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Capital Market

Capital Market

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Published by api-3818696
A great book on capital market
A great book on capital market

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Published by: api-3818696 on Oct 17, 2008
Copyright:Attribution Non-commercial

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Page No.
LIST OF ABBREVIATIONS..................................................................................................... 5
TRADING\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026.30\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026.7

1.1 INTRODUCTION..................................................................................................................... 7 1.2 NEAT SYSTEM..................................................................................................................... 9 1.3 MARKET TYPES.................................................................................................................... 9

1.3.1 Normal Market.............................................................................................................. 9 1.3.2 Odd Lot Market............................................................................................................. 9 1.3.3 RETDEBT Market......................................................................................................... 9 1.3.4 Auction Market............................................................................................................ 10

1.4 CORPORATE HIERARCHY.................................................................................................... 10 1.5 LOCAL DATABASE.............................................................................................................. 10 1.6 MARKET PHASES................................................................................................................ 11

1.6.1 Opening....................................................................................................................... 11 1.6.2 Open Phase................................................................................................................. 11 1.6.3 Market Close............................................................................................................... 11 1.6.4 Surcon......................................................................................................................... 11

1.7 LOGGING ON....................................................................................................................... 12 1.8 LOG OFF/EXIT FROM THE APPLICATION.............................................................................. 13 1.9 NEAT SCREEN.................................................................................................................... 14 1.10 INVOKING AN INQUIRY SCREEN........................................................................................ 15

1.10.1 Market Watch............................................................................................................ 15 1.10.2 Security Descriptor................................................................................................... 17 1.10.3 Market By Price........................................................................................................ 17 1.10.4 Previous Trades........................................................................................................ 18 1.10.5 Outstanding Orders................................................................................................... 19 1.10.6 Activity Log............................................................................................................... 20 1.10.7 Order Status.............................................................................................................. 21 1.10.8 Snap Quote................................................................................................................ 22 1.10.9 Market Movement..................................................................................................... 22 1.10.10 Market Inquiry........................................................................................................ 22 1.10.11 Auction Inquiry....................................................................................................... 23 1.10.12 Security/Portfolio List............................................................................................. 24 1.10.13 Multiple Index Broadcast and Graph...................................................................... 24 1.10.14 Online Backup......................................................................................................... 25 1.10.15 Basket Trading........................................................................................................ 25 1.10.16 Buy Back Trades..................................................................................................... 26 1.10.17 Supplementary Functions........................................................................................ 27

1.11 ORDER MANAGEMENT...................................................................................................... 40

1.11.1 Entering Orders........................................................................................................ 40 1.11.2 Order Modification................................................................................................... 46 1.11.3 Order Cancellation................................................................................................... 47 1.11.4 Order Matching........................................................................................................ 47

1.12 TRADE MANAGEMENT...................................................................................................... 50
1.12.1 Trade Modification................................................................................................... 51
1.12.2 Trade Cancellation................................................................................................... 51
2
1.13AUCTION........................................................................................................................... 52

1.13.1 Entering Auction Orders........................................................................................... 53 1.13.2 Auction Order Modification...................................................................................... 54 1.13.3 Auction Order Cancellation...................................................................................... 54 1.13.4 Auction Order Matching........................................................................................... 54

1.14 LIMITED PHYSICAL MARKET............................................................................................ 54 1.15 RETDEBT MARKET (RDM)............................................................................................ 55 1.16 TRADING INFORMATION DOWNLOADED TO TRADING MEMBERS...................................... 58 1.17 INTERNET BROKING.......................................................................................................... 60 1.18 WIRELESS APPLICATION PROTOCOL (WAP)..................................................................... 61 MODEL QUESTIONS.................................................................................................................. 61

CLEARING AND SETTLEMENT\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u202625\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026...64
2.1 INTRODUCTION.................................................................................................................. 64

2.1.1 Transaction Cycle....................................................................................................... 65 2.1.2 Settlement Process...................................................................................................... 66 2.1.3 Settlement Agencies..................................................................................................... 67 2.1.4 Risks in Settlement...................................................................................................... 70

2.2 SETTLEMENT CYCLE........................................................................................................... 71 2.4 SECURITIES SETTLEMENT................................................................................................... 75 2.5 FUNDS SETTLEMENT........................................................................................................... 78 2.6 SHORTAGES HANDLING...................................................................................................... 80 2.7 RISK CONTAINMENT MEASURES......................................................................................... 84

2.7.1 Capital Adequacy Requirements................................................................................. 84 2.7.2 Margins....................................................................................................................... 85 2.7.3 Settlement Guarantee.................................................................................................. 94 2.7.4 No-delivery Period...................................................................................................... 95

