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Under the partial fulfillment of T .Y. BCOM (FINANCIAL MARKET) SEMESTER 5th
Submitted By Ms. AMITA RAHI VIVEK Roll no. 07
Project Guide PROF. (MRS.) SHRADDHA BHOME
Submitted to UNIVERSITY OF MUMBAI Academic Year 2010-2011
VPM’S K.G. JOSHI COLLEGE OF ATRS & N.G. BEDEKAR COLLEGE OF COMMERCE CHENDANI BUNDER ROAD, THANE (W) 400601.
I would like to extend my sincere gratitude to all those people who have helped me in the successful completion of my Project. Its gives us immense pleasure in expressing our gratitude to us project guide prof. Mrs. Shraddha Bhome for giving her precious time and help us in completing our project. We would also like to thank Prof.D.M.Murdeswar (co-ordinator), our principal Dr. (Mrs.) S.A. Singh for their valuation suggestion and support provided during the project and also the library staff providing the books whenever demanded by us. We thank them for being informative and tolerant. We would not have been able to complete our project without sincere guidance and effort of above mentioned people, whose presence was blessing in disguise for me, which motivated us to complete our project on time. And at last but not the least, a special thank to my parents for their constant support & assistance, to make these project worth presenting before you.
I, AMITA V. RAHI the student of JOSHI-BEDEKAR COLLEGE, studying in the T.Y.B.Com – (Financial market), Semester-5TH course for the academic year 20010 – 11. Hereby declare that I have completed the project on “Study on Bombay Stock Exchange” in fulfillment of the course completion requirement at the University of Mumbai. I further declare that information presented in this project is true and original to the best of my knowledge.
signature of student
(Amita V. Rahi)
5 1.5 2.INDEX Sr.1 2.4 2. No 1 2 3 4 5 6 7 8 Title Page Certificate Acknowledgement Declaration Index List of Chart and Diagram Researcher methodology Chapter Schemes 1 Overview of financial market 1.3 2.4 1.1 1. 2 Secondary market 2.6 what is Financial System? Function of the Financial System Components of the Financial System Capital Market Primary Market Secondary market Contents Page no.2 1.3 1.6 Introduction Definition Features of secondary market Advantages of secondary market Ingredients of secondary market Innovation in secondary market .2 2.
4 4.6 Trading @ BSE BSE Indices BSE Technology Risk Management Derivative Safeguards for Investors 9 10 Bibliography Annexure .3 4.3 Study on Bombay Stock Exchange 3.4 Introduction History of BSE Milestones of BSE Achievements & Awards by BSE 4 Finding @ BSE 4.1 3.2 3.3 3.1 4.2 4.5 4.
3 Ingredients of Secondary Market 3. List 1.1 Features of Secondary Market 2.1 Function of the financial system 1 2 3 4 5 6 1.2 Indian Financial System 2. no.2 Advantages of Secondary Market 2.List of chart and Diagram Sr.1 Milestones of BSE .
To know about BSE INDICES To know about risk management by BSE To know the new derivative segment on BSE . The financial market deals with the various securities and these securities are traded on stock exchanges. companies. How BSE Sensex perform in the market.REASHER METHODOLOGY Why I have chosen this topic ? As being the student of financial market I have chosen my topic for project on study on Bombay Stock Exchange. Government and society. To know the role of Bombay Stock Exchange in capital market How BSE provide services to investor. This topic will increase my knowledge and will be benefited to my career. OBJECTIVES OF PROJECT To get an overview of Bombay Stock Exchange. That’s why I have done my project on the oldest and first stock exchange in India that is Bombay Stock Exchange. To know the role played by BOMBAY STOCK EXCHANGE in Indian capital market. I have chosen this topic to get more overview on Bombay Stock Exchange.
In this direction both primary as well as secondary data were attempted to be collected. Primary Data. SOURCE Interview at BSE Questionnaire Sample 20 • Secondary Data The methodology for collecting data with reference to the secondary data was taken from the following:• Books . The methodology is concentrated in the following area: 1. Incomplete responses were deleted. 2. Questionnaire was collected and arranged in one after the other in recording sheet. Secondary Data. • Primary Data The primary data collection is specially designed to have information from the manager level officer. The questionnaire was presented to the officers of the bank.• Newspaper • Internet • Prospectus of BSE RESEARCH DESIGN In order to conduct the research an appropriate methodology became necessary.
• Journals • Magazines LIMITATIONS The project has been limited to the visit on Bombay Stock Exchange.) as they were being considered to be confidential. Thankfully. these limitations did not act as hindrances for completion of the project. CHAPTER: 1 OVERVIEW OF FINANCIAL SYSTEM . were hesitant to provide general information as regards the functioning of the Exchange At the same time they were reluctant to disclose information such as the accurate facts and figures (commission for mercantile services etc. During research for the project it was noticed that the officers of the above mentioned.
instruments. A financial system plays a vital role in the economic growth of a country.1 functions of Financial System F U N C T I O N S Risk Transformation Function Maturity Transformation Function Size Transformation Function Mobilization of Savings Provision of Liquidity . It mobilizes and usefully allocates scarce resources of a country.2 FUNCTIONS OF THE FINANCIAL SYSTEM. well-integrated set of sub-system of financial institutions. markets.1. It intermediates between the savers and investor and promotes faster economic development. and services which facilitates the transfer and allocation of funds. Chart 1. efficiently and effectively. A financial system is a complex.1 WHAT IS FINANCIAL SYSTEM? The economic development of any country depends upon the existence of a well organized financial system. 1. An efficient functioning of the financial system facilities the free flow of funds to more productive activities and thus promotes investment.
Mobilization of Savings Another important activity of the financial system is to mobilize saving and channelize them into productive activities. the money and monetary assets are referred to as liquidity. 3.(Source: By Researcher) 1. The financial intermediaries have to play a dominant role in this activity. The financial system should offer appropriate incentives to attract saving and make them available for more productive ventures. the financial system facilitates the transformation of saving into investment and consumption. 2. is the leader of the financial system and hence it has to control the money supply and creation of credit by banks and regulates all the financial institutions in the country in the best interest of the nation. all activates in a financial system are related to liquidity. In India the R. The term liquidity refers to cash or money and other assets which can be converted into cash readily without loss of value and time. Thus. Hence.B. Size Transformation Function . Provision of liquidity The major function of financial system is the provision of money and monetary assets for the production of goods and services. In financial language.either provision of liquidity or trading in liquidity.I. There should not be any shortage of money for productive ventures.
On the other hand. Moreover. they hesitate to invest directly in stock market. Maturity Transformation Function Another function of the financial system is the maturity transformation function.Generally. Thus. 4. So. use of derivatives etc. Risk Transformation Function Most of the small investors are risk-averse with their small holding of savings. This risk transformation function promotes industrial development. various risk mitigating tools are available in the financial system like hedging. the financial intermediaries collect the saving from individual saver and distribute them over different investment units with their high knowledge and expertise. the risks of individual investors get distributed. the savings of millions of small investors are in the nature of a small unit of capital which cannot find any fruitful avenue for investment unless it is transformed into perception size of credit unit. Thus. . insurance. 5. The financial intermediaries accept deposits from public in different maturities according to their liquidity preference and lend them to the borrowers in different maturities according to their needs and promote the economic activities of a country. Banks and other financial intermediaries perform this size transformation function by collecting deposits from a vast majority of small customers and giving them as loan of a sizeable quantity. this size transformation function is considered to be one of the very important functions of the financial system.
