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Stock Exchanges and their Role in India

DEFINITIONS OF STOCK EXCHANGE


(1) According to Pyle, “Stock Exchange are market places where securities i.e.
shares, debentures, and bonds that have been listed thereon, may be bought and
sold for either investment or speculation.”3

(2) According to the Securities Contracts (Regulation) Act, 1956, “Stock Exchange
means an association, organization or body of individual whether incorporated or
not, constituted for the purpose of assisting, regulating, or controlling the
business of buying, selling or dealing in securities.”4 (3) According to Husband and
Dockerary, "Stock exchanges are privately organized markets which are used to
facilitate trading in securities."5
FEATURES OF STOCK EXCHANGE
The main features of a stock exchange are as under:-

• Stock exchange is an organized market. It is run by an association, organization


or body of individuals. • It deals in securities issued by various concerns such as
companies, government and other authorized authorities. • The area of operation
of a stock exchange is well defined.

• It is also called securities market or stock market.

• The main object of establishing a stock exchange is to assist, to regulate and to


control the business in securities.

• It operates as per guidelines and rules issued by Securities and Exchange Board
of India (SEBI).
FUNCTIONS OF STOCK EXCHANGE
The main functions performed by a stock exchange are as under:-

• Stock Exchange provides a ready market for the shares, debentures, and bonds
issued by various concerns.

• It helps in determining the price of various securities i.e. shares, debentures,


and bonds.

• It helps in mobilization of surplus funds of cooperatives, business firms, and


individuals for investment in popular securities

. • It plays a vital role in ensuring wider shares ownership

• It contributes to Economic Growth.

• It ensures fair dealings and safety of funds.

• It facilitates capital formation in the country by providing avenue for


investment in various securities which yield higher return.
ROLE OF STOCK EXCHANGES
Role of Stock Exchanges are diverse and highly important in the development of
economy of a country. They gauge and manage the growth of a country. Stock
exchanges apart from being center of primary and secondary market, they have
very important role to play in the economic growth of the country. Some of them
are as follows:-

1. Raising capital for businesses: - Stock Exchanges help joint stock companies to
capitalize by selling shares to the investing public.
2. Mobilizing savings for investment:-They help investing public to mobilize their
savings to invest in high yielding sectors of economy, which results in higher yield,
both to the individual and to the nation.

3. Facilitating company expansion: - They help joint stock companies to spread


out and grow by acquisition or fusion.

4. Profit sharing: - They help stock investors, to get their share in the wealth of
profitable businesses.

5. Corporate governance:-They impose severe rules to get listed in them.


Therefore, listed public companies have better management records than
privately held companies.

6. Creating investment opportunities for small investors: - By buying a small


number of shares, small investors can also participate in the growth of large
companies.

7. Government capital rising for development projects: - Through the issue of


bonds, they help government to rise fund for developmental activities. An
investor who buys them will be lending money to the government, which is safer
(secure), and sometimes enjoys tax benefits also.

8. Barometer of the economy: - They maintain the stock indices which are the
indicators of the general trend in the economy. They also regulate the price
fluctuations in stock.

What is stock ?
Stock is a type of security that signifies ownership in a corporation and represents a
claim on part of the corporation's assets and earnings.

There are two main types of stock: common and preferred. Common stock usually
entitles the owner to vote at shareholders' meetings and to receive dividends. Preferred
stock generally does not have voting rights, but has a higher claim on assets and
earnings than the common shares. For example, owners of preferred stock receive
dividends before common shareholders and have priority in the event that a company
goes bankrupt and is liquidated.

Also known as "shares" or "equity."

leading stock exchange in INDIA


1) BSE :-

The Bombay Stock Exchange (BSE) is an Indian stock exchange located


at Dalal Street, Mumbai (formerly Bombay).
Established in 1875, the BSE (formerly known as Bombay Stock Exchange
Ltd.) is Asia’s first stock exchange .. It claims to be the world's fastest stock
exchange, with a median trade speed of 6 microseconds, The BSE is the
world's 11th largest stock exchangewith an overall market
capitalization of more than $ 2 Trillion as of July, 2017 .

