOCK EXCHANGE IN INDIA

16. NAME ADDRESS

17. NAME ADDRESS

18. Major stock exchanges in india Bombay stock exchange Bombay stock exchange was edmstablished in 1875 as a voluntary non –profit making assosciation at mumbai ..It is asia’s oldest stock exchange and is a major stock exchange in india . The exchange has mechanisms to redress greviances of investors as well as members . It provides informative inputs to investing public.

19. The management includes: • A governing board comprising of a selected directors [ one third to retrieve every year by rotation. • An executive director. • 3 goverment nominees. • A reaerve bank of india nominee. • And 5 public nominees regulate the working of the exchange.

20. The executive director acts as the chief executive officer and is responsible for the day to day administration of the exchange. • Working • The members of stock exchange can trade in the exchange . They can trade on behalf of the outsiders . A display board within the rising is used to show the current prices of important shares from time to time. Sebi has allowed bse to extend its trading terminals to outside centres and bombay online trading system [BOLT] has enabled it to open trade working stations all over the country.

21. National stock exchange • National stock exchange was incorporated in november 1992 with an equity capital of 25 crores . NSE is a professionally managed national market For shares, bonds,debentures ,and goverment securities,with all the necessary infrastructure and trading facilities. Equal opportunity of trade irrespective of their location in different parts of the country as they are connected through a sattelite network.

22. The objectives of NSE are: • Providing a nation wide trading facility for equity , debt instruments etc. • Ensure equal access to investors all over the country throug an appropriate communication network. • Provide fair , efficient , and transparent securities market to investors using electronic trading systems. • Enable shorter settlement cycles and book entry settlement system. • And attain current international standards of securities market.

23. Over the counter exchange of india[OTCEI] • Over the counter ezxchange of india was established in october ,1990 which an objective to provide an alternate market for the securities of smaller companies . This exchange has been jointly promoted by UIT, ICICI, IDBI, SBI capital market ltd. .IFCI ,GIC,and canbank financial services ltd.

24. Main features of OTCEI are: • It is the ringless and national stock exchange.. • It caters to the needs of dmall businesses which have so far not met the requirements for listing on stock exchange. • It has nation wide range. • Smal and medium sizes companies with a paid up capital between 30 lakhs an 25 crores can be listed. • OTCEI deals in equity shqres ,prefferences shares ,bonds ,debentures ,and warrants. • The trading is by way of negogiarmted siding . • Trandnsactions take place through satellite communication telephone lines. • A company which is listed any other recognized stock exchange in india will not simultaneously be eligible for listing on OTCEI.

25. Advantages of OTCEI: • There is a transparency in trasactions. • The liquidity is ensured and a transaction is normally comleted in 7 days. • The proper scrutiny is done of the scrips by all the sponsers. • A company needing immediate funds can pledge ots equity with the sponsor and thereby reduce intrest cost. • A company at once gets nationwide listing . • Small angmd growth – oriented companies would be able to grow faster as they would raise required capital through OTCEI market at a low cost. • The company listed on OTCEI are subjected to low income tax.

26. Trading in stock markets: There are two basic ways of trading at stock exchange • Trading on the exchange floor The buying and selling at stock exchanges is not allowed to outsiders . They have to approach brokers who are members of the exchange and the dealings can only be done through them.

27. The procedure followesmd for dealongs at exchange is : • Selection of a broker : The first step to be done idms to sekect a broker through whom the purchase or sale is to be done. • Placing an order: After selecting the broker the client places an order for purchase or sale of securities. • Making the contrast: The trading floor of the stock exchange is divided into different parts known as trading posts . Different posts deal in different types of securities , the authoriaed clerk of the broken goes to the concerned post and expresses his intention to buy and aell the securities . A deal is struck when the other party also agrees.

28. Settlement : The spot dealings are settled there in full . The settlement for ready delivery and forward contracts is done with a different procedure . • Settlement of ready delivery contracts: The settlement in different stock exchanges is done between 3 to 7 day of transactions. • Settlement of forward delivery contracts: These are done for speculative purposes . The settlement of forwarsmd contracts can be done in any three ways. • Liquidation in full • Liquidation by payment of differences • Carry over the next settlement

29. Rolling settlement: Rolling settlement is an important measure to enhance the efficiency and integrity of the security market . In january 1998 SEBI had introduced rolling settlement on a voluntary basis of the stock exchamge for securities ,which were eligible for dematerialised Trading. Rolling settlement has been introduced in the form of T+5 settlemwnt system where T is the trade date and 5 days are given for delivery of securities and cash payments.

30. Advantages of rolling settlement : • It eliminates any scope for speculation and arbitrage. • RS system is simple to understand. • It reduces the period of settlement of transactions . • There is no risk of fluctuations of prices . • RS ensures standardised settlement. • Retail investors are at more advantageous position because RS shortens the delays for converting securities into cash. Stock markets moved from T+ 5 to T +2 system from April 1 ,2003 and further moved to T+1 system . Thus , at present , the delivery and payments are made one day after the date of trading.