Financial Institution Non. Banking Non –Banking Financial Financial Institution Institution Capital market money market Non.3 COMPONENTS OF THE FINANCIAL SYSTEM Chart 1. Hire purchase etc.banking Development Institution Equity market Debt market . .1. Venture capital. . Long term Instrument Short term Instrument Depositories.2 Indian financial systems Indian financial system Organized system Unorganized system (moneylender) Financial Institutions Financial Instruments Financial Markets Financial Services .banking .
the Industrial Financial . and 4. Financial institutions can also be classified as term.7) The financial system consists of four segment or components. Financial services. Financial Institutions Financial institution are intermediaries that mobilize saving and facilitate the allocation of funds in an efficient manner.Commercial Bank Co-operative Bank Primary market Secondary market Derivative market T-bill Commercial paper Certificate of deposit Repo (Source: The Indian financial System by Bharati V. Financial markets. and Non-Banking Financial Companies (NBFCs) as well as Housing Finance Companies (HFCs) are major institutional purveyors of credit. 3. the Industrial Credit and Investment Corporation of India (ICICI). These are: 1. Banking institutions are creators and purveyors of credit while non-banking financial institution is purveyors of credit. Financial institutions. page no. pathak. Financial instruments. the Developmental Financial Institutions (DFIs). non-banking financial institutions. namely. In India. Financial institutions can be classified as banking and non-banking financial institutions. 2.financial institutions such as the Industrial Development Bank of India (IDBI). 1.
term securities while the second is a market for long. the Small Industries Development Bank of India (SIDBI) and the industrial investment Bank of India (IIBI). The main organized financial markets in India are the money market and the capital market.Corporation of India (IFCI). of a sum of money and periodic payment in the form of interest or dividend.reforms era. Financial instruments represent paper wealth shares. Many financial instruments are . the role and nature of activity of these financial institutions have undergone a tremendous change. 2. The first is a market for short.term securities. Most of the financial institution now resorts to financial markets for raising funds. In the post. Financial Markets Financial markets are a mechanism enabling participants to deal in financial claims. i. 3. at a future date.bank activities and financial institutions have taken up banking functions. the secondary market is meant for trading in outstanding or existing securities. While the primary market deals with new issues.e. securities having a maturity period of one year or more. The markets also provide a facility in which their demands and requirements interact to set a price for such claims. like bonds and notes.. Financial markets can be also be classified as primary and secondary markets. debentures. Financial Instruments Financial instrument is a claim against a person or an institution for payment. Banks have now undertaken non.
Financial Services Financial services are those that help with borrowing and funding. Financial instruments help financial markets and financial intermediaries to perform the important role of channelizing funds from lenders to borrowers. types of options.marketable as they are denominated in small amount and traded in organized markets. Financial services are necessary for the management of risk in the increasingly complex global economy. buying and selling securities. liquidity. They enable risk transfer and protection from risk. helps in reducing risk. They are independent and interact continuously with each other. risk management and financial engineering. payments mechanism. This distinct feature of financial instruments has enabled people to hold a portfolio of different financial assets which. 1. reversibility. 4. Financial instrument differ in term of marketability. risk and transaction cost. The four financial system components discussed do not function in isolation.4 CAPITAL MARKET . Their interaction leads to the development of a smoothly functioning financial system. lending and investing. and provision of liquidity. in turn. making and enabling payments and categories of financial services are funds intermediation. returns.
It is a market where industrial concerns raised their capital or debt by issuing appropriate instruments.term.The capital market is a market for financial assets which have a long or indefinite maturity. it deals with long term securities which have a maturity period of above one year. It can be further subdivided in two. Industrial Securities Market As the very name implies. Capital market may be further divided into three namely: i Industrial securities market ii Government securities market and iii Long term loan market i. and Debenture or Bonds. It is a market where Government securities are traded. Long term securities are traded in this market while short term securities are traded in money . They are: • Primary market or new issue market • Secondary market or stock exchange ii. Preference shares. In India there are many kinds of Government Securities – short.term and long. it is a market for industrial securities namely Equity shares. Generally.Government securities market It is otherwise called Gild-Edged securities market.
market. Securities issued by the Central Government, State Governments, Semi-Government authorities like City corporations, Port Trusts etc.
iii. Long- Term Loans Market
Development banks and commercial banks play a significant role in this market by supplying long term loans to corporate customers. Long term loans market may further be classified into: a. Term Loans market b. Mortgages market c. Financial guarantees market.
a. Term loans market
Many industrial financing institutions have been created by the Government both at the national and regional levels to supply long term and medium term loans to corporate customers directly as well as indirectly.
b. Mortgages market
The mortgages market refers to those centers which supply mortgage loan mainly to individual customers. A mortgage loan is a loan against the security of immovable property like real estate. This mortgage may be equitable mortgage or legal one.
c. Financial Guarantees market
A Guarantee market is a center where finance is provided against the Guarantee of a reputed person in the financial circle. Guarantee is a contract to discharge the liabilities of a third party in case of his default. In case the borrower fails to repay the loan, the liability falls on the shoulders of the Guarantor. Hence the guarantor must be known to both the borrower and the lender and he must have the means to discharge his liability.
1.5 PRIMARY MARKET
Primary market is a market for new issues or new financial claims. Hence, it is also called New Issue Market. The primary market deals with those securities which are issued to the public for the first time. The market, therefore, makes available a new block of securities for public subscription. In the primary market, borrower exchange new financial securities for long term funds. Thus, primary market facilitates capital formation. There are three ways by which a company may raise capital in a primary market. They are: i ii Public issue Rights issue
iii Private placement The most common method of raising capital by new companies is through sale of securities to public. It is called public issue. When an existing company wants to raise additional capital, securities are first offered to the existing shareholders on a pre-emptive basis. It is called right issue. Private placement is a way of selling securities privately to a small group of investors.
The new issue market encompasses all institution dealing in fresh claims. These claims may be in the form of equity shares, preference shares, debentures, rights issues, deposits etc. all financial institutions which contribute, underwrite and directly subscribe to the securities are part of new issue market.
1.6 SECONDARY MARKET
The Secondary market is a market for secondary sale of securities. In other words, securities which have already passed through the new issue market are traded in this market. The market where existing securities are traded is referred to as the secondary market or stock market. In a stock market, purchases and sales of securities whether of Government or SemiGovernment bodies or other public bodies and also shares and debentures issued by joint stock companies are affected. The securities of government are traded in the stock exchange as a separate component, called guilt edged market. Government securities are traded outside the trading wing in the form of over the counter sales or purchases. Another component of the stock market deals with trading in shares and debentures of limited companies. Stock exchanges are the important ingredient of the capital market. They are the theatres of trading in securities and as such they assist and control the buying and selling of securities. The stock exchanges in India are regulated under the Securities Contract (Regulation) Act, 1956. The Bombay Stock Exchange is the principal stock exchange in India which sets the tone of the stock markets.
In a stock market. Another component of the stock market deals with trading in shares and debentures of limited companies. The securities of government are traded in the stock market as separate component.CHAPTER: 2 SECONDARY MARKET 2. called guilt edged market.1 INTRODUCTION The market where existing securities are traded is referred to as the secondary market or stock market. purchases and sales of securities whether of Government or Semi. The secondary . Government securities are traded outside the trading wing in the form of over the counter sales or purchases.Government bodies or other public bodies and also shares and debentures issued by joint stock companies are affected.
NASDAQ etc. * * * * * * * Equity Shares Preference Shares Bonus Shares Bonds Debentures Commercial Papers Treasury Bills 2. London Stock Exchange of The Great Britain. . Each and every country has the secondary markets some of the well known stock exchanges are Bombay Stock Exchange (BSE) of India. They are the theatres of trading in securities and as such they assist and control the buying and selling of securities. In brief. However at present stock exchanges need not necessarily be privately organized ones. according to Husband and Dockeray “securities or stock exchange are privately organized markets which are used to facilities trading in securities”.market plays a very vital role as one of the indicators of the industrial development of a nation. public bodies and joint stock companies are traded. New York Stock Exchange (NYSE) of America. Various securities & financial instruments that are traded in the stock market are. Thus. National Stock Exchange (NSE). They are the citadel of capital and fortress of finance. stocks exchanges constitute a market where securities issued by central and state government.2 DEFINATION Stock exchanges are the important ingredient of the secondary market.