History of Bombay Stock Exchange :-


Bombay Stock Exchange was founded by Premchand Roychand. He was one of the
most influential businessmen in 19th-century Bombay. A man who made a fortune in the
stockbroking business and came to be known as the Cotton King, the Bullion King or
just the Big Bull. He was also the founder of the Native Share and Stock Brokers
Association, an institution that is now known as the BSE.[7]
The Bombay Stock Exchange is the oldest stock exchange in Asia[8]. Its history dates
back to 1855, when 22 stockbrokers[9] would gather under banyan trees in front of
Mumbai's Town Hall. The location of these meetings changed many times to
accommodate an increasing number of brokers. The group eventually moved to Dalal
Street in 1874 and became an official organization known as "The Native Share & Stock
Brokers Association" in 1875.
On August 31, 1957, the BSE became the first stock exchange to be recognized by
the Indian Government under the Securities Contracts Regulation Act. In 1980, the
exchange moved to the Phiroze Jeejeebhoy Towers at Dalal Street, Fort area. In 1986,
it developed the S&P BSE SENSEX index, giving the BSE a means to measure the
overall performance of the exchange. In 2000, the BSE used this index to open its
derivatives market, trading S&P BSE SENSEX futures contracts. The development of
S&P BSE SENSEX options along with equity derivatives followed in 2001 and 2002,
expanding the BSE's trading platform.
Historically an open outcry floor trading exchange, the Bombay Stock Exchange
switched to an electronic trading system developed by CMC Ltd. in 1995. It took the
exchange only 50 days to make this transition. This automated, screen-based
trading platform called BSE On-Line Trading (BOLT) had a capacity of 8 million orders
per day. The BSE has also introduced a centralized exchange-based internet trading
system, BSEWEBx.co.in to enable investors anywhere in the world to trade on the BSE
platform. Now BSE has raised capital by issuing shares and as on 3rd May 2017 the
BSE share which is traded in NSE only closed with Rs.999 .[10]
The BSE is also a Partner Exchange of the United Nations Sustainable Stock Exchange
initiative, joining in September 2012.[11]
BSE established India INX on 30 December 2016. India INX is the first international
exchange of India.
Awards given to BSE are :-
 ICICI Lombard & ET Now Risk Manager Award in BFSI Category [12]
 The World Council of Corporate Governance has awarded the Golden Peacock
Global CSR Award in financial sector for BSE's initiatives in Corporate Social
Responsibility (CSR) in 2007.[13]

Clause 49
Clause 49 of the Listing Agreement to the Indian stock exchange that came into effect
from 31 December 2005. It has been formulated for the improvement of corporate
governancein all listed companies
In corporate hierarchy two types of managements are envisaged:
i) companies managed by Board of Directors; and
ii) those by a Managing Director, whole-time director or manager subject to the
control and guidance of the Board of Directors i.e., he is liable to the Board of
Directors and the function of the corporate.

 As per Clause 49, for a company with an Executive Chairman, at least 50 per
cent of the board should comprise independent directors. In the case of a
company with a non-executive Chairman, at least one-third of the board
should be independent directors.
 It would be necessary for chief executives and chief financial officers to
establish and maintain internal controls and implement remediation and risk
mitigation towards deficiencies in internal controls, among others.
 Clause VI (ii) of Clause 49 requires all companies to submit a quarterly
compliance report to stock exchange in the prescribed form. The clause also
requires that there be a separate section on corporate governance in the
annual report with a detailed compliance report.
 A company is also required to obtain a certificate either from auditors or
practicing company secretaries regarding compliance of conditions as
stipulated, and annex the same to the director's report.
 The clause mandates composition of an audit committee; one of the directors
is required to be "financially literate".
 It is mandatory for all listed companies to comply with the clause by 31
December 2005.

