EXECUTIVE SUMMARY

This Project named as Risk Management in Broking Firm, is carried out at BSE & NSE ltd from
1st April to 31st June to analyze and understand the risk management of Stock Broking Firm BSE
& NSE LIMITED.

Capital Market in India is an emerging market with a great potential Indian capital market has
got a strong foundation and therefore has gained a confidence of Indian investors as well as
Foreign Institutional Investors. In India there are two Stock Exchanges (National Stock
Exchange and Bombay Stock Exchange) through which securities are traded. Stock exchange is
a body formed for the purpose of assisting, regulating or controlling the business of buying,
selling or dealing in securities. An investor has to trade in stock market through a registered
stockbroker. A stock broker is a member of a recognized stock exchange who is permitted to do
trades on the floor of the exchange. ‘Study of Risk Management in Stock Broking Firm’ the title,
shows that the project revolves around the risks managed by Stock Brokers while handling their
Sub brokers, branches, franchisees and investors

Risk and uncertainty go together. However, risk and return have a direct relationship, higher the
risk, higher the chances of good return and vice versa. There is a growing competition between
brokerage in a post reform India. For investors is always to decide which brokerage to choose.

Research was carried out to find out how BSE & NSE manage their risk .

Risk can be defined as “Possibility of suffering losses”

“The chance of something happening that will have an impact upon objectives. It is measured in
terms of consequences and likelihood”.

Risk management in a Broking Industry is a new concept in India, since it poses maximum risk
in the financial market, managing it was felt most essential by the regulatory bodies and
exchanges.

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In stock broking industry risks are high due to the volatility of the market. The risk may cause
due to its sub brokers, investor clients, branches etc. there are uncertainties about payments from
clients or from clients to sub brokers and then sub brokers to the broker. The high volatility of
the market may cause the clients or sub brokers not to make payments in specified time. Thus
brokers are always exposed to market risks, financial risks, credit risks, liquidity risk and
operational risks. To cope up with such events brokers have to collect certain amount of margins
and maintain the same with the exchange. To manage such risks Margin, Mark to Market
margin, Inspection, Insurance, is maintained.

Also, the brokers are allowed intraday turnover and gross exposure limits. Brokers

have to maintain minimum base capital and additional base capital with the exchange.
Exchanges, SEBI and NSCCL have taken steps like KYC, continuous
surveillance, mandatory audit etc. Thus, every broking firm has Risk Management department.
In BSE & NSE Limited there is a surveillance department to deal with the risk management
activities.

This study suggests my own experience in BSE & NSE Limited which is one of the leading
brokerage firms. Every company has to bear risk at some point of time in the organization so
BSE & NSE Limited manages its risk very well. It has its own separate department for risk
management.

Through this report we were also able to understand, what our company’s (BSE & NSE Limited)
positive and negative points the company’s hierarchy, its vision and mission, the product offer
my BSE & NSE Limited. It provide live terminal known as trade tiger for online trading. We
also gave suggest to the company what improvement can be done for the benefits of the
customers.

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 TABLE OF CONTENT

SR. PARTICULARS PAGE NO.

NO.
1. Acknowledgement
2. Executive Summary
3. Chapter 1 Area of Internship and Insight Gained
4. Chapter 2 Profile of the Organization
5. Chapter 3 Job Description and Functional Profile
6. Chapter 4 Learning Experience and Insight Gained
7. Chapter 5 Recommendation and Conclusion
8. Bibliography

3
A] REGULATION OF BUSINESS IN THE STOCK EXCHANGES

Under the SEBI Act, 1992, the SEBI has been empowered to conduct inspection of
stock exchanges. The SEBI has been inspecting the stock exchanges once every year
since 1995-96. During these inspections, a review of the market operations,
organisational structure and administrative control of the exchange is made to
ascertain whether:

 the exchange provides a fair, equitable and growing market to investors

 the exchange’s organisation, systems and practices are in accordance with the
Securities Contracts (Regulation) Act (SC(R) Act), 1956 and rules framed
thereunder
 the exchange has implemented the directions, guidelines and instructions issued
by the SEBI from time to time
 the exchange has complied with the conditions, if any, imposed on it at the time
of renewal/ grant of its recognition under section 4 of the SC(R) Act, 1956.

Based on the observations/suggestions made in the inspection reports, the exchanges

are advised to send a compliance report to SEBI within one month of the receipt of the
inspection report by the exchange and thereafter quarterly reports indicating the
progress made by them in implementing the suggestions contained in the inspection
report. The SEBI nominee directors and public representatives on the governing
board/council of management of the stock exchanges also pursue the matters in the
meetings of the governing board/council of management. If the performance of the
exchanges whose renewal of recognition is due, is not found satisfactory, the SEBI
grants further recognition for a short period only, subject to fulfillment of certain
conditions.

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During the year, renewal of recognition was granted to three stock exchanges. The
renewal of recognition to Saurashtra - Kutch Stock Exchange was renewed for a
further period of one year only as the exchange failed to rectify the deficiencies
pointed out in the inspection report and renewal of recognition of Jaipur Stock
Exchange was granted only for a period of one year as the exchange has not started
Screen Based Trading. The renewal of recognition of Vadodara stock Exchange was
granted for a further period of three years.

During the year 1997-98, inspection of stock exchanges were carried out with a
special focus on the measures taken by the stock exchanges for investors protection.
Stock exchanges were, through inspection reports, advised to effectively follow-up
and redress the investors’ complaints against members/listed companies. The stock
exchanges were also advised to expedite the disposal of arbitration cases within four
months from the date of filing.

During the earlier years’ inspections, common deficiencies observed in the

functioning of the exchanges were delays in post trading settlement, frequent clubbing
of settlements, delay in conducting auctions, inadequate monitoring of payment of
margins by brokers, non-adherence to Capital Adequacy Norms etc. It was observed
during the inspections conducted in 1997-98 that there has been considerable
improvement in most of the areas, especially in trading, settlement, collection of
margins etc.

Supersession of the governing board of Magadh stock exchange

The annual inspection of Magadh Stock Exchange for the year 1997-98 was
conducted by the SEBI during August 11-13, 1997. Based on the mismanagement and
various irregularities observed in the functioning of the exchange during the
inspection and the complaints received from the Public Representative Directors and

5
SEBI Nominee Directors on the Council of Management of the exchange, a show-
cause notice was issued by the SEBI to the Council of Management of Magadh Stock
Exchange as to why it should not be superseded. The Council of Management did not
respond to show-cause notice and also did not avail of the two opportunities of
personal hearing granted to them by the Chairman, SEBI. The SEBI received a letter
from the Executive Director of the exchange enclosing a copy of circular resolution
passed by a majority of the members of the Council of Management requesting SEBI
to take immediate appropriate action in the light of the complete breakdown in the
administration of exchange.