The organized stock exchanges can take any of the following forms: • Public Limited by Guarantee.profit Organization. • Companies Limited by Guarantee. • Voluntary Non.2.1 Features of Secondary Market (Source: By Researcher) Stock exchange is a mechanism. which facilitates listing and trading in securities.Organized body:A stock exchange is an organized association or corporate body.3 FEATURES OF SECONDARY MARKET Chart 2. The main features of stock exchange are as follows: 1. 2.Facilitates Listing Of Shares :- .
• Annual subscription fees. SEBI may cancel the registration of such stock exchange. The membership fees include: • Entrance fees. If the rules and regulations are not followed. The shares listed on the exchange can be traded. 5. The trading of shares brings liquidity to the shares. 4. • Membership security deposit. The companies that issue shares to the public can get their shares listed on one or more stock exchange in the country. The members are normally the stock brokers. The listing agreement is signed by the shares issuing company and the concerned stock exchange. Membership:Every stock exchange has its members. companies are able to raise long term funds through the issue of shares. SEBI may also impose penalty on defaulting stock exchange.The stock exchanges facilities listing of shares issued by public limited companies. Membership charges must be paid to become members of the stock exchange. 3. SEBI has framed rules and regulations to be followed by stock exchanges. or as and when they want to book profits. . The investors can sell the shares and realize cash as and when they are in need of funds. The listing of shares is done through the listing agreement. Controlled by SEBI:The activities of stock exchanges are controlled by SEBI. Due to listing of shares.Facilities Trading of Securities :The stock exchange facilitate of shares. The shares can be traded between the sellers and buyers on the stock exchange.
6. • Government Nominees. The highest membership charges are at Bombay Stock Exchange and Calcutta stock Exchange. Important Element of Capital Market:A capital market is a market for medium term and long term funds. • Directors. Governing Body:The stock exchanges are managed by Governing Body/ Board. 8. It enable the companies to raise medium and long term funds through the issue of shares and debentures. The governing body has administrative powers relating to the functioning of the stock exchange. Trading Through Registered Brokers:Transactions on the stock exchange are done only through the registered stock brokers. Barometer of Economic Strength:- . The Government nominates the president and Vice-president.president. The Governing board consists of: • President and Vice. The Directors are elected by the stock broker members. 7. Transactions through any other party are considered invalid. Government nominees are nominated by SEBI. • Chief Executive. • Public Representative. 9.The membership charges vary depending upon the stock exchange. A stock exchange plays an important role in capital market.
At present.Stock exchanges are indicators or barometers of economic stability of a nation. At present. only 8 stock exchanges are granted permanent recognition by the Central Government. the economic growth is high. The oldest stock exchange in the country is the Bombay Stock Exchange. then the stock exchanges will reflect such a strong economic position.versa. 10. located in the financial capital of India. there are 25 stock exchanges in the country. Central Government Recognition:The stock exchanges need to obtain recognition from the Central Government. 2. and vice. 11. This is because the stock markets are at high. There are four national level stock exchanges and 21 regional stock exchanges.2 Advantages of secondary market A D V A N Assist in raising funds Facilitates listing of shares Generate Employment Capital Formation Stimulates Industrial Development . Location :- The stock exchanges are mostly located in the capital cities of major states in India.4 ADVANTAGES OF SECONDARY MARKET Chart2. If the national economy is strong and healthy.
The long term funds can be utilized for the purpose of expansion and modernization of existing units. so company can list their share easily. Stock exchange also facilities indirect employment in the various sectors. Readymade market to buy or sale shares. Companies can also utilize the funds for the purpose of setting new projects. 2. Assist in Raising funds:The stock exchange is enables public limited companies to raise long term funds from the stock market. The companies that issue shares to the public can get their shares listed on or more stock exchanges in the country. . The advantages of stock market are briefly stated as follows: 1. and other do get their employment because of stock exchange. The companies can issue shares and debentures and obtain long term funds. A number of brokers. Generates Employment:It generates employment facilities in the country.T A G E S Facilitates Regional Development Provides Investment Opportunities Provides Revenue to the Government Promotes Efficient Management of Listed Companies (Source: By Researcher) Stock market is vital for the economic development of a nation.brokers. 3. sub. Facilitates Listing of Shares :The stock exchanges facilitate listing of shares issued by public limited companies.
companies undertake expansion and modernization programs. The investors are provided with an additional opportunity to invest in shares. 5. which in turn generate more employment. This leads to regional development in the country. It has been . The long term funds can be utilized by companies for the following purpose:• Expansion and modernization. 6. Facilitates Regional Development:The stock exchange also facilitates regional development in the country. Investment leads to capital formation.Due to availability of long term funds. 4. Capital Formation:The stock exchange encourages investors to invest in the primary and secondary stock market. Stimulates Industrial Development:The Stock exchanges facilities mobilization of long term funds through the issue of shares and debentures. For investing in stock market. Provides Investment Opportunity:The stock exchange provides an investment opportunity to the investors. The funds generated can be utilized for setting up units in backward areas. • Setting up of new projects. other than investment in fixed deposits in bank or in other forms. Companies can generate long term funds due to stock exchanges. investors need to save money. 7. Savings lead to investment in shares and other securities.
2.3 Ingredients of secondary market .proved that the returns from the stock markets are much higher as compare to traditional forms of investment. But the investor must only in good companies that provide good return to investors. Higher the efficiency.5 INGREDIENTS OF SECONDARY MARKET Ingredients are citadel of capital and fortress of finance. Promotes Efficient Management of Listed Companies:Stock exchange indirectly promotes efficiency of the management of listed companies. The stock exchanges pay tax on the revenue or profits earned by them. higher is the performance. 8. and as such higher the prices of the shares on the stock market. Also. Provides Revenue to the Government:The stock exchange provides revenue to the Government. the investors who invest on stock markets are subject to capital gain tax. They are the theatres of trading in securities and as such they assist and control the buying and selling of securities. 9. Ingredients of secondary market are as follow:- Chart 2. either directly or indirectly.
. Stock Exchanges:Stock exchanges are the important ingredient of capital market. Stock exchanges provide an organized market place for the investors to buy and sell securities freely. Further. stock exchanges provide an auction market in which member of the exchange participate to ensure continuity of price and liquidity to investors.I N G R E D I E N T S Stock Exchanges Jobbers Tarawaniwala commission Brokers Sub-Brokers / Remisiers Authorized Clerks (Source: By researcher) 1. The market offers perfectly competitive conditions where a large number of seller and buyer participate.
A jobber plays in the market for quick returns. keeps them for a very short period and sell them for profit known as the ‘jobber’s turn’. Jobbers:A jobber is a professional independent broker who deals in securities on his own behalf. a jobber can deal either with a broker or with another jobber. But at same time. 2. The drawback of this system is that a Tarawaniwala can act against the interest of investors by purchasing securities from them in his own name at lower prices and selling the same securities to them at higher prices. he is not prohibited from acting as a broker. Now.The first stock exchange in India was started in Bombay in 1875 with formation of the “Native Share and Stock Broker’s Association’. Thus. His main job is to earn a margin of profit due to price variations of securities. Tarawaniwalas:A Tarawaniwala is an active member in the Bombay Stock Exchange. he purchases and sells securities in his own name. With the growth of joint stock companies. So. He is a professional broker who carefully judges the worth of the securities and makes a good forecast of their future price movements. the stock exchanges also made a steady growth and at present these are 22 recognized stock exchanges. the . 3. Thus Bombay Stock Exchange is the oldest one in the country. A Tarawaniwala can act both as a broker as well as a jobber. In other words. a jobber does not work on commission basis but work for profit. He buys securities as a owner. Basically he is a jobber.