Clause 49 of the SEBI guidelines on Corporate Governance as amended on 29 October


2004 has made major changes in the definition of independent directors, strengthening
the responsibilities of audit committees, improving quality of financial disclosures,
including those relating to related party transactions and proceeds from public/ rights/
preferential issues, requiring Boards to adopt formal code of conduct,
requiring CEO/CFO certification of financial statements and for improving disclosures to
shareholders. Certain non-mandatory clauses like whistle blower policy and restriction
of the term of independent directors have also been included. [1]
The term ‘Clause 49’ refers to clause number 49 of the Listing Agreement between a
company and the stock exchanges on which it is listed (the Listing Agreement is
identical for all Indian stock exchanges, including the NSE and BSE). This clause is a
recent addition to the Listing Agreement and was inserted as late as 2000 consequent
to the recommendations of the Kumarmangalam Birla Committee on Corporate
Governance constituted by the Securities Exchange Board of India (SEBI) in 1999.
Clause 49, when it was first added, was intended to introduce some basic corporate
governance practices in Indian companies and brought in a number of key changes in
governance and disclosures (many of which we take for granted today). It specified the
minimum number of independent directors required on the board of a company. The
setting up of an Audit committee, and a Shareholders’ Grievance committee, among
others, were made mandatory as were the Management’s Discussion and Analysis
(MD&A) section and the Report on Corporate Governance in the Annual Report, and
disclosures of fees paid to non-executive directors. A limit was placed on the number of
committees that a director could serve on.

Origins

In late 2002, SEBI constituted a Committee to assess the adequacy of current corporate
governance practices and to suggest improvements. Based on the recommendations of
this committee, SEBI issued a modified Clause 49 on 29 October 2004 (the ‘revised
Clause 49’) which came into operation on 1 January 2006.
The revised Clause 49 has suitably pushed forward the original intent of protecting the
interests of investors through enhanced governance practices and disclosures. Five
broad themes predominate. The independence criteria for directors have been clarified.
The roles and responsibilities of the board have been enhanced. The quality and
quantity of disclosures have improved. The roles and responsibilities of the audit
committee in all matters relating to internal controls and financial reporting have been
consolidated, and the accountability of top management—specifically the CEO and
CFO—has been enhanced. Within each of these areas, the revised Clause 49 moves
further into the realm of global best practices (and sometimes, even beyond).
By Circular dated 8 April 2008, the Securities and Exchange Board of India amended
Clause 49 of the Listing Agreement to extent the 50% independent directors rule to all
Boards of Directors where the Non-Executive Chairman is a promoter of the Company
or related to the promoters of the company.
At the end of the first India Corporate Week in December 2009, the Ministry of
Corporate Affairs issued new Corporate Governance Voluntary Guidelines and new
Corporate Social Responsibility Voluntary Guidelines.
5000 companies
Take a look at how many companies are listed on the NSE and BSE. On
the Bombay Stock exchange, which is the oldest stock exchange in the
country, there are approximately5000 companies listed. This is the highest
number of companies.
National Stock Exchange of India

The National Stock Exchange of India Limited (NSE) is the leading stock
exchange of India, located in Mumbai . The NSE was established in 1992
as the first demutualized electronic exchange in the country. NSE was the
first exchange in the country to provide a modern, fully automated screen-
based electronic trading system which offered easy trading facility to the
investors spread across the length and breadth of the country. Vikram
Limaye is Managing Director & Chief Executive Officer (MD & CEO) of
NSE.
National Stock Exchange has a total market capitalization of more
than US$1.41 trillion, making it the world’s 12th-largest stock exchange as
of March 2016.[1] NSE's flagship index, the NIFTY 50, the 50 stock index is
used extensively by investors in India and around the world as a barometer
of the Indian capital markets. However, only about 4% of the Indian
economy / GDP is actually derived from the stock exchanges in India.[2]
NSE was set up by a group of leading Indian financial institutions at the
behest of the government of India to bring transparency to the Indian
capital market. Based on the recommendations laid out by the government
committee, NSE has been established with a diversified shareholding
comprising domestic and global investors. The key domestic investors
include Life Insurance Corporation of India, State Bank of
India, IFCI Limited IDFC Limited and Stock Holding Corporation of India
Limited. And the key global investors are Gagil FDI Limited, GS Strategic
Investments Limited, SAIF II SE Investments Mauritius Limited, Aranda
Investments (Mauritius) Pte Limited and PI Opportunities Fund I.[3]
NSE offers trading, clearing and settlement services in equity, equity
derivatives, debt and currency derivatives segments. It is the first exchange
in India to introduce electronic trading facility thus connecting together the
investor base of the entire country. NSE has 2500 VSATs and 3000 leased
lines spread over more than 2000 cities across India.
History