31. Electronic trading Due to large number of problems in the physical trading on the exchange floor ,nowadays vast computer networks are used to match buyers and sellers rather than human brokers . Many large institutional traders ,such as mutual funds , pension funds, etc.prefer this method of trading. It facilitates online investing by bringing investors closer to the market.

32. The trading mechanism under electronic trading is: It takes place through open electronic limit order books in which order matching is done by the trading computer . There are no market markers and the entite process in order is driven . The market orders placed by investors are automatically matched with the best limit. The advantage of electronic yltrading is that it brings more transparency by displaying all buy and sell orders in trading system. The types of transactions that are usually carried out on the indian stock exchange includes: • Spot delivery transactions • Future and forward transactions.

33. Clearing and settlement constitutes the crore part or the trade life cycle . After a trade deal is confirmed , the broker involved in transaction issues a contract note to the investor which contains all yhe details about the transactions . The obligation of paying all the money and delivery of shares is then completed through the clearing house.

34. BUYING AND SELLING OF SECURITIES • Nowadays everything is done online in electronic format. No need to go to any stock exchange. Stock transactions takes place in the three major steps: • Placing orders(buying or selling): There are two methods for placing orders. • (i)Online stock trading: The online stock trading is done by self. If you want to do trading yourself then you can go for online trading. For online trading you need computer ,internet connection, demat and trading account. • (ii) Offline stock trading: in this method the orders will be placed by the broker on behalf of the buyer. It means the buyer of the stock have to tell his broker which stocks to buy and sell and based on the buyer’s instruction broker carries out transactions. In this method the buyer doesn’t need any computer and internet connection.

35. 2. The order goes to the broker. 3. From broker the order goes to stock exchange and finally based on offer price the order gets executed. 0NLINE STOCK TRADING The online stock trading companies are stock brokers for the investors. They are registered with one or more stock exchanges. Mostly online trading websites in Indian trade is BSE and NSE. Online stock trading is a facility based on trading of the stocks. The investors can easily trade the shares by means of an online website. There are two different types of trading platforms available for online equity trading.

36. 1. INSTALLABLE SOFTWARE BASED STOCK TRADING TERMINALS • These trading terminals require software to be installed on investor’s computer. These softwares are provided by the stock broker. These softwares require high speed internet connection. • ADVANTAGES: • Orders are directly sent to stock exchange rather than stock broker. This makes order execution very fast. • It provides almost each and every information which is required by a trader on a single screen. • DISADVANTAGES: • Location constraint – one cannot trade if you are not on the computer.

37. It requires high speed internet connection. • These trading terminals are not easily available for low volume share traders. 2. WEB(INTERNET) BASED TRADING APPLICATION This kind of trading application does not require any additional software installation. They are like other internet websites which investor can access from around the world through normal internet connection.

38. ADVANTAGES AND DISADVANTAGES OF ONLINE STOCK MARKET TRADING Advantages of Online Stock Trading: There are various advantages that one can obtain while trading online, which are follows: • It helps in real time stock trading without calling or visiting broker’s office. • It displays real time market watch, historical data, graphs etc. • It makes easy to invest in IPOs, mutual funds and bonds. • It offers customer service through email or chat. • It secures transactions.

39. Disadvantages of online stock trading. Despite various advantages, the online trading also has certain disadvantages, which include: • The procedure of online stock trading in India is a bit long- learning procedure for those who are not aware about the internet and computer technology. • Sometimes the site is very slow and is not enough user friendly. • Brokerages are little high. • If one wants to invest in share market through online trading he needs to have three things: • Money. A person desirous of investing needs money or balance in his account to trade. • Demat Account. To open a demat account the person could approach his bank for opening a demat account. They will charge a very nominal amount for this service.

40. (3) Online Trading Account. To open a online trading account the person has to approach a online share-market broker or else, safest and reliable will be bank. Approach the bank and ask for details. PROCEDURE OF ONLINE TRADING 1. Log on to the stock brokers website. 2. Register as client /investor. 3. Fill in application form and client-broker agreement form on the requisite value stamp paper. 4. Obtain user ID and password. 5. Log on to the broker’s site using secure user ID and password.

41. 6. Market watch page will show real time online market data. 7. Trade shares directly by entering the symbol or number of the security. 8. Brokers server will check your limit in the online account and demat account for the number of shares and executes the trade. 9. Order is executed instantly and confirmation can be obtained. 10. Confirmation is e-mailed to investor by the broker. 11. Contract note is printed and mailed in 24 hours. 12. Settlement will take place automatically on the settlement day. 13. Demat account and bank account will get debited and credited by electronic means.