In case he wants to act as such for a non-member. He is called remisier in the Bombay Stock Exchange. a broker acts for a large number of his clients. a sub-broker is an agent of a stock broker. Since he is not a member of a stock exchange. their commission cannot exceed 40% of the commission received on the business transacted by them 6. Authorized Clerks:An authorized clerk is one who is appointed by a stock broker to assist him in the business of securities trading. Generally. and therefore. He helps the client to buy and sell securities only through the stock broker. He buys and sells securities on behalf of his client for a commission. He does not purchase or sell in his own name. His commission is paid out of the commission received by brokers for whom he is acting as an agent. he cannot directly deal in securities. Generally. 4. He get the orders from his clients and executes them through jobbers. Hence. 5. He is subject to similar restrictions as are applicable to member brokers. he must get his consent and this fact must disclose in agreement also. He is permitted to deal with nonmembers directly. Sub. remisiers are also called “half commission men”.Securities Contract act of 1956 provides that a member of a stock exchange can act as a principal only for a member of a recognized stock exchange.Brokers/ Remisiers:As a stated earlier. he deals in a large variety of securities. Commission Brokers:A commission broker is nothing but a broker. A broker cannot be present always .
The SEBI now requires that 50 per cent of the directors must be non-broker directors or government Representatives. the SEBI has announced revised norms for companies accessing the capital market so that only quality securities are listed and traded in stock exchanges. Transparency of Accounting Practices:- . it is obligatory that a non-broker professional shall be appointed as the Executive Director. Generally. Change in the Management Structure:In the early periods. the boards of stock exchanges were dominated by brokers whose decisions were not fair and transparent. Insistence of Quality Securities:For efficient and active functioning of a stock exchange. Some of the developments in the secondary market are as following:- 1. he requires the assistance of others to carry on the trading activities on his behalf. authorized clerks are given power of attorney to act on behalf of brokers and hence they can sign on behalf of brokers. In Bombay Stock Exchange. 3. quality securities are absolutely essential. Realizing this fact. 2. 2.on the trading floor of a stock exchange. Further. each member broker can employ a maximum number of 5 clerks.6 Innovations in Secondary market Many steps have been taken in recent years to reform the secondary market so that it may function efficient and effectively. Steps are also being taken to broaden the market and make it function with greater degree of transparency and in the best interest of investors. and therefore.
Everything is done through electronic media. deposits and even to equity shares also. brokerage. service tax etc. all debt instruments must be compulsorily credit rated by a credit rating agency .To ensure correct pricing mechanism and wider participation. Of course the service tax is collected from the client and paid to the Government. Brokers are asked to show their prices. So. There is no physical transfer of shares. The depository system facilitates investors to hold securities in the electronic form rather than in physical form. The account will be credited with the purchase of securities and debited with the sale of securities. separately in the contract notes and their accounts. they are transparent. 5. Setting up of Credit Rating Agencies:Credit rating agencies have been set up for awarding credit rating to the money market instruments. less speculative and cost effective. The SEBI has directed that all offer of public/ rights issue/ offer for sale should only be of ‘dematerialized shares’. 4. All DPs will act as collection agents. the investors will be compulsorily required to open a depository account with a Depository Participant (DP) for making an application. Introduction of Depository system:A depository is an organization where the securities of a shareholder are held in the electronic form through a process of dematerialization. Since the operations are computer linked. The investors have to simply open an account with the depository through a depository participant. all attempts are being taken to achieve transparency in trading and accounting procedures. speedier. Now.
BSE switched over to electronic trading system in January 1995. and bustle scenes etc. It would bring to light automatically the scrip which are under alert. 7. It is a healthy trend towards a developed capital market. certain parameters are put to work at once. The buyers and sellers living apart from each other can trade in corporate securities through electronic media and through telephone/ teller / computer in the case of OTC. The Stock Watch System simply works as a mathematical model which keeps a constant watch on the market movement. 6. no hustle. investment counters can be spread throughout the country under the electronic network. NSE went over to screen based trading with a national network. Hence. Again. When the model is activated. Trading in Derivatives:- . bothersome and most bothersome indicating blue.so that the investing public may not be deceived by financially unsound companies. yellow and red signals respectively. which are commonly found in conventional stock exchanges. Introduction of Electronic Trading:The OTCEI has started its trading operations through the electronic media. no trading ring. there is a national market with no physical location. Under this system. Similarly. Stock Watch System:The SEBI is contemplating to introduce a New Stock Watch system to trace out the source of undesirable trading if any in the market. This alert divided into three categories such as least bothersome. no stock exchange building. 8. called BOLT.
The hassles of KYC documentation are creating obstacles in the path of investor and advisors In 2002. Large intra-day volatility was experienced on the stock exchanges when these block deals were carried out. Know Your Customer (KYC) Norms:KYC norms are providing quite a deterrent for the population to put its money alike. terrorist financing etc. L. Bye-laws have already been framed by NSE and BSE based on the recommendation of the Committee. Gupta committee which had gone into the question of introduction of derivative trading has recommended introducing trading in Index Futures to start with and then trading in options.Dr. KYC norms were introduced in India with the RBI directing all Bank and Financial Institution to put in place a policy framework to Know Their Customer. Trading in derivatives has been introduced by bringing necessary amendment to the Securities Contract Regulation Act. Window For Block Deals:A separate window has been created in both BSE and NSE for executing huge block deals to check intra-day volatility on this count on the bourses. These measures would make the capital market active. 9. into various investment channels. this involve verifying customer’s identity and address by asking them to submit document that are accepted as relevant proof. money laundering. The basic purpose of KYC was to prevent identity theft. Keeping them outside the purview of the time after the first half-an hour will stem this volatility. 10. C. .
1 INTRODUCTION Bombay Stock Exchange is the oldest stock exchange in Asia What is now popularly known as the BSE was established as "The Native Share & Stock Brokers' Association" in 1875. .CHAPTER 3: STUDY ON BOMBAY STOCK EXCANGE 3.
BSE are ISO 27001:2005 certified. which is a ISO version of BS 7799 for Information Security. is India's first and most popular Stock Market benchmark index. are listed on BSE and in Hong Kong. And it is in the top ten of global exchanges in terms of the market capitalization of its listed companies (as of December 31. BSE is the first exchange in India and the second in the world to obtain an ISO 9001:2000 certifications. Exchange traded funds (ETF) on SENSEX. It is the world's 5th most active in terms of number of transactions handled through its electronic trading system. BSE has facilitated the growth of the Indian corporate sector by providing it with an efficient capital raising platform. SENSEX. Today. It is also the first Exchange in the country and second in the world to receive Information Security Management System Standard BS 7799-2-2002 certification for its BSE On-Line trading System (BOLT).28 as of Feb. 2010. The companies listed on BSE command a total market capitalization of USD Trillion 1. BSE is the world's number 1 exchange in the world in terms of the number of listed companies (over 4900). The BSE Index. 2009).Over the past 135 years. Futures and options on the index are also traded at BSE. Vision "Emerge as the premier Indian stock exchange by establishing global benchmarks" Mission “To educate and create awareness among investor” . Presently.
the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act.36 Trillion. Historically an open-cry floor trading exchange. trading Sensex futures contracts. Today BSE is among the 10 major international exchanges in context of market investment of the firms registered under it. In 2000 the BSE used this index to open its derivatives market. The development of Sensex options along with equity derivatives followed in 2001 and 2002. giving the BSE a means to measure overall performance of the exchange. The Bombay Stock Exchange developed the BSE Sensex in 1986. The group eventually moved to Dalal Street in 1874 and in 1875 became an official organization known as 'The Native Share & Stock Brokers Association'. It traces its history to the 1850s. The location of these meetings changed many times. expanding the BSE's trading platform.2 HISTORY OF BOMBAY STOCK EXCHANGE The Bombay Stock Exchange is known as the oldest exchange in Asia. It took the exchange only fifty days to make this transition. the Bombay Stock Exchange switched to an electronic trading system in 1995. The total amount of investment dominated by the cataloged firms under BSE as on 31st March. 2010 was USD 1.3 MILESTONES OF BSE SINCE 1875 . 3. as the number of brokers constantly increased. In 1956.3. when stockbrokers would gather under banyan trees in front of Mumbai's Town Hall.