NSE was mainly set up in the early 1990s to bring in transparency in the
markets. Instead of trading membership being confined to a group of
brokers, NSE ensured that anyone who was qualified, experienced and met
minimum financial requirements was allowed to trade.[4] In this context,
NSE was ahead of its times when it separated ownership and management
in the exchange under SEBI's supervision. The price information which
could earlier be accessed only by a handful of people could now be seen
by a client in a remote location with the same ease. The paper-based
settlement was replaced by electronic depository-based accounts and
settlement of trades was always done on time. One of the most critical
changes was that a robust risk management system was set in place, so
that settlement guarantees could protect investors against broker defaults.
NSE was also instrumental in creating the National Securities Depository
Limited (NSDL) which allows investors to securely hold and transfer their
shares and bonds electronically. It also allows investors to hold and trade in
as few as one share or bond. This not only made holding financial
instruments convenient but more importantly, eliminated the need for paper
certificates and greatly reduced the incidents of forged or fake certificates
and fraudulent transactions that had plagued the Indian stock market. The
NSDL's security, combined with the transparency, lower transaction prices
and efficiency that NSE offered, greatly increased the attractiveness of the
Indian stock market to domestic and international investors.

Exchange Traded Funds and Derivatives on National


Stock Exchange

The following products are trading on NIFTY 50 Index in the Indian and
international Market:

 7 Asset Management Companies have launched exchange-traded


funds on NIFTY 50 Index which are listed on NSE
 15 index funds have been launched on NIFTY 50 Index
 Unit linked products have been launched on NIFTY 50 Index by several
insurance companies in India
 World Indices
Derivatives Trading on NIFTY 50 Index:

 Futures and Options trading on NIFTY 50 Index


 Trading in NIFTY 50 Index Futures on Singapore Stock Exchange(SGX)
 Trading in NIFTY 50 Index Futures on Chicago Mercantile
Exchange(CME)

Technology
NSE’s trading systems, is a state of-the-art application. It has an up time
record of 99.99% and processes more than 450 million messages every
day with sub millisecond response time.[9]
NSE has taken huge strides in technology in these 20 years. In 1994, when
trading started, NSE technology was handling 2 orders a second. This
increased to 60 orders a second in 2001. Today NSE can handle 1, 60,000
orders/messages per second, with infinite ability to scale up at short notice
on demand, NSE has continuously worked towards ensuring that the
settlement cycle comes down. Settlements have always been handled
smoothly. The settlement cycle has been reduced from T+3 to T+2/T+1.
Financial Literacy

NSE has collaborated with several universities like Gokhale Institute of


Politics & Economics (GIPE), Pune, Bharati Vidyapeeth Deemed University
(BVDU), Pune, Guru Gobind Singh Indraprastha University, Delhi,
Ravenshaw University of Cuttack and Punjabi University, Patiala, among
others to offer MBA and BBA courses. NSE has also provided mock market
simulation software called NSE Learn to trade (NLT) to develop investment,
trading and portfolio management skills among the students.[10] The
simulation software is very similar to the software currently being used by
the market professionals and helps students to learn how to trade in the
markets.
NSE also conducts online examination and awards certification, under its
Certification in Financial Markets (NCFM) programmes.[11] At present,
certifications are available in 46 modules, covering different sectors of
financial and capital markets, both at the beginner and advanced levels.
The list of various modules can be found at the official site of NSE India. In
addition, since August 2009, it offered a short-term course called NSE
Certified Capital Market Professional (NCCMP).[12] The NCCMP or NSE
Certified Capital Market Professional is a 100-hour program for over 3–4
months, conducted at the colleges, and covers theoretical and practical
training in subjects related to the capital markets. NCCMP covers subjects
like equity markets, debt markets, derivatives, macroeconomics, technical
analysis and fundamental analysis. Successful candidates are awarded
joint certification from NSE and the concerned.