Taking in view the gravity of the situation, the Chairman, SEBI, in pursuance of
powers conferred on him under Section 11 of the Securities Contracts (Regulation)
Act, 1956, read with notification No. SO 573, dated July 30, 1993 and Section 4(3) of
the SEBI Act, 1992, superseded the Council of Management of the exchange for a
period of one year w.e.f. December 08, 1997 and appointed an Administrator as an
alternative arrangement.

The Administrator has been taking immediate steps to improve overall functioning of
the exchange. An Advisory Committee has also been constituted to assist the
Administrator. The exchange is in the process of constituting various Statutory
Committees and also the appointment of an Executive Director. The performance of
the exchange is since being monitored on a monthly basis by the SEBI.

Expansion of BSE On-Line Trading System (BOLT)

In order to have a level playing field and to provide healthy competition in the
Secondary Market, the SEBI had, in October 1996, permitted stock exchanges to
expand their trading terminals to locations outside the city wherein such exchanges
are located subject to compliance with certain conditions.

6
The stock exchanges were granted permission to expand their trading terminals to
those cities where no other stock exchange is located. The BSE On-Line Trading
system (BOLT) has already been permitted to expand to such cities subject to
compliance with certain conditions imposed by the SEBI.

As for the cities where a stock exchange already exists, the exchanges seeking
expansion were required to enter into a Memorandum of Understanding (MoU) with
the concerned stock exchange. Accordingly, the Stock Exchange, Mumbai has entered
into MoU with the Pune, Calcutta, Ahmedabad, and Rajkot stock exchanges. After
due consideration, the SEBI has permitted BOLT expansion to the cities of Pune,
Calcutta and Rajkot subject to fulfillment of certain conditions by these stock
exchanges. The proposal of BOLT expansion to Ahmedabad was under consideration
by the SEBI.

Similar proposals by stock exchanges to expand outside their area of jurisdiction were
also received from Bangalore Stock Exchange and were under evaluation of the SEBI.

New Stock Exchanges

In December 1996, the SEBI had taken a policy decision, in public and trade interest,
that grant of recognition to new stock exchanges would be considered subject to
fulfillment of the following conditions :

 The exchange would begin trading only after introduction of On-Line Screen
Based Trading
 The exchange makes rules, regulations and bye-Laws with adequate provisions
for investor protection, with the approval of the SEBI and thereafter strictly
follows them
 The exchange establishes a Clearing House within 6 months from the date of
recognition
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The SEBI received several applications for recognition of new stock exchanges. As on
April 01, 1997, the number of such pending applications/representations for new stock
exchanges was 6. During the current year 1997-98, 4 new applications were received.
Out of a total of 10 applications/representations, 3 were closed and 2 were granted ‘in-
principle recognition’ during the year 1997-98. As on March 31, 1998, only 5
applications were pending which are under consideration of the SEBI.

The Capital Stock Exchange Kerala Limited (CSEKL) and The Inter-Connected Stock
Exchange of India (ISE) were granted ‘in-principle recognition’ by the SEBI subject
to compliance with certain conditions.

The Inter-Connected Stock Exchange of India Limited (ISE)

The Inter-Connected Stock Exchange of India Limited (ISE) is being promoted by 14

regional stock exchanges to set up a new national level stock exchange. The ISE will
set up an Inter-Connected Market System (ICMS) which would provide a national
market in addition to the trading facility at the regional stock exchanges. The
proposed stock exchange has a broader objective of protecting the regional stock
exchanges as the consolidation of the market would increase the order flow to the
regional stock exchanges and help in their survival and also benefit the investors by
offering them a national reach with greater liquidity. The fourteen stock exchanges
participating in the Inter-Connected Stock Exchange of India are :

1. Bangalore Stock Exchange

2. Bhubaneshwar Stock Exchange
3. Cochin Stock Exchange
4. Coimbatore Stock Exchange
5. Guwahati Stock Exchange
6. Hyderabad Stock Exchange

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 7. Jaipur Stock Exchange
8. Ludhiana Stock Exchange
9. Madhya Pradesh Stock Exchange
10.Magadh Stock Exchange
11.Mangalore Stock Exchange
12.Saurashtra Kutch Stock Exchange
13.Uttar Pradesh Stock Exchange
14.Vadodara Stock Exchange

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 CHAPTER 1
THE AREA OF INTERNSHIP AND LEARNING OBJECTIVE

The internship was conducted in BSE & NSE from 1 April 2018 to 30 June 2019. It was a very
good experience. The internship comprises of finance training as well as marketing in which
there was the theoretical knowledge of Online Trading, and practical training for performing
online training and opening of demat account for prospective customers. The training was
provided on all products that BSE & NSE limited offers to the customers. It provides an
exposure of live capital market and other financial products. The training program is designed in
such a way it was easy to learn about the share market. Benefits after doing internship in BSE &
NSE it provided experience which can ultimately help in providing a good job opportunity. It is
important to know about the following terms:

Capital market

A capital market is a market for share, securities; where business enterprises or companies

and governments can raise long-term funds .Through capital market or security market people
who have idle resources can most efficiently transfer those recourses that have productive need
for them. Securities market provides channels for allocation of savings to investment and thereby
decouples these two activities. A Financial/capital market consists of investors (buyers of
securities), and borrowers (sellers of securities), intermediaries and regulatory bodies.

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INDIAN STOCK MARKET OVERVIEW

A stock market or equity market is a public entity for the trading of company stock or shares
and derivatives at an agreed price; these are securities listed on a stock exchange as well as those
only traded privately.

Indian Stock Market consists of more than 20 Stock Exchanges. The Bombay stock exchange
(BSE) and National stock exchange (NSE) are the two primary exchanges in India. BSE and
NSE account for about 80% of the equity volume traded in India.

Bombay Stock Exchange

BOMBAY STOCK EXCHANGE - (BSE) (Bombay Share Bazaar) The Stock Exchange,

Bombay is a stock exchange located on Dalal Street ,  Mumbai and Is the oldest stock exchange
in Asia . The equity market capitalization of the companies listed on the BSE
was US$1 trillion as of December 2011, making it the 6th largest stock exchange in Asia and
the 14th largest in the world . The BSE has the largest number of listed companies in the world.

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As of March 2012, there are over 5,133 listed Indian companies and over 8,196 scrip on the
stock exchange, the Bombay Stock Exchange has a significant trading volume. 

NATIONAL STOCK EXCHANGE

NATIONAL STOCK EXCHANGE - (NSE) The National Stock Exchange of India was set up
by Government of India on the recommendation of Pherwani Committee in 1991. It was
incorporated in November 1992 as a tax-paying company. In April 1993, it was recognized as
a stock exchange under the Securities Contracts (Regulation) Act, 1956. The National Stock
Exchange (NSE) is a stock exchange located at Mumbai, India. It is the 16th largest stock
exchange in the world by market capitalization and largest in India by daily turnover and number
of trades, for both equities and derivative trading.  NSE has a market capitalization of
around US$985 billion and over 1,646 listings as of December 2011.  Though a number of other
exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock
exchanges in India and between them are responsible for the vast majority of share transactions.
The NSE's key index is the S&P CNX Nifty, known as the NSE NIFTY an index of fifty major
stocks weighted by market capitalization.