1 Milestones of BSE Date 9th Jul 1875 2nd Feb 1921 31st Aug 1957 Milestones The Native Share & Stock Broker's Association formed Clearing House started by Bank of India BSE granted permenant recognition under Securities Contracts (Regulation) Act (SCRA) 2nd Jan 1986 SENSEX. develop and regulate the securities market) 29thMay 1992 Capital Issues (Control) Act repealed 1992 Securities Appellate Tribunal (SAT) established 14th Mar 1995 BSE On-Line Trading (BOLT) system introduced 19th Aug 1996 First major SENSEX revamp 12thMay 1997 Trade Guarantee Fund (TGF) introduced 21st Jul 1997 1997 1st Jun 1999 Brokers Contingency Fund (BCF) introduced BSE On-Line Trading (BOLT) system expanded nation-wide Interest Rate Swaps (IRS) / Forward Rate Agreements (FRA) allowed 22ndMar 1999 Central Depository Services Ltd. country's first equity index launched (Base Year:1978-79 =100) 10th Jul 1987 Investor's Protection Fund (IPF) introduced 3rd Jan 1989 BSE Training Institute (BTI) inaugurated 25th Jul 1990 SENSEX closes above 1000 15th Jan 1992 SENSEX closes above 2000 30th Mar 1992 SENSEX closes above 4000 1st May 1992 SEBI Act established ( An Act to protect.(CDSL) set up with other financial institutions 15thJul 1999 CDSL commences work 11th Oct 1999 SENSEX closed above 5000 .Table 3.
11th Feb 2000 SENSEX crosses 6000 intra-day 9th Jun 2000 Equity Derivatives introduced 1st Mar 2001 Corporatization of Exchanges proposed by the Union Govt.‘SPICE' introduced 16th Jan 2003 Retail trading in G Sec 1st Apr 2003 T+2 settlement Introduced 1st June 2003 Banker launched 1st Dec 2003 T group launched 17thMay 2004 Second biggest fall of all time. 1st Feb 2001 4th Jun 2001 BSE Webx Launched BSE PSU index introduced 15th Jun 2001 WDM operations at commenced 1st Jun 2001 Index Options launched 2nd Jul 2001 VaR model introduced for margin requirement calculation 9th Jul 2001 Stock options launched 11th Jul 2001 BSE Teck launched.14%) . 11. India 's First free float index 25th Jul 2001 Dollex 30 launched 1st Nov 2001 Stock futures launched 29th Nov 2001 100% book building allowed 31st Dec 2001 All securities turn to T+5 1st Apr 2002 T+3 settlement Introduced 15th Feb 2002 Negotiated Dealing System (NDS) established 1st Feb 2002 1st Sep 2003 1st Jan 2003 Two way fungibility for ADR/GDR SENSEX shifted to free-float methodology India 's first ETF on SENSEX .71 points. Circuit filters used twice in a day (564.
34%) and Index-wide upper circuit breaker applied BSE .e.77 1st Oct 2008 18th May2009 Currency Derivatives Introduced The SENSEX raised 2110.2007 10th Jan 2008 SENSEX All-time high 21206.06.a new market access platform 4th Dec 2009 BSE Launches BSE StAR MF – Mutual Fund trading platform 14th Dec 2009 Marathi website launched .USE Form Alliance to Develop Currency & Interest Rate Derivatives Markets 7th Aug 2009 24th Aug 2009 BSE IPO Index launched 1st Oct 2009 Bombay Stock Exchange introduces trade details facility for the Investors 5th Oct 2009 BSE Introduces New Transaction Fee Structure for Cash Equity Segment 25th Nov 2009 BSE launches FASTRADE™ .70 points (17.2nd Jun 2004 SENSEX closes over 6000 for the first time 20thMay 2005 The BSE (Corporatization and Demutualisation) Scheme.Notified in the Official Gazette on 29. 2005 (the Scheme) announced by SEBI 8th Aug 2005 Incorporation of Bombay Stock Exchange Limited 12th Aug 2005 Certificate of Commencement of Business 19th Aug 2005 BSE becomes a Corporate Entity 7th Feb 2006 7th Jul 2006 SENSEX closed above 10000 BSE Gujarati website launched 21st Oct 2006 BSE Hindi website launched 2nd Nov 2006 iShares BSE SENSEX India Tracker listed at Hong Kong Stock Exchange 7thMar 2007 Singapore Exchange Limited entered into an agreement to invest in a 5% stake in BSE Appointed Date” and under the Scheme was i. Date on by which SEBI 16thMay 2007 Corporatisaton Demutualisation achieved.
BSE now offers AMFI Certification for Mutual Fund Advisors through BSE Training Institute (BTI) Co-location facilities for Algorithmic trading • • • • • • .m.30 p.18th Dec 2009 BSE's new derivatives rates to lower transaction costs for all 4th Jan 2010 Market time changed to 9.com) 3. 20th Jan 2010 BSE PSU website launched (Source: www.m.bseindia.0 a. . which enables exchange members to use its existing infrastructure for transaction in MF schemes.3.4 Achievements & Awards by BSE Landmark Achievements: Some of the landmarks achieved by the BSE are mentioned as under: • Became the first national exchange to launch its website in Gujarati and Hindi and now Marathi Purchased of Marketplace Technologies in 2009 to enhance the in-house technology development capabilities of the BSE and allow faster time-tomarket for new products Launched a reporting platform for corporate bonds christened the ICDM or Indian Corporate Debt Market Acquired a 15% stake in United Stock Exchange (USE) to drive the development and growth of the currency and interest rate derivatives markets Launched 'BSE StAR MF' Mutual fund trading platform.
• • BSE also successfully launched the BSE IPO index and PSU website BSE revamped its website with wide range of new features like 'Live streaming quotes for SENSEX companies'. Awards: • The Annual Reports and Accounts of BSE for the year ended March 31. 2007 have been awarded the ICAI awards for excellence in financial reporting. BSE has been undertaking • Corporate Social Responsibility (CSR) initiatives with a focus on Education. 2006 and March 31. and 'Members' Launched 'BSE SENSEX MOBILE STREAMER' With its tradition of serving the community. CHAPTER 4 : FINDING @ BSE 4. The Human Resource Management at BSE has won the Asia . BSE has been awarded by the World Council of Corporate Governance the Golden Peacock Global CSR Award for its initiative in Corporate Social Responsibility (CSR). 'SENSEX View'. 'Advanced Stock Reach'. 'Market Galaxy'. BSE will continue to remain an icon in the Indian capital market. health management at work and excellence in HR through technology Drawing from its rich past and its equally robust performance in the • recent times.Pacific HRM awards for its efforts in employer branding through talent management at work. Health and Environment.1 Trading @ BOMBAY STOCK EXCHANGE .
which is settled on a trade-to. viz. for the guidance and benefit of the investors.trade basis as a surveillance measure. The 'Z' group was introduced by BSE in July 1999 and includes companies which have failed to comply with its listing requirements and/or have failed to resolve investor complaints and/or have not made the required arrangements with both the depositories.m. BSE has. ‘S'.'T'. The "S" Group represents scrips forming part of the "BSE-Indonext" segment.. The "TS" Group consists of scrips in the "BSE-Indonext" segment. Trading in Government Securities by the retail investors is done under the "G" group.Timing Trading on the BOLT System is conducted from Monday to Friday between 9:00 a. and 3:30 p. normally. The "F" Group represents the Fixed Income Securities. ‘B’. ‘TS' and 'Z' groups on certain qualitative and quantitative parameters. Groups The scrips traded on BSE have been classified into various groups. classified the scrips in the Equity Segment into 'A'. Central Depository Services .m. The "T" Group represents scrips which are settled on a trade-to-trade basis as a surveillance measure.