BSE vs. NSE


The Bombay Stock Exchange (BSE) and National Stock
Exchange (NSE) are the leading stock exchanges in India. While BSE has
the distinction of being the oldest stock exchange in Asia, NSE is the
largest in the country.

BSE NSE
BSE NSE
Number of listed companies 5,163 (as of late 2012) 1,635 (as of July
2013)

Market capitalization of listed US$ 1.32 trillion (as of january 2013) US$0.989 trillion
companies (as of july 2013)

Main Index BSE Sensex S&P CNX Nifty

Index value 19,900 (as of Sep 2013) 5,889 (as of Sep


2013)

Location Mumbai, India Mumbai, India

Claim to fame Oldest stock exchange in Asia. Largest stock


exchange in India
in terms of daily
turnover and
number of trades.

Key Person Mr Ashish Chauhan (MD & CEO) Ms Chitra


Ramkrishna
(Managing
Director and CEO)

Website www.bseindia.com www.nseindia.com

Geographical spread Presence in 417 cities Presence in 1,486


cities

Number of members 951 (Oct 2007) 1,009 as on March


2007

Established in 1875 1992

Name formerly Bombay Stock Exchange National Stock


Limited; now simply BSE Exchange

Ranking w.r.t. market capitalization(as 11th largest in world 12th largest in


on 31 dec 2012) world

Top trading companies in volumes in tcs, reliance, itc, ongc, infosys, coal Reliance
main index (Till March 2007) india, hdfc bank Industries Limited,
BSE NSE
Infosys
Technologies
Limited, Satyam
Computer
Services.

Securities and Exchange Board of


India

The Securities and Exchange Board of India (SEBI) is the regulator for
the securities market in India. It was established in the year 1988 and given
statutory powers on 30 January 1992 through the SEBI Act, 1992.[1]
History
Securities and exchange Board of India (SEBI) was first established in the
year 1988 AQF as a non-statutory body for regulating the, securities
market. It became an autonomous body by The Government of India on 12
April 1992 and given statutory powers in 1992 with SEBI Act 1992 being
passed by the Indian Parliament. SEBI has its headquarters at the
business district of Bandra Kurla Complexin Mumbai, and has Northern,
Eastern, Southern and Western Regional Offices in New
Delhi, Kolkata, Chennai and Ahmedabadrespectively. It has opened local
offices at Jaipur and Bangalore and is planning to open offices at
Guwahati, Bhubaneshwar, Patna, Kochi and Chandigarh in Financial Year
2013 - 2014.
Controller of Capital Issues was the regulatory authority before SEBI came
into existence; it derived authority from the Capital Issues (Control) Act,
1947.
Initially SEBI was a non statutory body without any statutory power.
However, in 1992, the SEBI was given additional statutory power by the
Government of India through an amendment to the Securities and
Exchange Board of India Act, 1992. In April 1988 the SEBI was constituted
as the regulator of capital markets in India under a resolution of the
Government of India. The SEBI is managed by its members, which consists
of following:
The chairman who is nominated by Union Government of India.Two
members, i.e., Officers from Union Finance Ministry. One member from the
Reserve Bank of India. The remaining five members are nominated by
Union Government of India, out of them at least three shall be whole-time
members.
After amendment of 1999, collective investment scheme brought under
SEBI except NIDHI, chit fund and cooperatives.

Organization structure
Ajay Tyagi was appointed chairman on 10 January 2017 replacing U K Sinha.[3] And took charge of
chairman office on 1 March 2017. The Board comprises[4]

Name Designation

Ajay Tyagi Chairman

Gurumoorthy Mahalingam Whole Time Member


Sanjeev Kaushik Whole Time Member

Madhabi Puri Buch Whole Time Member

Shaktikanta Das Part Time Member

N.S. Vishwanathan Part Time Member

Arun P. Sathe Part Time Member

Tapan Ray Part Time Member

List of Chairmen:[5]