42. DEPOSITORY SYSTEM One of the biggest problem faced by the Indian capital market has been the manual and paper based settlement system. Under this system, the clearing and settlement of transactions take place only with the use of paper work. The system of physical delivery of scrips poses many problems for the purchaser as well as the seller in the form of delayed settlements, long settlement periods, high level of failed trailed, high cost of transactions, bad deliveries etc. Thus, to eliminate paper work, facilitate scripless trading and electronic book entry of the transfer of securities, it was found necessary to replace the old system of transfer and settlement with the new and modern system of depositories. Accordingly the government of India enacted the depositories Act in 1996 for the orderly growth and development of the Indian capital market.

43. Depository system is a system whereby the transfer and settlement of scrips take place not through the traditional method of transfer deeds and physical delivery of scrips but through the modern system of effecting transfer of ownership of securities by means of book entry on the ledgers of the depository without the physical movement of scrips. This system is also known as ‘scripless trading system’. • A depository is a firm wherein the securities of an investors are held in electronic form in the same way a bank holds money. It carries out the transactions of securities by means of book entry, without any physical movement of securities. At present there are two depositories in India. • National Securities Depository Ltd. (NSDL) • Central Depository Service (India) Ltd. (CDSL)

44. NATIONAL SECURITIES DEPOSITORY LTD. (NSDL) NSDL the first depository organisation promoted by IDBT, UTI and national Stock Exchange (NSE). NSDL was set up to provide electronical depository facilitates for securities being traded in capital market. The depositories ordinance was promulgated by the Government of India in september, 1995. The Securities and Exchange Board of India (SEBI) issued the guidelines for depositories in May, 1996. The Bill was passed by the parliament in July 1996, whereas registered by SEBI on June 7, 1996

45. NSDL has minimum network of Rs. 100 crores. NSDL deals with shares in dematerialized form through depository participants who are agents of investors banks stock brokers and financial institutions. As per RBI guidelines, institutional investors/banks having a minimum portfolio of securities of Rs. 10 crore have to settle all transactions through depository. Depository Participants (DP) has to pay an admission fee of Rs. 25,000 to NSDL and deposit Rs. 10 Lakh as a security with NSDL • Functioning of NSDL: The investors can obtain depository services by opening a demat account with a depository participant of NSDL • Issuer company can make dematerialization services available to its shareholders by entering into an agreement with NSDL. • A Clearing Member has to open a clearing account in the depository system for receiving the securities from its clients for delivery to the Clearing house/Clearing Corporations as pay in and to distribute the payout to its clients received from the Clearing Corporation/House.

46. The Clearing Corporations/Houses of stock exchanges are linked electronically to the depository in order to electronically receive securities delivered by clearing members towards pay-in and to give out securities to clearing members towards pay-out. • The Certification Program of NSDL: • In order to ensure rendering of quality services by the depository participants, NSDL has launched Certification programme on depository. This helps programme helps the participants to understand and adopt the procedures to be followed in conducting various transactions in the NSDL Depository system. • Safety measures: • In order to ensure safety of the investor holding, various checks have been taken by NSDL. These included: • ADP has to get itself registered with SEBI in order to be operational. • DPs are allowed to effect any debit and credit to an account only when a valid instruction is received from the client.

47. NSDL carries out periodic inspection into records and the activities of both DP & R & T agents. • Everyday, there is system driven mandatory reconciliation between participant and NSDL. • All investors have a right to receive their statement of accounts periodically from the DP. • NSDL forwards statement of account to the investors every month at random as a counter check. • All grievances of the investors are to be resolved by the concerned business partner. • NSDL has taken up a comprehensive insurance policy to protect the interest of the investors.

48. CENTRAL DEPOSITORY SERVICES (INDIA) LTD. Central Depository System (India) Ltd. Commenced its operations during February, 1999. It was promoted by Mumbai Stock Exchange in association with leading banks such as State Bank Of India, Bank of Baroda, HDFC bank, Union bank of India, Centurion bank. CDSL was set up with the objective of providing convenient, dependable and secure depository services at affordable cost to all market participants. An investor can hold almost all his securities in one account with CDSL.

49. Features of CDSL: • Wide coverage:CDSL has over 165 DPs spread around 100 cities/towns across the country. • On-line DP Services. DP can provide on-line depository services because CDSL’s system is based on centralised database architecture. • Reasonable Fee: CDSL has kept the tariff rates at the lowest in order to provide affordable depository services to investors. • Internet Access: Demat account holders can have an access to their accounts on internet. • Contingency Arrangements: CDSL has made provisions for contingency terminals which help a DP to update transactions in case there is any problem with the system. • Helpline: Any DP or an investor can obtain clarifications and guidance from CDSL’s prompt and courteous helpline facility.

50. DEMATERIALISATION OF SHARES Dematerialisation is the process wherein share certificates or other securities held in physical form are converted into electronic form and credited to demat Account of an investor opened with a depository participant. The demat account offers a number of benefits to the investor as he is not required to keep the shares or other securities in safe custody eliminating the risk of fire, theft, loss in transit, delay in transfer, bad delivery, fake or forged shares etc. SEBI has made a compulsory trading of shares of all the companies listed in stock exchanges in demat form with effect from 2nd January 2002.