2.8 INTERNATIONAL SECURITIES IDENTIFICATION NUMBER..................................................... 95 2.9 DEMATERIALISATION AND ELECTRONIC TRANSFER OF SECURITIES................................... 96 2.10 INVESTOR PROTECTION FUND.........................................................................................98 2.11 CLEARING SOFTWARE \u2013 DATA AND REPORTS DOWNLOAD............................................... 99

2.11.1 Obligation Reports..................................................................................................99 2.11.2 Custodial Trade Reports....................................................................................... 100 2.11.3 Deliveries Reports.................................................................................................100 2.11.4 Receipts Reports....................................................................................................101 2.11.5 Bad Deliveries Reports......................................................................................... 101 2.11.6 Funds Reports.......................................................................................................101 2.11.7 Auction Reports.....................................................................................................102 2.11.8 Objections Reports................................................................................................102 2.11.9 Margin Reports.....................................................................................................104 2.11.10 Securities Reports................................................................................................. 104 2.11.11 Miscellaneous Reports.......................................................................................... 105

2.12 FILE TRANSFER PROTOCOL............................................................................................. 105
MODEL QUESTIONS................................................................................................................. 106
TRADING MEMBERSHIP\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026..20\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026...109
3.1 STOCK BROKERS............................................................................................................... 109
3.1.1 Introduction............................................................................................................... 109
3
3.1.2 Membership in NSE.................................................................................................. 110
3.2. SUB-BROKERS................................................................................................................. 129
3.3. BROKER-CLIENTS RELATIONS......................................................................................... 131

3.3.1. Know your client...................................................................................................... 131 3.3.2. Unique Client Code.................................................................................................. 132 3.3.3. Margins from the Clients......................................................................................... 133 3.3.4. Execution of Orders................................................................................................. 133 3.3.5. Accumulation of orders............................................................................................ 133 3.3.6. Contract Note........................................................................................................... 133 3.3.7. Payments/Delivery of Securities to the Clients........................................................ 134 3.3.8. Brokerage................................................................................................................. 134 3.3.9 Segregation of Bank Accounts.................................................................................. 134

3.4. SUB-BROKER \u2013 CLIENT RELATIONS................................................................................. 135

3.4.1 Know Your Client...................................................................................................... 135 3.4.2. Orders...................................................................................................................... 135 3.4.3. Purchase/Sale Note.................................................................................................. 135 3.4.4. Payments/Delivery of Securities.............................................................................. 136 3.4.5. Sub-brokerage.......................................................................................................... 136

3.5. DISPUTE, ARBITRATION AND APPEAL.............................................................................. 136 3.6 CODE OF ADVERTISEMENT............................................................................................... 137 MODEL QUESTIONS................................................................................................................ 140

LEGAL FRAMEWORK\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026.15\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026.142

4.1 SECURITIES CONTRACTS (REGULATION) ACT, 1956......................................................... 146
4.2 SECURITIES CONTRACTS (REGULATION) RULES, 1957..................................................... 148
4.3 SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992................................................ 148
4.4 SEBI (STOCK BROKERS & SUB-BROKERS) RULES, 1992.................................................. 152
4.5 SEBI (STOCK BROKERS & SUB-BROKERS) REGULATIONS, 1992...................................... 153
4.6 SEBI (INSIDER TRADING) REGULATIONS, 1992................................................................ 160
4.7 SEBI (PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO
SECURITIES MARKETS) REGULATIONS, 1995.......................................................................... 163
4.8 THE DEPOSITORIES ACT, 1996.......................................................................................... 165
4.9 INDIAN CONTRACT ACT, 1872.......................................................................................... 168
4.10 THE COMPANIES ACT, 1956............................................................................................ 169
4.11 PUBLIC DEBT ACT, 1944................................................................................................. 173
4.12 INCOME TAX ACT, 1961................................................................................................. 174

MODEL QUESTIONS................................................................................................................. 179
AN OVERVIEW OF THE INDIAN SECURITIES MARKET\u2026\u2026\u20265\u2026\u2026\u2026\u2026\u2026\u2026\u2026..182
5.1 INTRODUCTION................................................................................................................ 182
5.1.1 Market Segments....................................................................................................... 182
5.1.2 Products and Participants........................................................................................ 183
5.2 A PROFILE....................................................................................................................... 185
5.2.1 Dependence on Securities Market............................................................................. 185
5.2.2 Investor Population................................................................................................... 187

5.3 PRIMARY MARKET..........................................................................................................188 5.4 SECONDARY MARKET.....................................................................................................190 5.5 DERIVATIVES MARKET................................................................................................... 195

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