Name From To

Ajay Tyagi 10 February 2017 present

U K Sinha 18 February 2011 10 February 2017

C. B. Bhave 18 February 2008 18 February 2011

M. Damodaran 18 February 2005 18 February 2008

G. N. Bajpai 20 February 2002 18 February 2005

D. R. Mehta 21 February 1995 20 February 2002

S. S. Nadkarni 17 January 1994 31 January 1995


G. V. Ramakrishna 24 August 1990 17 January 1994

Dr. S. A. Dave 12 April 1988 23 August 1990


Functions and responsibilities
The Preamble of the Securities and Exchange Board of India describes the
basic functions of the Securities and Exchange Board of India as "...to
protect the interests of investors in securities and to promote the
development of, and to regulate the securities market and for matters
connected there with or incidental there to".
SEBI has to be responsive to the needs of three groups, which constitute
the market: ● the issuers of securities ● the investors ● the market
intermediaries.
SEBI has three functions rolled into one body: quasi-legislative, quasi-
judicial and quasi-executive. It drafts regulations in its legislative capacity, it
conducts investigation and enforcement action in its executive function and
it passes rulings and orders in its judicial capacity. Though this makes it
very powerful, there is an appeal process to create accountability. There is
a Securities Appellate Tribunal which is a three-member tribunal and is
headed by Mr. Justice J P Devadhar, a former judge of the Bombay High
Court.[6] A second appeal lies directly to the Supreme Court. SEBI has
taken a very proactive role in streamlining disclosure requirements to
international standards.[7]

Powers
For the discharge of its functions efficiently, SEBI has been vested with the
following powers:

1. to approve by−laws of Securities exchanges.


2. to require the Securities exchange to amend their by−laws.
3. inspect the books of accounts and call for periodical returns from
recognized Securities exchanges.
4. inspect the books of accounts of financial intermediaries.
5. compel certain companies to list their shares in one or more
Securities exchanges.
6. registration broke
There are two types of brokers:

1. Discount Brokers
2. Merchant Brokers
SEBI committees

1. Technical Advisory Committee


2. Committee for review of structure of market infrastructure institutions
3. Advisory Committee for the SEBI Investor Protection and Education
Fund
4. Takeover Regulations Advisory Committee
5. Primary Market Advisory Committee (PMAC)
6. Secondary Market Advisory Committee (SMAC)
7. Mutual Fund Advisory Committee
8. Corporate Bonds & Securitization Advisory Committee

Major achievements
SEBI has enjoyed success as a regulator by pushing systematic reforms
aggressively and successively. SEBI is credited for quick movement
towards making the markets electronic and paperless by introducing T+5
rolling cycle from July 2001 and T+3 in April 2002 and further to T+2 in
April 2003. The rolling cycle of T+2[8] means, Settlement is done in 2 days
after Trade date.[9] SEBI has been active in setting up the regulations as
required under law. SEBI did away with physical certificates that were
prone to postal delays, theft and forgery, apart from making the settlement
process slow and cumbersome by passing Depositories Act, 1996.[10]
SEBI has also been instrumental in taking quick and effective steps in light
of the global meltdown and the Satyam fiasco.[citation needed] In October 2011,
it increased the extent and quantity of disclosures to be made by Indian
corporate promoters.[11] In light of the global meltdown, it liberalised the
takeover code to facilitate investments by removing regulatory structures.
In one such move, SEBI has increased the application limit for retail
investors to ₹ 2 lakh, from ₹ 1 lakh at present.[12]
Controversies
Supreme Court of India heard a Public Interest Litigation (PIL) filed by India
Rejuvenation Initiative that had challenged the procedure for key
appointments adopted by Govt of India. The petition alleged that, "The
constitution of the search-cum-selection committee for recommending the
name of chairman and every whole-time members of SEBI for appointment
has been altered, which directly impacted its balance and could
compromise the role of the SEBI as a watchdog." [13][14] On 21 November
2011, the court allowed petitioners to withdraw the petition and file a fresh
petition pointing out constitutional issues regarding appointments of
regulators and their independence. The Chief Justice of India refused
the finance ministry’s request to dismiss the PIL and said that the court was
well aware of what was going on in SEBI.[13][15] Hearing a similar petition
filed by Bengaluru-based advocate Anil Kumar Agarwal, a two judge
Supreme Court bench of Justice SS Nijjar and Justice HL Gokhale issued a
notice to the Govt of India, SEBI chief UK Sinha and Omita Paul, Secretary
to the [President of India].[16][17]
Further, it came into light that Dr KM Abraham (the then whole time
member of SEBI Board) had written to the Prime Minister about malaise in
SEBI. He said, "The regulatory institution is under duress and under severe
attack from powerful corporate interests operating concertedly to
undermine SEBI". He specifically said that Finance Minister's office, and
especially his advisor Omita Paul, were trying to influence many cases
before SEBI, including those relating to Sahara Group, Reliance, Bank of
Rajasthan and MCX.[18][19]...