PURPOSE - Stock markets basic role is to provide a platform for the masses of the country to
invest their savings and also as a source of funds for various organizations and institutions. It
provides an opportunity for any person to become a part-owner of the company by buying the
company’s shares. These shares can be sold and exchanged as well as used as collateral in
certain cases. One can deal in a variety of financial instruments in a stock market such as Equity

12
which has already been explained, Future’s, Retail Debt, Wholesale Debt, Currency Future’s,
Derivatives, and Bonds etc. Trading can only be performed by a registered broker of the
respective stock one wants to deal in or through a broker.

Stocks

The stock or capital stock of a business entity represents the original capital paid into or invested
in the business by its founders. It serves as the security of the creditors in the business since it
cannot be withdraw to the detriment of the creditors. Stock is distinct from the property and
the assets of a business which may fluctuate in quantity and value. Buying a stock for the long
term means that you want to own part of a company and you think that in the future the company
will be profitable. If you buy stock in a company and the company perform well then the price of
the stock will rise and vice versa.

Stock Market

A stock market or equity market is a public market (a loose network of economic transactions,
not a physical facility or discrete entity) for the trading of company stock  and derivatives at an
agreed price; these are securities listed on a stock exchange as well as those only traded
privately. The size of the world stock market was estimated at about$36.6 trillion US at the
beginning of October 2008. The largest stock market in the United States, by market cap is the
New York Stock Exchange, NYSE, and while in Canada, it is the Toronto Stock Exchange. The
two main Stock Exchange of India is National Stock Exchange ( NSE) and Bombay Stock
Exchange (BSE).

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 LITERATURE REVIEW

This project is related to the BSE & NSE Limited and Risk Management in BSE & NSE. BSE &
NSE is the stock broking firm of SSKI Group which is still running successfully. This broking
firm offers a wide range of products to its customers like equity and derivative trading, online
trading, Dial and trade, portfolio management services, IPO online, mutual funds and insurance.
The company provides the software which is known as Trade Tiger for doing online trading.
Trade Tiger is software of BSE & NSE which is given to customers for trading. It enables its
user

Online trading in equity and derivatives

Dial-n- Trade

Cash transfer

Order and trade confirmation

Live Terminal

Every company has to bear risk and to reduce the companies have risk management department.
BSE & NSE also have risk management department to reduce the risk of its clients. The risk
management department performs the following;

 To maintain the margin of the customers

 Mark to Market margin is calculated at the end of the day on all open positions by
comparing transaction price with the closing price of the share for the day.
 Hedging
 Doing averaging in case of loss is more
 Taking stoploss to minimize the risk

BSE & NSE provide online trading facility various products and services to the customers which
help them do trade easily. BSE & NSE also knows how to minimize the risk of its customers
that’s why BSE & NSE have over 3 lacks customers all over the country.

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Learning Objectives

 To study about the capital market.

 To gain practical knowledge of the market.

 To study about the background of the company.

 To study the organization structure and the financial position of the company.

 To study the products and services of the company.

 To study about the procedure adapted to open demat account.

 To study about the swot analysis and competitive analysis of the company

 To understand the concept and types of risks

 To find out the risk involved in stock broking firm

 To study the measures to reduce the risk

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 CHAPTER-2
PROFILE OF THE ORGANISAGTION
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 dematerialized 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 of NSE.

National Stock Exchange has a total market capitalization of more than US$2.27 trillion, making
it the world's 11th-largest stock exchange as of April 2018.[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. Nifty 50 index was launched in 1996 by the NSE.
[2]
 However, Vaidyanathan (2016) estimates that only about 4% of the Indian economy / GDP is
actually derived from the stock exchanges in India.[3]

Unlike countries like the United States where nearly 70% of the GDP is derived from larger
companies and the corporate sector, the corporate sector in India accounts for only 12-14% of the
national GDP (as of October 2016). Of these only 7,800 companies are listed of which only 4000
trade on the stock exchanges at BSE and NSE. Hence the stocks trading at
the BSE and NSE account for only around 4% of the Indian economy, which derives most of its
income-related activity from the so-called unorganized sector and households.[3]

Economic Times estimated that as of April 2018, 60 million (6 crore) retail investors had
invested their savings in stocks in India, either through direct purchases of equities or through
mutual funds.[4] Earlier, the Bimal Jalan Committee report estimated that barely 1.3% of India's
population invested in the stock market, as compared to 27% in USA and 10% in China.

NATIONAL STOCK EXCHANGE is 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

16
ensured that anyone who was qualified, experienced and met minimum financial requirements
was allowed to trade.[9] 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 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 Pherwani 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

The exchange was incorporated in 1992 as a tax-paying company and was recognized as a stock
exchange in 1993 under the Securities Contracts (Regulation) Act, 1956, when P. V. Narasimha
Rao was the Prime Minister of India and Manmohan Singh was the Finance Minister. NSE
commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The capital
market (equities) segment of the NSE commenced operations in November 1994, while
operations in the derivatives segment commenced in June 2000. NSE offers trading, clearing and
settlement services in equity, equity derivatives, debt, commodity derivatives, and currency
derivatives segments. It was the first exchange in India to introduce an 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.

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

17
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.

NSE EMERGE

This article is about National Stock Exchange of India. For NSE EMERGE, see NSE EMERGE.

NSE EMERGE is NSE's new initiative for SME & Startup companies from India. [11] These
companies can get listed on NSE without Initial Public Offer (IPO). This platform will help SME
& Startup to connect with investor and help them for the funding. [12] During August 2019, NSE
gets 200th company listed on its SME platform.[13]

MARKETS

NSE offers trading and investment in the following segments

Equity

 Equities
 Indices
 Mutual Funds
 Exchange Traded Funds
 Initial Public Offerings
 Security Lending and Borrowing Scheme etc.

Derivatives

 Equity Derivatives (including Global Indices like CNX 500, Dow Jones and FTSE )
 Currency Derivatives
 Commodity Derivatives
 Interest Rate Futures

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Debt

 Corporate Bonds

Equity Derivatives

The National Stock Exchange of India Limited (NSE) commenced trading in derivatives with the
launch of index futures on 12 June 2000. The futures and options segment of NSE has made a
global mark. In the Futures and Options segment, trading in NIFTY 50 Index, NIFTY IT index,
NIFTY Bank Index, NIFTY Next 50 index and single stock futures are available. Trading in
Mini Nifty Futures & Options and Long term Options on NIFTY 50 are also available. [14] The
average daily turnover in the F&O Segment of the Exchange during the financial year April 2013
to March 2014 stood at ₹1.52236 trillion (US$21 billion).