viz. Investors having quantities of securities less than the market lot are required to sell them as "Odd Lots". This facility of selling physical shares in compulsory demat scrips is called an Exit Route Scheme. 'B'. The scrips of companies which are in demat can be traded in market lot of 1. (NSDL) for dematerialization of their securities.(I) Ltd. However. 'TS' and 'Z' groups and in rights renunciations in all groups of scrips in the Equity Segment. 'T'. This facility offers an exit route to investors to dispose of their odd lots of securities. 2001. BSE also provides a facility to the market participants for on-line trading of odd-lot securities in physical form in 'A'.. With effect from December 31. This facility can also be used by small investors for selling up to 500 shares in physical form in respect of scrips of companies where trades are required to be compulsorily settled by all investors in demat mode. 'S'. trading in all securities listed in the Equity segment takes place in one market segment. Listed Securities . (CDSL) and National Securities Depository Ltd. and also provides them an opportunity to consolidate their securities into market lots. Compulsory Rolling Settlement Segment (CRS). the securities of companies which are still in the physical form are traded in the market lot of generally either 50 or 100.
which have signed the Listing Agreement with BSE. entered in the system for particular scrip. buy or sell. securities traded in "F" group and equity shares having closing price up to Rs. Trading in scrips listed on BSE is done with the tick size of 5 paise. trading in such securities is facilitated as “Permitted Securities" provided they meet the relevant norms specified by BSE Tick Size: Tick size is the minimum differences in rates between two orders on the same side i. in order to increase the liquidity and enable the market participants to put orders at finer rates. the tick size in various scrips quoting up to Rs. However.15 is revised to 1 paise on the first trading day of month. Computation of Closing Price of Scrips .The securities of companies. 15 on the last trading day of the calendar month. BSE has reduced the tick size from 5 paise to 1 paise in case of units of mutual funds. Almost all scrips traded in the Equity segment fall in this category. The tick size so revised on the first trading day of month remains unchanged during the month even if the price of scrips undergoes a change. are traded as "Listed Securities".e. Permitted Securities To facilitate the market participants to trade in securities of such companies. Accordingly. which are actively traded at other stock exchanges but are not listed on BSE..
2000. Basket Trading System BSE has commenced trading in the Derivatives Segment with effect from June 9. However. then the last traded price of scrip in the continuous trading session is taken as the official closing price. the investors can alter the weights of securities in such profiled baskets and enter their own weights. 2000 to enable investors to hedge their risks. Initially. With a view to provide investors the facility of creating Sensex-linked portfolios and also to create a linkage of market prices of the underlying securities of Sensex in the Cash Segment and Futures on Sensex. The investors can also . the investors through the Members are able to buy/ sell all 30 scrips of Sensex in one go in the proportion of their respective weights in the Sensex. if there is no trade recorded during the last 30 minutes. BSE has provided to the investors as well as to its Members a facility of Basket Trading System on BOLT with effect from August 14. The investors can also create their own baskets by deleting certain scrips from 30 scrips in the Sensex. the facility of trading in the Derivatives Segment was confined to Index Futures. In the Basket Trading System. Investors in the cash market had felt a need to limit their risk exposure in the market to the movement in Sensex. BSE has introduced the Index Options and Options & Futures in select individual stocks. Further.The closing price of scrips is computed by BSE on the basis of weighted average price of all trades executed during the last 30 minutes of a continuous trading session. Subsequently. The investors need not calculate the quantity of Sensex scrips to be bought or sold for creating Sensex-linked portfolios and this function is performed by the system.
The Basket Trading System thus meets the need of investors and also improves the depth in cash and futures markets. This would provide a balancing impact on the prices in both cash and futures markets.000 for each order. Rs.e. 7. as are applicable to normal trades in the Cash Segment.000/-. The trades executed under the Basket Trading System are subject to intraday trading and gross exposure limits available to the Members. The investors can also place orders by entering value of Sensex portfolio to be brought or sold with a minimum value of Rs. To participate in this system. are also recovered from the Members.2 BSE INDICES .select less than 100% weightage to reduce the value of the basket as per their own requirements. MTM margins etc. the value of one basket of Sensex would be 15000 x 50= i. For example. the Members need to indicate the number of Sensex basket(s) to be bought or sold. The VaR.50. 50. 4.50 to the prevailing Sensex.000. The Basket Trading System provides the arbitrageurs an opportunity to take advantage of price differences in the underlying Sensex and Futures on the Sensex by simultaneous buying and selling of baskets comprising the Sensex scrips in the Cash Segment and Sensex Futures.. where the value of one Sensex basket is arrived at by the system by multiplying Rs. if the Sensex is 15.
Delhi.Bombay Stock Exchange Indices are as follow:• SENSEX: - SENSEX or Sensitive Index is not only scientifically designed but also based on globally accepted construction and review methodology. Ahmadabad and Madras. 2003. SENSEX is a basket of 30 constituent stocks representing a sample of large. Initially. For Index Based Derivatives Products • BSE-100:After the launch of SENSEX. The objective of SENSEX is: To measure Market Movements. a need was felt for a more broad-based index. The index was initially calculated based on the “Full market Capitalization” methodology but was shifted to the free-float methodology with effect from September 1. A distinction was made between “local scrips” for which prices were taken from only one exchange and . Calcutta. liquid and representative companies. which reflect the movement of stock prices on a national scale. The index is widely reported in both domestic and international markets through print as well as electronic media. Benchmark for Funds Performance. the BSE 100 National Index was calculated by taking prices of its constituents from five major stocks exchange in the country viz. First compiled in 1986. Mumbai.
The TMT benchmark:Attuning itself to the global standard in equity index construction methodology and leading the way in responding to the market demand for a TMT Benchmark (technology. market capitalization and turnover.line Indies.based indices. media and telecommunications). The BSE PSU Index ensure a reasonable measure of how the Government wealth fluctuation on the bourses.200 indices are broad. the BSE-PSU Index is also displayed on. The BSE-500 represent around 94% of the total listed market capitalization of BSE and around 99% of the average daily turnover on the exchange. Like other on.“Inter-Exchange Scrips” for which an average of the prices quoted on two or more exchanges was considered for index compilation. a need was felt to construct BSE-500 index to represent all segment of listed stocks and to give more coverage in term of number of scrips. BSE PPSU index is a sub-set of BSE-500 index and hence all its constituents are part of the BSE-500 index. 2001. . BSE PSU Index tracks the performance of the listed PSU stocks on exchange. • BSE TECk Index. It launched on 11 July. • BSE-500:- Although BSE-100 and BSE. • BSE PSU INDEX:BSE launched “BSE PSU Index” on 4th June 2001.line on the BOLT.