SEBI and Regional Securities Exchanges


SEBI in its circular dated May 30, 2012 gave exit - guidelines for Securities
exchanges. This was mainly due to illiquid nature of trade on many of 20+
regional Securities exchanges. It had asked many of these exchanges to
either meet the required criteria or take a graceful exit. SEBI’s new norms
for Securities exchanges mandates that it should have minimum net-worth
of Rs.100 crore and an annual trading of Rs.1,000 crore. The Indian
Securities market regulator SEBI had given the recognized Securities
exchanges two years to comply or exit the business.

Process of De-recognition and Exit


Following is an excerpts from the circular
1.Exchanges may seek exit through voluntary surrender of recognition.
2.Securities where the annual trading turnover on its own platform is less
than Rs 1000 Crore can apply to SEBI for voluntary surrender of
recognition and exit, at any time before the expiry of two years from the
date of issuance of this Circular.
3.If the Securities exchange is not able to achieve the prescribed turnover
of Rs 1000 Crores on continuous basis or does not apply for voluntary
surrender of recognition and exit before the expiry of two years from the
date of this Circular, SEBI shall proceed with compulsory de-recognition
and exit of such Securities exchanges, in terms of the conditions as may be
specified by SEBI.
4.Securities Exchanges which are already de-recognised as on date, shall
make an application for exit within two months from the date of this circular.
Upon failure to do so, the de-recognized exchange shall be subject to
compulsory exit process.
SEBI Departments
SEBI regulates Indian financial market through its 20 departments[22].
These are -

1. Commodity Derivatives Market Regulation Department (CDMRD)


2. Corporation Finance Department (CFD)
3. Department of Economic and Policy Analysis (DEPA)
4. Department of Debt and Hybrid Securities (DDHS)
5. Enforcement Department – 1 (EFD1)
6. Enforcement Department – 2 (EFD2)
7. Enquiries and Adjudication Department (EAD)
8. General Services Department (GSD)
9. Human Resources Department (HRD)
10. Information Technology Department (ITD)
11. Integrated Surveillance Department (ISD)
12. Investigations Department (IVD)
13. Investment Management Department (IMD)
14. Legal Affairs Department (LAD)
15. Market Intermediaries Regulation and Supervision Department
(MIRSD)
16. Market Regulation Department (MRD)
17. Office of International Affairs (OIA)
18. Office of Investor Assistance and Education (OIAE)
19. Office of the Chairman (OCH)
20. Regional Offices (RO’s)
INVESTOR PROTECTION MEASURES BY
SEBI

Investor protection legislation is implemented under the Section 11(2) of


the SEBI Act. The measures are as follows:

 Stock Exchange and other securities market business regulation.


 Registering and regulating the intermediaries of the business like
brokers, transfer agents, bankers, trustees, registrars, portfolio
managers, investment consultants, merchant bankers, etc.
 Recording and monitoring the work of custodians, depositors,
participants, foreign investors, credit rating agencies, etc.
 Registering investment schemes like Mutual fund & venture capital
funds, and regulating their functioning.
 Promotion and controlling of self-regulatory companies.
 Keeping a check on frauds and unfair trading methods related to the
securities market.
 Observing and regulating major transactions and take-over of the
companies.
 Carry out investor awareness and education programme.
 Train the intermediaries of the business.
 Inspecting and auditing the security exchanges (SEs) and
intermediaries.
 Assessment of fees and other charges.