On 29 August 2011, National Stock Exchange launched derivative contracts on the world's most-
followed equity indices, the S&P 500 and the Dow Jones Industrial Average. NSE is the first
Indian exchange to launch global indices. This is also the first time in the world that futures
contracts on the S&P 500 index were introduced and listed on an exchange outside of their home
country, USA. The new contracts include futures on both the DJIA and the S&P 500 and options
on the S&P 500.

On 3 May 2012, the National Stock exchange launched derivative contracts (futures and options)
on FTSE 100, the widely tracked index of the UK equity stock market. This was the first of its
kind of an index of the UK equity stock market launched in India. FTSE 100 includes 100 largest
UK listed blue chip companies and has given returns of 17.8 per cent on investment over three
years. The index constitutes 85.6 per cent of UK's equity market cap.[15]

On 10 January 2013, the National Stock Exchange signed a letter of intent with the Japan
Exchange Group, Inc. (JPX) on preparing for the launch of NIFTY 50 Index futures, a
representative stock price index of India, on the Osaka Securities Exchange Co., Ltd. (OSE), a
subsidiary of JPX.[16]

Moving forward, both parties will make preparations for the listing of yen-denominated NIFTY
50[17] Index futures by March 2014, the integration date of the derivatives markets of OSE and
Tokyo Stock Exchange, Inc. (TSE), a subsidiary of JPX. This is the first time that retail and
institutional investors in Japan will be able to take a view on the Indian markets, in addition to

19
current ETFs, in their own currency and in their own time zone. Investors will therefore not face
any currency risk, because they will not have to invest in dollar denominated or rupee
denominated contracts.

In August 2008, currency derivatives were introduced in India with the launch of Currency
Futures in USD–INR by NSE. It also added currency futures in Euros, Pounds, and Yen. The
average daily turnover in the F&O Segment of the Exchange on 20 June 2013 stood
at ₹419.2616 billion (US$5.9 billion) in futures and ₹273.977 billion (US$3.8 billion) in
options, respectively.

Interest Rate Futures

In December 2013, exchanges in India received approval from market regulator SEBI for
launching interest rate futures (IRFs) on a single GOI bond or a basket of bonds that will be cash
settled. Market participants have been in favour of the product being cash settled and being
available on a single bond. NSE will launch the NSE Bond Futures on 21 January on highly
liquid 7.16 percent and 8.83 percent 10-year GOI bonds. Interest Rate Futures were introduced
for the first time in India by NSE on 31 August 2009, exactly one year after the launch of
Currency Futures. NSE became the first stock exchange to get an approval for interest-rate
futures, as recommended by the SEBI-RBI committee.

Debt Market

On 13 May 2013, NSE launched India's first dedicated debt platform to provide a liquid and
transparent trading platform for debt related products.[18]

The Debt segment provides an opportunity for retail investors to invest in corporate bonds on a
liquid and transparent exchange platform. It also helps institutions who are holders of corporate
bonds. It is an ideal platform to buy and sell at optimum prices and help Corporates to get
adequate demand when they are issuing the bonds.

Trading schedule

Trading on the equities segment takes place on all days of the week (except Saturdays and
Sundays and holidays declared by the Exchange in advance). The market timings of the equities
segment are:

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 (1) Pre-open session:
o Order entry & modification Open: 09:00 hrs
o Order entry & modification Close: 09:08 hrs*
*
with random closure in last one minute. Pre-open order matching starts immediately after the
close of pre-open order entry.

 (2) Regular trading session

o Normal/Retail Debt/Limited Physical Market Open: 09.15 hrs
o Normal/Retail Debt/Limited Physical Market Close: 15:30 hrs.

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 uptime record of 99.99% and
processes more than a billion messages every day with the sub-millisecond response time.[19]

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

21
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, the 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.[20] 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.[21] 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).[22] 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.

NSE co-location case

On 8 July 2015, Sucheta Dalal wrote an article on Moneylife alleging that some NSE employees
were leaking sensitive data related to high-frequency trading or co-location servers to a select set
of market participants so that they could trade faster than their competitors. NSE alleged
defamation in the article by Moneycontrol. On 22 July 2015, NSE filed a ₹1
billion (US$14 million) suit against Moneycontrol.[23] However, on 9 September 2015, the

22
Bombay High Court dismissed the case and fined NSE ₹5 million (US$70,000) in this
defamation case against Moneycontrol (www.moneylife.in). The High Court asked NSE to
pay ₹150,000 (US$2,100) to each journalist Debashis Basu and Sucheta Dalal and the
remaining ₹4.7 million (US$66,000) to two hospitals.

The Bombay High Court has stayed the order on costs for a period of two weeks, pending the
hearing of the appeal filed by NSE.[25]

In May 2019 SEBI has debarred NSE from accessing the markets for a period of 6 months.
While NSE confirmed this will not impact their functioning, they won't be able to list their IPO
or introduce any new trading products for that period. Additionally, the watchdog also ordered
NSE to disgorge Rs 624.9 crores (along with accrued interest for the period), an amount
equivalent to the profits it made from the unfair trade practice of co-location servers they
provided during the period from 2010–11 to 2013–14.

The board also passed orders against 16 individuals including former managing directors and
CEOs Ravi Narain and Chitra Ramakrishna ordering them to disgorge 25% of their salaries
during that period along with interest. All money is to be paid into the Investor protection and
education fund. These individuals have also been debarred from the markets or holding any
position in a listed company for a period of five years.

23
 BOMBAY STOCK EXCHANGE

The Rocky stock exchange was founded by Premchand Roychand, an influential businessman in
the 19th-century Bombay. He 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.

While BSE Ltd is now synonymous with Dalal Street, it was not always so. The first location of
the earliest stock broker meetings in the 1850s was in a much more natural setting — under
banyan trees — in front of the Town Hall, where Horniman Circle is now situated. A decade
later, the brokers moved their location to another leafy setting, this time under banyan trees at the
junction of Meadows Street and what was then called Esplanade Road, now Mahatma Gandhi
Road. With a rapid increase in the number of brokers, they had to shift places repeatedly. At last,
in 1874, the brokers found a permanent location, the one that they could call their own. The new
place was, aptly, called Dalal Street (Brokers' Street).

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. Now BSE has raised capital by issuing shares
and as on 3 May 2017 the BSE share which is traded in NSE only closed with Rs.999 .[10]

24
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.[12]

BSE launches commodity derivatives contract in gold, silver.[13]

25
REASONS TO CHOOSE BSE & NSE LIMITED

Experience
SSKI has more than eight decades of trust and credibility in the Indian stock market. In the Asia
Money broker's poll held recently, SSKI won the 'India's best broking house for 2004' award.
Ever since it launched BSE & NSE as its retail broking division in February 2000, it has been
providing institutuonal-level research and broking services to individual invcestors.

Technology
With our online trading account you can buy and sell shares in an instant from any PC with an
internet connection. You will get access to our powerful online trading tools that will help you
take complete control over your investment in shares.