• BSE Sectoral Indices: Stock belonging to major sectors in the BSE-500 index constitutes respective sect oral indices. was launched in June 2003 by Exchange to enable the market participants to track the movement of stocks from the banking sector 4. The 'Operations & Trading Department' at BSE continuously upgrades the hardware. a benchmark for the banking sector. • BSE BANKEX:- BANKEX. investors and other market intermediaries. software and networking systems. BSE Mid-Cap and BSE Small-Cap index have proved to be great utility to the investing community as they would truly capture the movement of the segment they are represent (mid and small).3 BSE Technology BSE places a great deal of emphasis on Information Technology for its operations and performance. BSE strictly adheres to IS policies and IS Security policies and procedures for its day-to-day .• BSE Mid-Cap and BSE Small-Cap:- BSE introduced the new index series called ‘BSE Small-Cap’ index on 11th April 2006 to track the performance of the companies with relatively small market capitalization that would exclusively represent the mid and small cap companies listed on the Stock Exchange. thus enabling BSE to enhance the quality and standards of service provided to its members.
bseindia. screen-based trading in securities was put into practice nationwide within a record time of just 50 days. The initiative enables investors anywhere in the world to trade on the BSE platform. BSE had replaced its open outcry system with the BSE On-line Trading (BOLT) facility in 1995. BSE has also been successful in maintaining systems and processes uptime of 99. The capacity of the BOLT platform stands presently enhanced to 80 lakh orders per day.com BSE's website www. BOLT has been certified by DNV for conforming to ISO 27001:2005 security standards. This totally automated. BOLT To facilitate smooth transactions.co. bseindia.in BSE has also introduced the world's first centralized exchange based Internet trading system. It is one of the most popular financial websites in India and is regularly visited by financial organizations and other stakeholders for updates. BSEWEBx. .co.in.com provides comprehensive information on the stock market.operations on 24x7 basis which has enabled it to achieve the BS7799 certification and the subsequent ISO 27001 certification. In addition. BSEWebx.99%.
Other Technology-based Initiatives BSE. have put into place several critical processes/systems such as • • • • • • • • • Derivatives Trading & Settlement System (DTSS) Electronic Contract Notes (ECN) Unique Client Code registration (UCC) Real-time Data Dissemination System Integrated Back-office System . Towers. The network uses following segments to cater to market intermediaries:BSE's Campus LAN: Connects market participant offices across 20 floors of BSE campus to BSE systems.CDB / IDB Book Building System (BBS) Reverse Book Building System (RBBS) Debt Market Director's Database A Large Private Network BSE operates a large private network in India. Rotunda and Cama building BSE WAN: . along with its strategic partners. BSE Campus comprises of 3 BSE buildings: P.J.
TDM / MPLS lines from different service providers cater to connectivity requirements of market participants across the country. which have been inherently borne by the member brokers for all times. Since the introduction of the screen based trading the nature of risks to which the members of the Exchange are exposed to has undergone radical transformation. will continue to exist.4 Risk Management:Nature of Risks: The Exchange has been exposed to a large number of risks. Services are provided through BSE's Satellite Communication Hub in Mumbai. Risks associated with Paper Based Trading . the risk of trading in fake/forged shares and instances of loss of shares etc. Wired / Wireless media is used. At the same time the inherent risk involved with the trading of paper based securities still remains. The Risks can be classified as under: 1. VSATs: Satellite based communication system serves the connectivity requirements of market participants in remote areas. Though the process of dematerialization has already begun. 4. The safe custody of these shares in physical form in the Exchange as well as in the member broker’s offices is of prime importance. till such that it is made compulsory in all scrips.
Client Risk o o o Reduction and Control of Risks: As a measure of the pro-active risk control several measures have been initiated by the Exchange to reduce the risks to which the Exchange and the member brokers are exposed. Database of lost. by the Companies / registrars. stolen. duplicate etc. In case the member broker fails to furnish the same it is viewed seriously. The information available through the database is time relevant thus the database . Misplaced Securities: The Exchange maintains a database on all the shares that have been reported as lost. Know Your Client Scheme: Under the procedure the member brokers of the Exchange are compulsory required to obtain detailed information of clients prior to commencement of any transactions for new clients. A similar procedure is also to be followed for existing clients.o o o Lost/misplaced securities damage to securities loss of securities in transit Client default Client absconding Fake/ forged/stolen securities introduced by the client 2. Stolen. In this regard the Exchange has initiated the following measures: 1. This information is to be made available to the Exchange authorities whenever called for. 2.
The member brokers can thus reduce the instances of delivery of shares that have been reported by the Company as bad delivery by checking all the deliveries in their office with the database provided.. which is downloaded to the members. These details are incorporated in the database. These details are checked against the database and a report is generated in case a match is found.is modified on a regular basis and is downloaded by the members through BOLT on a weekly basis. All member brokers whose clients / sub-brokers have introduced fake / forged shares are required to lodge a FIR / Police complaint against their clients and also report the same to the Exchange. This database is also provided to the Clearing House. The Clearing House also uses the database. as a . Further follow-up is done with the delivering broker and they are directed to lodge a police complaint against the client introducing the stolen shares 3. The information of such clients is called for in a prescribed format. the Exchange has designed and developed a client database. As per the scheme the members have to collect detailed information about the clients. Such shares are then reported as bad delivery in the Exchange. Client Caution Database: The Risk Management department in conjunction with the Bad Delivery Cell of the Exchange. The Exchange has designed and developed a software module for the above for the benefit of the members. At the time of pay-in the members of the Exchange are required to submit the details of the shares being deposited in the pay-in in a softcopy in a prescribed format.
in case the transaction in a script with one particular client in a settlement exceeds Rs. The member brokers at the time of admitting new clients can refer to the client caution database for further verification. 10 lakhs then the member brokers are required to send the photocopies of the transfer . The members can select a random sample for the same from the lot.deeds and the share certificates to the Company / Registrar for verification of the material particulars. The basic idea behind the introduction of this procedure is to prevent Fake/ forged/stolen shares from being introduced in the market. 10 lakhs are received from the Clearing House during pay-out in one scrip. . A similar procedure should also be followed in case the shares worth more than Rs. The above procedure is an important Risk Management Tool especially where there exists a large volume of deliveries. The Risk Management Department acts as a facilitator in this regard and has written to all "A" group and B1 group companies in this regard seeking their co-operation. As per the procedure outlined issued by the Exchange. 4. Verification of shares at members office : The Risk Management Committee has outlined a process for minimizing the risks arising out of Fake/ forged /stolen shares introduced by the clients of the member brokers. The Exchange issued a notice outlining the procedure to be followed.precautionary measure.
. The inauguration of trading was done by Prof. 1996.e. Varma.R. No SMD/SED/RCG/270/96 dated January 19th. member of SEBI and Chairman of the committee which formulated the risk containment measures for the derivatives market.5. Securities & Exchange Board of India (SEBI) vide its circular ref. J. Insurance companies in consultation with BSE have offered an insurance policy which covers losses on account of trading as well as back office losses to the Members.the BSE Sensex.5 DERIVATIVE Introduction BSE created history on June 9. futures on the capital market benchmark index . The minimum sum insured is Rs. had directed all stock exchanges to ensure that all active Members are properly insured. Inspection : The department is carrying out inspection of the member brokers records as regards compliance of the risk management procedures Integrated Comprehensive Insurance Policy for Members To reduce the systematic risk. 4. 2000 by launching the first Exchangetraded Index Derivative Contract in India i.5 lakhs per Member Presently. all active Members obtain the said policy directly from the insurance companies and then inform BSE about the same.
2001. State Bank of India. . In sequence of product innovation. 2008. it allows for comparatively lower capital outlay. 2004 marked another milestone in the history of the Indian capital market. The contract is available for one. more precise hedging and flexible trading. It is a step to encourage and enable small investors to mitigate risk and enable easy access to India's most popular index. two and three months along with weekly options. a unique product unparalleled worldwide in the derivatives markets. Satyam. 2002. September 13. and TISCO ( now Tata Steel) in addition to the flagship index-Sensex. Chhota (mini) SENSEX Chhota SENSEX was launched on January 1. Stock Options were introduced on 31 stocks on July 9. BSE permitted trading in weekly contracts in options in the shares of four leading companies namely Reliance Industries.Trading in derivatives is enabled through a separate front end system called the Derivatives Trading & Settlement System (DTSS) Trader Work station (TWS). lower trading costs. BSE commenced trading in Index Options on Sensex on June 1. 2001 and Single Stock Futures were launched on November 9. It is also extendable through Intermediate Messaging Layer (IML) where trading members can access the exchange systems through their own customized software. The Security Symbol for SENSEX Mini Contracts is MSX. SENSEX. through futures & options. when BSE launched Weekly Options. With a small or 'mini' market lot of 5.