Securities and Exchange Board of India Act, 1992

The Securities and Exchange Board of India Act, 1992 (the SEBI Act) is
an Act of the Parliament of India enacted for regulation and development
of securities market in India. It was amended in the years 1995, 1999 and
2002 to meet the requirements of changing needs of the securities market.

Difference between sensex and nifty


We have often heard the terms Nifty and Sensex, and every time when we turn
on a business news channel it is Nifty and Sensex which mostly make the
headlines. With the linear graphs, Red and Green arrows Nifty and Sensex
appear most of the time when it comes to stocks market.

Being layman, it looks confusing to understand what could be the difference


between the two when they both denote the same thing i.e. the movement of the
stock market.

Before getting into the differentiation of Nifty and Sensex, let’s start with the
basics of what Nifty and Sensex are, what NSE and BSE are, how they are
different, their importance etc.

What is Nifty?
Nifty which is derived from National and Fifty is an equity benchmark index for
the Indian Equity Market. It is one of the two major stock indices in India.
Officially known as S&P CNX Nifty, it is operated by India Index Services and
Products, which is a subsidiary of National Stock Exchange of India (popularly
known as NSE).

Nifty was introduced by NSE on April 21, 1996. It represents the weighted
average of 50 Indian Company Stocks across 24 sectors, which account for
around 60% of the market capitalization.

How is Nifty calculated?


Nifty is calculated by free-float market capitalization weighted method. To do
this calculation it also follows a mathematical formula to know the market
capitalization. To derive the market capitalization, it multiplies equity with a
price. While to derive free-float capitalization, equity capital which is multiplied
by a price is further multiplied with IWF (Investible Weight Factors). IWF is a
factor which determines the shares available for freely trading in the market.
Nifty is determined on a daily basis by considering the current market value
divided by base market capital, which is multiplied by Base Index Value of
1000.

What is Sensex?

Sensex which is derived from Sensitive and Index is an equity benchmark index
for the Indian Equity Market. It is one of the two major stock indices in India.
Officially known as S&P BSE Sensex, it is operated by Bombay Stock Exchange
(popularly known as BSE).

Sensex was introduced by NSE on January 1, 1986. It represents the weighted


average of 30 Indian Company Stocks across 13 sectors.

How is Sensex calculated?

Sensex is currently calculated by the free-floating method which came into


existence from September 1, 2003. This is a variation of market capitalization
method. It uses the company’s floating shares which are readily available for
trading, which implies total capitalization minus Director’s shareholding. As per
this methodology, Index level at any point of time depicts the free float market
value of 30 constituent stocks relative to a base period.

Difference between Nifty and Sensex:

Although both Nifty and Sensex depicts the strength of the stock market, still
both of them are different in the following ways:

Derived from:
 Nifty: Nifty is derived from National Fifty. It is also known as S&P CNX
Nifty.
 Sensex: Sensex is derived from Sensitive Index. It is also known as S&P BSE
Sensex.
Date of Commencement:
 Nifty: Nifty came into existence on April 21, 1996.
 Sensex: Sensex came into existence on September 1, 2003.
Operated by:
 Nifty: Nifty is operated by India Index Services and Products, which is a
subsidiary of National Stock Exchange of India (NSE).
 Sensex: Sensex is operated by Bombay Stock Exchange (BSE).
Based at:
 Nifty: Nifty is based at NSE, whose corporate office is located at Exchange
Plaza, Bandra Kurla Complex, Mumbai.
 Sensex: Sensex is based at BSE, located at Dalal Street, Mumbai.
Number of stocks it constitutes of:
 Nifty: Nifty consists of 50 company’s stocks which are used to calculate the
index.
 Sensex: Sensex consists of 30 company’s stocks which are used to calculate
the index.
Number of sectors it covers:
 Nifty: Nifty covers companies across 24 sectors.
 Sensex: Sensex covers companies across 13 sectors .

Conclusion:
While both Nifty and Sensex are the important Stock Indices which determine
the strength of the stock market. Though they have many similarities but are also
different from one another in the above ways.