Accessibility
BSE & NSE provides ADVICE, EDUCATION, TOOLS AND EXECUTION servies for
investors. These services are accessible through our centres across the country (Over 588
locations in 148 cities) over the internet (through the website www.BSE & NSE.com) as well as
over the Voice Tool.

Knowledge
In a business where the right information at the right time can translate into direct profits, you get
access to a wide range of information on our content-rich portal, BSE & NSE. You will also get
a useful set of knowledge-based tools that will empower you to take informed decisions.

26
Convenience
You can call our Dial-N-Trade number to get investment advice and execute your transactions.
We have a dedicated call-centre to provide this service via a Toll Free Number 1800-22-7500 &
1800-22-7050 from anywhere in India.

Customer Service

Our customer service team will assist you for any help that you need relating to transactions,
billing, Demat and other queries. Our customer service can be contracted via a toll-free number,
email or live chat on www.BSE & NSE.com.

Investment Advice

BSE & NSE has dedicated research teams of more than 30 people for fundamental and technical
researchs. Our analysts constantly track the pulse of the market and provide timely investment
advice to you in the form of daily research emails, online chat, printed reports and SMS on your
mobile phone.

Benefits

 Free Depository A/c

 Secure Order by Voice Tool Dial-n-Trade.
 Automated Portfolio to keep track of the value of your actual purchases.
 24x7 Voice Tool acess to your trading account.
 Personalised Price and Account Alerts delivered instantly to your Cell Phone & E-mail
address.
 Special Personal Inbox for order and trade confirmations.
 On-line Customer Service via Web Chat.
 Anytime Ordering.

27
COMPETITIVE ANALYSIS

Follower:

 The followers are those who just blindly follows other players who are leaders and chalengers.
 The players like 5 Paisa, Motilal Oswal, HDFC securities, Kotak street are the followers.

Leaders:

 ICICI Direct is a leader in the online account which is having 1,24,000 accounts in the country.
 While in offline account BSE & NSEis leading with 64000 offline accounts.

Nicher:

 ICICI Direct.com and Kotakstreet.com are the two stock brocking houses which are focusing
only on online investors.

Chalenger:

 BSE & NSE, Kotakstreet and India bulls come under this head.
 BSE & NSE challenges competitors by providing quality services and research based advice.
 Indiabulls is also challenging with low brokerage rates and class one services.

28
 SWOT ANALYSIS

STRENGTH

 It is a pioneer in online trading with an over of Rs 400 corers and more than 800 people
working in the organization.
 SSKI the parent company of BSE & NSE has more than eight decades of trust and
credibility in the Indian market.
 BSE & NSE provides multi-channel access to all its customers through a strong online
presence with www.BSE & NSE.com 250 share shops in 130 cities and a call centre
based Dial-n-Trade facility.
 Easier access to the customer due to braded share shops in 120 cities.

WEAKNESS
 Localized presence due to insufficient investments for country wide expansion
 Less emphasis on customer retention
 Promotional activities conducted by the company are not at par with other firms.

OPPORTUNITIES
 With the booming capital market it can successfully launch new services and raise its
client’s base.
 It can easily tap the retail investors with small saving through promotional channels like
print media, disclosure mails etc.
 As interest on fixed deposits with post office and banks are all time low, more small
investors are entering into stock market.

29
THREATS
 Lack of sufficient branch- offices for speedy delivery of services
 Other players are providing margin funds to investors on easy terms where as there is not
such facility in BSE & NSE.
 More and more players are venturing into this domain which can further reduce the
earnings of BSE & NSE.

30
RESEARCH SECTION IN BSE & NSE LIMITED
BSE & NSE limited has its own in house Research Organization which is known as value line. It
comprises a team of experts who constantly keep a eye on the share market and do research on
the various aspects of the share market. Generally the research is based on the Fundamentals and
Technical analysis of different companies and also taking into account various factors relating to
the economy.

As a customer of sharekan limited one receives daily 5-6 Research Reports on their emails which
they can use as tips for investing in the market. These reports are named as Punter Report, Eagle
Report, Investor Eye Report and High noon Report.

SOURCE – BSE & NSE’s Website

31
CURRENT CHALLENGES OF BSE & NSE

BSE & NSE faced lots of challenges. Some of the challenge that it face are

 Retaining its customers is a big challenge of BSE & NSE.

 Updating its Online Trade Software TRADE TIGER and make sure that it always work is another
challenge.
 As the broking firms are increasing number of competitors of BSE & NSE are also rising. Facing
competitions from all these firms and maintaining its position is another challenge of BSE &
NSE. Some of the main competitors of BSE & NSE are Angel Broking , Religare, Kotak
Securities, India Bulls, Reliance Money , HDFC Securities, ICICIdirect.com , Bajaj Capital ,
Motilal Oswal , India Infoline.

AWARDS AND ACHIEVEMENTS

 A rated among the top 20 wired companies along with Reliance, HUJI, Infosys etc. by
‘Business Today” January 2004 edition.
 Awarded “Top Domestic Brokerage House” four times by Euro Money and Asai Money.
 Pioneers of online trading in India amongst the top 3 online trading websites from India.
Most preferred financial destination amongst online broking customers.
 India’s mot preferred brokers within 5 yrs “ Awaaz Customers Award 2005”
 The team has completed over US$5 billion worth of deals in the  last 5 years
- making it among the most significant players raising equity in the Indian
market.
 SSKI, a veteran equities solutions company has over 8 decades of experience in
the Indian stock markets. If we experience their language, presentation style,
content or for that matter the online trading facility, we'll find a common
thread; one that helps us make informed decisions and simplifies investing in
stocks.

32
FUTURE PLAN

 200000 plus retail customers being serviced through centralized call centers / web
solutions.
 Branches / Semi branches servicing affluent / aggressive traders through high skills
financial advisor.
 250 independent investment managers / franchisee servicing 50000 highly valued clients.
 New initiatives Portfolio Management Services and commodities trading.

SPREADING ITS WINGS OVERSEAS

NRI SERVICES- ONE STOP SHOP FOR ALL INVESTMENT NEEDS

 Online trading platform for NRIs for Equities and Mutual Funds

 Our first representative office in Dubai

 Dedicated Relationship Manager for advisory services and Operational issues

 Simplified transactions statement

 Customized research reports

 Daily Market updates

 Access to research newsletters/ reports

33
 CHAPTER -3
JOB DESCRIPTION AND FUNTIONAL PROFILE

A job description sets out the purpose of a job, where the job fits into the organization structure,
the main accountabilities and responsibilities of the job and the key tasks to be performed A job
description is usually developed by conducting a job analysis, which includes examining the
tasks and sequences of tasks necessary to perform the job. The analysis considers the areas of
knowledge and skills needed for the job. A job usually includes several roles. The job description
might be broadened to form a person specification or may be known as Terms of Reference

There was a 3 months training in BSE & NSE limited. In this training there were lot of things to
learn about BSE & NSE, organizational structure, history of BSE & NSE, products, BSE & NSE
research reports, trading techniques, clients, demat account, online trading accounts, learned how
to buy and sell shares through these online terminals, sales technique, BSE & NSE’s brokerage.