2008. The change was in response to requests from trading members for a common front end from which equities and equity derivatives could be traded. Why SENSEX Futures There are many reasons why a SENSEX future makes sense: . on October 1. increased transparency. Currency Derivatives: Going ahead. The risk management and settlement of futures and option trades will continue to take place on DTSS. 2008 BSE launched its currency derivatives segment in dollar-rupee currency futures as the exchange traded currency futures contracts facilitate easy access. whereby the Members can trade in Sensex (in the normal lot of 15 only and not 'mini' Sensex) Options contracts with an expiry of up to 3 years. efficient price discovery. The change will enable a trader to trade in cash scrips and futures products through BOLT TWS/ IML while Option products would continue to trade through the DTSS TWS/DIML. Futures on BOLT BSE re-launched its Derivatives Segment by enabling trading of Index and Stock Futures on its BOLT Terminal. wider participation and reduced transaction costs.Long Dated Options BSE also introduced 'Long Dated Options' on its flagship index Sensex� -on February 29. better counterparty credit risk management.
Because of its long history and wide acceptance. . BSE FMCG. SENSEX is truly investible as it is the only broad based index in India that is "free float market capitalization weighted". SENSEX is widely used to describe the mood in the Indian stock market.6 Safeguards' for Investors' These are some of the safeguards the investors should keep in mind before trading in the securities market. the indices are based on the globally followed standard of free float market capitalization methodology. Also. FF stands for free float .e. • • It may be noted that in addition to the SENSEX�. BSE Metal.i. five sectoral indices belonging to the 90/FF series are also available for trading in the Futures and Options Segment of BSE Limited. Futures & Options and Exchange Traded Funds. The term '90 /FF' means that the indices cover 90% of the market capitalization of the sector to which the index belongs and is thus well representative of that sector.• SENSEX as compared with other indices shows less volatility and at the same time gives returns equivalent to the returns given by the other indices. which reflects the market trends more rationally and takes into consideration only those shares that are available for trading in the market. no other index matches the BSE SENSEX� in reflecting market movements and sentiments and it makes an attractive underlying for index-based products like Index Funds. BSE Banker and BSE Oil & Gas. 4. The five sectoral indices that are presently available for F&O are BSE TECK.
Agreement to be signed on all the pages by the Client and the Member or their representative who has the authority to sign the agreement. Please note that Regulatory Authorities have not stipulated for execution of any document other than Broker/ Sub . Selecting • a Broker/ Sub . 3.Broker / Client Agreement. Transacting .broker .broker after due diligence.Broker Deal only with a SEBI registered Broker / Sub . Agreement has also to be signed by the witnesses by giving their names and addresses.broker Enter into Broker / Sub . Entering into an Agreement • • Fill in a Client registration form with the Broker / Sub . This agreement is mandatory for all investors for registering as a client of a BSE Trading Member.1. Details of the BSE Brokers can be obtained from the Member's List published by BSE and from the website : 2.Client Agreement. Ensure the following before entering into an agreement: Carefully read and understand the terms and conditions of the agreement before executing the same on a valid stamp paper of the requisite value.
Contract Note issued where Contract Note . both keep one copy each. This maximum brokerage is inclusive of the brokerage charged by the sub-broker (Sub-brokerage cannot .. trade time. Contract Notes are made in duplicate.Contract Note issued by Members Ensure that the Contract Note contains: Member is acting for constituents as brokers/ agents.• Specify to the Broker / Sub . Trade price should be shown separately from the brokerage charged. • Obtain a valid Contract Note from the Broker / Sub-broker within 24 hours of the execution of the trade.Form 'B' .broker. • SEBI registration number of the Trading Member/ Sub – broker Details of trade such as. dealing with constituents as principals.Form 'A' . the exchange through which your trade is to be executed and maintain separate account for each exchange. Order no. trade no. As stipulated by SEBI. quantity. the maximum brokerage that can be charged is 2. details of other levies. The Client is expected to sign on the duplicate copy of the Contract Note. a. settlement number.5% of the contract price. Contract Note . Contract note is a confirmation of trade(s) done on a particular day for and on behalf of a client in a format prescribed by BSE. b. brokerage. confirming receipt of the original. and the Trading Member and Client. price. It establishes a legally enforceable relationship between the Trading Member and his Client in respect of settlement of trades executed on BSE as stated in the Contract Note.
give the Depository Participant (D P) 'Delivery out' instructions to transfer the same from the beneficiary account to the pool account of broker through whom shares and securities have been sold. • • • Open a demat account.) Any additional charges that a Trading Member can charge are Service Tax on the brokerage. The brokerage. • Member should pay the money or securities to the investor within 24 hours of the payout. Arbitration clause stating that the trade is subject to the jurisdiction of Mumbai must be present on the face of the Contract note. Opt for buying and selling shares in demat form.exceed 1. For delivery of shares from demat account. before the prescribed pay-in-day.5% of the contract price. Settlement • Ensure delivery of securities /payment of money to the broker immediately upon getting the Contract Note for sale / purchase but in any case. service tax and STT are indicated separately in the Contract Note. any penalties arising on behalf of client and Securities Transaction Tax (STT). 4. . Signature of authorized representative.
The following details to be given to the DP: details of the pool a/c of broker to which the shares are to be transferred. details of scrip. • and consolidation of holdings in the Company. Sub-divisions As an equity holder have a right to subscribe to further issue of capital by the Company. As per the requirement of depositories the 'Delivery out' Instruction should be given at least 48 hours prior to the cut-off time for the prescribed securities pay-in. • Bad delivery cases should be sorted out through BSE mechanism immediately. quantity etc. • by the Company. • Ensure that all registration of physical shares for ownership by transfer should be executed by a valid. give the Depository Participant (D P) 'Delivery in' instructions to accept shares in beneficiary account from the pool account of broker through whom shares have been purchased. duly completed and stamped transfer deed. • If physical deliveries are received check the deliveries received as per Good/Bad delivery guidelines issued by SEBI. Rights of Investors • To receive all benefits/ material information declared for the investors Prompt services from the Company such as transfers. . • For receiving shares in your demat account.
Service Tax and STT. the Seat of Arbitration shall be Regional Arbitration Centre which covers the States and Union Territories given in Column 2. in which lies the address or the Registered Office address. within which the most recent address / registered office address of the constituent. of the trading member. brokerage. . by confirming geographical jurisdiction . as duly communicated in writing to the trading member in accordance with law. depending upon corporate or non-corporate membership of the trading member. Provided in respect of a non-resident Indian Constituent. • hours from pay-out. is located. • Approach concerned Regional Arbitration Centre’s of BSE. The hearings shall be held in the concerned Regional Arbitration Centre in which the Applicant had duly filed the Application for Arbitration.5% of the contract price. separately. as the case may be. Receipt of the Contract Note from the broker in the specified format Expect delivery of shares purchased/value of shares sold within 24 showing transaction price. referred to in Column 2 below. The Complaint against trading members of the Exchange or Applications for Arbitration should be filed at the concerned Regional Arbitration Centre referred to in column 1 below covering that State or Union Territory of India.• • Brokerage not to exceed 2.
ANNEXURE 1) How Bombay Stock Exchange has established? 2) What are the various types of scrips traded on BSE? 3) How the trading took place at BSE? 4) What are the technologies used by BSE? 5) How BOLT helps the invertors? .
6) What are the various types of BSE indices? 7) What is BSE derivative? 8) How the settlement took place @ BSE? 9) How the risks are managed by BSE? 10) What are investors right’s given by BSE? .
11) BSE safeguard for investors .
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