Trading is done through live terminal known as Trade Tiger. Trade Tiger is software of BSE &
NSE which is given to customers for trading. It enables its user

Online trading in equity and derivatives

Dial-n- Trade

Cash transfer

Order and trade confirmation

Live Terminal

In order to gain more of the practical knowledge it is important to interact with customers for
opening a demat account in BSE & NSE. In order to sell demat account some market work was
done. Selling requires identifying the prospective client and then trying to convince them.

34
Placement of order

The next step is to place the order of buying and selling of the shares. The orders are placed by
me after analyzing the share market. The orders may take any form such as at best order, limit
order, cancel order and stop loss order.

WORK ENVIRONMENT

 It was a 3months experience as a summer trainee. It was a learning experience in

corporate world.
 The managerial staff was highly supportive in allotted work.
 They guide us with the knowledge of hedging tools to manage the risk in share market
and minimize our loss and how we can maximize our profit.

DAY TO DAY ACTIVITIES

 Reach BSE & NSE Limited Office at 9 a.m.

 Do online trading on Trade Tiger Software.
 On some days we also used to go outside to find the prospective customers and do the
marketing of BSE & NSE.
 In between the trading we used to do the calling to various prospective customers and
persuade them to open the Demat Account in BSE & NSE.
 Visit the client place to take the cheque and complete all the formalities which are
required to open the Demat Account.

AREA ASSIGNED

 I covered areas in Delhi, Sector 18 Noida, Udyog Vihar Gurgaon.

35
 REPORTING RELATIONSHIP

 Reporting Time : 9 a.m

 Reporting to : Mr. Jaipal Singh
(Assistant Manager)

NICE EXPERIENCE

Good place for freshers

Supportive members

Good atmosphere to work at.

Friendly & adaptable

JOB CHALLENGES

 In every field there are job challenges. Likewise some challenges in this organization were also
there but the good thing was with hardwork and sincerity it was easy to face all this challenges.
The challenges which were faced are as follows:

 Knowing about the organization and completing assignments on time, making the best
presentations among all my colleagues as allotted by our mentor was a challenge.

 Understanding the Share market and learning how to do the trading was also one of the
challenges which were faced in BSE & NSE. This field is totally new and no one knows about in

36
 detail. Learning things like how to place order? How to sell the order? How to place the bid?
When to place the bid? On what amount I had to sell and buy the currency, equities?

 Making profit in trading was another challenge and learning how to minimize the loss by
knowing the concept of hedging, stoploss.

 Fulfilling the target to open 3 accounts was really very challenging. As most of the people had a
fear of sharemarket as they think that in sharemarket people always had to bear loss. Finding the
prospective client and persuading them is really very challenging.

37
 CHAPTER-4
LEARNING EXPERIENCE AND INSIGHT GAIN

 The type of training in internship was On the Job Training. On the Job Training means
learning practical and implementing it in the day to day work of the organisation.
 During the SIP in the company learned many things and implemented.
 The training was of 2 weeks in the Share Market along with 16 classmates. The training
include learning about the Share Khan practices and services. The powerpoint
presentation was used by BSE & NSE for teaching the trainees.
 Learned about various products of BSE & NSE which it offers to its
customers the products are as follows:

 Online trading account

BSE & NSE provide two types of trading account:

 Classic account (For beginners and medium investor)

 Speed trade (For heavy investor)

Are you an investor Are you an active trader?

The classic account enables you to trade speed trade is a next generation online
online through our website and gives you our trading product that brings the power of
research content. your broker’s terminal to your PC.

 BSE & NSE classic account

38
The classic account is a BSE & NSE online trading account, through which you can buy and sell shares
through our website www.BSE & NSE.com in an instant.

Along with enabling access for you to trade online, the CLASSIC ACCOUNT also gives you our Dial-n-
Trade service. With this service, all you have to do is dial 1-600-22-7050 to buy and sell shares using you
phone.

 Free trading through phone (Dial-n-trade)

a. Two dedicated numbers for placing your orders with your cell phone or landline.
b. Automatic funds transfer with phone banking(for Citibank and HDFC bank
customers)
c. Simple and secure interactive voice response based system for authentication
d. Get the trusted, professional advice of our telebrokers
e. After hours order placement facility between 8.00 am and 9:30 am

ii) Integration of: Online trading + saving bank + Demat Account.

iii) Instant cash transfer facility against purchase and sale of shares
iv) IPO investments
v) Instant order and trade confirmations by email
vi) Single screen interface for cash and derivatives

 BSE & NSE Speed Trade Account

This account is for active traders who trade frequently during the day’s trading session.

Following are few popular features of speed trade account.

a. Single screen interface for cash and derivatives

b. Real time streaming quotes with instant order execution & confirmations
c. Hot keys similar to a traditional broker terminal
d. Alerts and reminders
e. Back up facility to place trades on Direct Phone lines

39
  DIAL-N-TRADE

Along with enabling access for your trade online, the CLASSIC and TRADE-TIGER ACCOUNT also
gives you our Dial-ntrade serives. With this service, all you have to do is dial our dedicated phone lines 1-
800-22-7500, 3970-7500.

 PORTFOLIO MANAGEMENT SERVICES

1. ProPrime: - Research & Fundamental Analysis.

2. ProTech: - Technical Analysis.

-Thrifty Nifty

-Beta Portfolio

3. ProArbitrage: - Exploit price analysis

 IPO ON-LINE

You can apply all the forthcoming ipo online hasselfree, paperless and time saving work.

CHARGE STRUCTURE

Fee structure for general individual:-

CHARGE CLASSIC ACCOUNT SPEED TRADE

ACCOUNT
Account opening Rs 750/- Rs 1000/-
Brokerage Intraday- 0.10% Intraday- 0.10%
Delivery- 0.50% Delivery-0.50%

40
PRODUCT DETAILS

Online Trading:

CLASSIC ACCOUNT: A/C Opening charges: Rs. 750/-

DEMAT A/C free for first year and Rs.400 from 2nd year onwards (Annual Maintenance charges).
Trading through website Live terminal. No brokerage commitment required. NSE and BSE online. Both
Cash & F&O.

EXPOSURE : 10 TIMES for Intraday (ON MARGINE MONEY)

: 4 TO 6.7 TIMES for 5 days (ON MARGINE MONEY)

Online IPO's available

We have tie up with Nine banks for online fund transfering i.e. HDFC, ICICI, IDBI, CITI, Union
Bank of India, Oriental Bank of Commerce, INDUSIND, UTI bank , Bank of india, Deutsche Bank
& Yes Bank for online money transfer.

 Meanwhile we were suppose to bring documents to open our Demat Account the
documents are mentioned above . After the training of about the company and the the
industry, they provided theoritical knowledge of how to trade in currency(futures),
equity, derivatives( futures and options)
 Learned to calculate the brokerage of different transactions.
 After the theoritical knowledge was over, the demat account was opened for practical
knowlege of the trading online in the Share Market.
 The target was given to open Demat accounts. So the survey of about 100 people was
done to fill the questionaire. And after the anaysis of the findings there were 20 people
who were interested to open accounts . But they were not ready to open their accounts
now.
 The rest of the tenure of my SIP , did trading in all the possible markets and gained
knowledge of how the market fluctuate and its ups and down.

41
 Inshort the following things are:

 Importance of information technology in the field of stock broking is immense.

 The terminal through which the brokers buy and sell shares is software that completely
depends on the internet. For BSE & NSE this terminal has been designed by the software
company. Buying and selling through internet is fast. As soon as the prices of the shares
goes up or comes down then they can be sold or purchased instantly within seconds.
 In BSE & NSE limited. I have learned a lot relating to the finance, learned the meaning
of words that are mostly used in the share market.
 Learned about various product of BSE & NSE limited, learned various aspects regarding
share market.
 Learned how to use online trading terminal
 Learned about various product used in the share market especially demat account.
 Got the practical knowledge of the market
 Learned some marketing techniques also by convincing people to open a demat account.

INSIGHT GAINED
 Information plays a vital role in share market
 It was also observed that many broking houses offering internet trading allow clients to
use their conventional system as well just to ensure that they do not lose them.
 The no of players is increasing at a steady rate and today there are over a dozen of
brokerage houses who have opted to offer not trading to their customers and prominent
 among them as BSE & NSE.
 Many people are also getting aware about the share market so they are started investing
in share market which include equity, commodity and currency market.

42
RESEARCH METHODOLOGY

During this project the necessary inputs taken were primary as well as secondary. The primary
data collection and secondary data collection form an integral part of the study. This is explained
below.

Primary Data

Primary research consists of a collection of original primary data. It is often undertaken after the
researcher has gained some insight into the issue by reviewing secondary research or by
analyzing previously collected primary data. It can be accomplished through various methods,
including questionnaires and telephone interviews in market research, or experiments and
direct observations in the physical sciences, amongst others.

For this report the primary data is collected from the following source
 Discussion with surveillance department officers
 Discussion with managers
 Discussion with sub brokers
 Discussion with employees of the organizations

Secondary Data

Secondary data, is data collected by someone other than the user. Common sources of secondary
data for social science include censuses, organizational records and data collected through
qualitative methodologies or qualitative research. For this study the data is collected from the
following sources

 Books related to risk management and capital market

 Magazines related to the stock market
 Website related to risk management and stock market

43
 RISK MANAGEMENT IN BSE & NSE LIMITED

What is risk management?

Risk management is the structured approach towards managing the uncertainties. Risk
management involves risk identification and risk assessment. Further to avoid the unpredictable
outcomes arising out of risk, the risk can be avoided, reduced or transferred. However, best
possible solution has to be chosen to tackle the risk.

The objective of the Risk management function is to ensure that all risks, which threaten the
business of Stock and Share Markets, are recognized, controlled and reduced to an acceptable
level while all applicable regulatory requirements of the various regulatory authorities are
complied with.

To manage risks like value at risk margin, mark to market margin and extreme loss margin is
maintained. Also the brokers are allowed intraday turnover and gross exposure limits. Brokers
have to maintain minimum base capital and additional base capital with the exchange. Exchanges
like SEBI and NSCCL have taken steps like know your client, continuous surveillance,
mandatory audit etc. Thus every risk broking firm has risk management department.

Risk vs. Return

The risk and return go hand in hand. They have a direct relationship. Higher the risk, higher is
the possibility of better returns and lower the risk, lower is the possibility of better returns.
Investors’ personality, lifestyle, and their financial position play a big role on how much risk
they can comfortably bear. The risk/return tradeoff is the balance, an investor must decide on
between the desires for the lowest possible risk for the highest possible returns. It is important to
keep in mind that low levels of uncertainty (low risks) are associated with low potential return
and high levels of uncertainty (high risks) are associated with high potential returns.

The diagram given below explains the relationship between risks and return. As the risk
increases the probability of getting higher returns also increases and vice versa.

44
 Low risk

Low return

Higher risk

High return

Returns

Risk

Ways to deal with Risk 

Ways to deal with Risk Avoid Retain Reduce Transfer

(a) Avoid the Risk 

Avoidance of risk includes not performing an activity that could carry risk. Avoidance may seem
the answer to all risks, but avoiding risks also means losing out on the potential gain that
accepting the risk may have allowed. Not entering a  business to avoid the risk of loss also
avoids the possibility of earning profit.

(b) Retain the Risk 

Retention of risk involves accepting the loss when it occurs. Risk retention is a viable strategy
for small risks where the cost of insuring against the risk would be greater over time than the
total losses sustained. All risks that are not avoided or transferred are retained by default. This
45
includes risks that are so large that they either cannot be insured against or the premiums would
be infeasible.

(c) Reduce the Risk 

Reduction in risk involves methods that reduce the severity of the loss or the likelihood of the
loss from occurring. Outsourcing could be an example of risk reduction. For example, a
company may outsource its manufacturing of hard goods to another company, while handling
the business management itself. This way, the company can concentrate more on business
development without worrying much about the manufacturing process.

(d) Transfer the Risk 

Risk transference causes another party to accept the risk, typically by contract or hedging.
Insurance is one type of risk transfer which uses contracts.Liability among construction or other
contractors is very often transferred this way. Such transference of risk may include certain cost
like insurance premium.

Process of Risk Management

Identify the areas of risk 

Search for and locate the areas where there can be risk before they become the actual problems for the
organization.

Analyze the risk 

Transform the risks data into decision-making information. Evaluate impact, probability and time frame
of it and classify the risks, and prioritize them.

Plan

On the basis of the data evaluated, plan for the management of risk Planning is done according to whether
the risk is to be avoided, retained, reduced or transferred.

46
Control

Find out any deviations or variance and correct for the same during the execution of risk mitigation plan.

Communicate

Communicate the internal and external information and feedback to the project on the risk activities,
current risks, and emerging risks.

47
 MEASURES TAKEN BY BSE FOR RISK MANAGEMENT

Certain steps or measures are taken by BSE towards the reduction of risks of stock brokers.

 Know your client (KYC)

According to know your client scheme the member brokers of the exchange are
required to obtain detailed information of clients prior to commencement of any transactions
with new clients. A similar procedure is also to be followed for existing clients. This information
is to be made available to the exchange authorities whenever called for. In case the member
broker fails to furnish the same, it may result in penalties to the member brokers.

 Surveillance / Inspection

Surveillance / Inspection department carries out inspection of themember brokers records and

keep a regular check on the activities of member brokers as well as sub brokers as regards the
compliance of the risk management procedures.

 Insurance

The exchange presently has in place insurance policies to protect

itself in the event of losses on account of fire, damage to computer systems and a comprehensive
policy that covers risks faced by the exchange, its member brokersand the clearing houses.

The risks covered under the basic cover of the policy are detailed as below.

 Verification of shares members’ office

The exchange has outlined the process i.e. in case the transaction in a script with one particular
client in a settlement exceeds Rs. 10 lacs then the member has to send the photocopies of the
transfer 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 the fake /
forged / stolen shares from being introduced in the market

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MEASURES TO REDUCE THE RISK

Stock broking firm is highly exposed to the financial risks. Since it poses maximum risk in the
financial markets, risk management in stock broking firms was felt most essential by the
exchanges and its regulatory bodies. National Stock Exchange introduced for the first time in
India, risk containment measures that were common internationally but were absent from the
Indian Securities Market. NSCCL has also put in place a comprehensive risk management
system, which is constantly upgraded to pre-empt market failures. These measures were taken to
reduce the risks at brokers’ end. SEBI has also suggested certain measures to manage the risks
borne by the brokers.

 Margins

There is a lot of uncertainty in the movement of share prices. This uncertainty leading to risk is
sought to be addressed by margining systems by stock markets. Suppose an investor, purchases
1000 shares of ‘ABC’ company atRs.100 on July 1, 2008. Investor has to give the purchase
amount of Rs.1, 00,000 (1000 x 100) to his broker on or before July 2, 2008. Broker, in turn,
has to give this money to stock exchange on July 3, 2008. There is always a small chance that the
investor may not be able to bring the required money by required date. As an advance for buying
the shares, investor is required to pay a certain portion (margin) of the total amount of
Rs.1,00,000 to the broker at the time of placing the buy order. Stock exchange in turn collects
similar amount from the broker upon execution of the order. This initial token payment is called
margin. For every buyer there is a seller and if the buyer does not bring the money, seller may
not get the money. Margin is levied on the seller also to ensure that the gives the shares sold to
the broker who in turn gives it to the stock exchange.

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  Mark to Market Margin (MTM Margin)

Mark to Market margin is calculated at the end of the day on all open positions by comparing
transaction price with the closing price of the share for the day. In the above example a buyer
purchased 1000 shares @ Rs.100 at 11 am on July1, 2008. If close price of the shares on that day
happens to be Rs.75, then the buyer faces a notional loss of Rs.25, 000 on his buy position. In
technical terms this loss is called as MTM loss and is payable by July 2, 2008 (that is next day of
the trade). Incase price of the share falls further by the end of July 2, 2008 to Rs. 70, then
buy position would show a further loss of Rs.5, 000. This MTM loss is payable. In case, on a
given day, buy and sell quantity in a share are equal, that is net quantity position is zero, but
there could still be a notional loss / gain (due to difference between the buy and sell values), such
notional loss also is considered for calculating the MTM payable.

MTM Profit/Loss = [(Total Buy Qty X Close price) - Total Buy Value] - [Total Sale Value -
(Total Sale Qty X Close price)]

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TECHNIQUES TO REDUCE RISK FOR INVESTOR

 Hedging

Hedging means reducing or controlling risk. It is a transfer of risk without buying insurance

policies. It consists of the purchase or sale of equal quantities of the same or very similar
commodities in two different markets at approximately the same time, with the expectation that a
future change in price in one market will be offset by an opposite change in the other market.
This technique is basically used in Derivatives Markets ( Future and Options) For example if you
own a stock that you are worried will decline in price, you can "hedge" your position by either
buying put options on the stock or by selling call options on the stock. So if the price of stock
will decrease, the value of the put options will increase, thereby offsetting part of the loss
incurred in the stock. Similarly, a call option will decline in value as the price of the stock falls.
So if you sold call options, with the hope that they expire worthless, the money you received for
selling the options (called the option premium) would partially offset the losses from your long
position in the stock. Generally, this strategy is not recommended as to reduce their investment
risk because an individual may sometimes end up losing on both sides. Rather, if you own a
stock and it's time to sell, then sell it at the market. This is the best way to limit your investment
risk.

 Averaging

Averaging is another way to reduce the risk of an investor. Averaging is the process of buying
additional shares in a company at lower prices than you originally purchased. For example if you
own 10 lots in JPY Currency ( Yen ) at price 61.75 and the price of JPY is decreasing then you
can again buy 10 lots of JPY at price 61.05 in order do its averaging.

 A basic calculation for average inventory would be:

(Current Inventory + Previous Inventory) / 2

The market price which you will get is

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61.75*10+61.05*10/20 = 61.4

Now 61.4 will be your new market price instead of 61.75 which is the previous price.

 Stop loss

Stop-loss is a widely used term in investment circles. As the name says, it is a price level at
which one should stop or limit his losses in a position. Investing or trading is like gambling when
one looks at from the outcome perspective. When a person gambles or speculates, he does not
know what the outcome will be. He would hope the outcome to be in his favor but it could very
well go against him. The same thing goes for investing or trading. When someone buys a stock,
he might be thinking, and to a great extent hoping, that the stock price would go up, but it could
very well go down. So what should a person do if the prices go contrary to one's expectations?

There are two alternatives: (i) He can continue to hold it believing, and hoping, that it will
ultimately go up; or (ii) He can blame the unexpected mess on his wrong selection, bad
judgment, bad timing or on circumstances/development beyond his control or imagination,
and… get out of the position and to get exit from that position an investor use the technique
known as stoploss.

Stop losses are the same as a stop limit order, in terms of online trading, stop losses are a price
you set at which your shares will sell automatically. Stop losses greatly reduce the risk involved
in trading shares. Whenever you buy (go long) or sell (short)  a share, brokerage accounts allow
you attach stop losses for free to a share.

For example If you own 20 lots of dollar in currency market at dollar 56.75 but it goes down then
an investor can use the strategy known as stoploss in order to minimize his loss. He can set a
price say at dollar 52.5 where his shares will sell automatically and his loss will get minimize.

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 CHAPTER-5

RECOMMENDATION AND CONCLUSION

CONCLUSIONS

Working with BSE & NSE Ltd. to online trading and to study the risk management was a great
experience. The activities of online trading and risk management are the heart of barking industry and
they should be taken care of.

As you know prices of shares in Indian stock market change very swiftly, they are very volatile and
unpredictable too. Therefore, broking firm is a very risky business and chance of financial losses lies in
almost each and every activity of the business. However, with the margin system and use of advanced
technology the transparency of market is growing.

Therefore, to conclude it can be noted that though the business of stock broking is always exposed to the
risk of loss of money but such risk can be managed and reduced through technical analysis and having a
good knowledge of stock market and by strictly adhering to the rules and regulations mentioned by
exchanges, SEBI and NSCCL. This will not only reduce the risk but also organization run smoothly and
grow further.

Through this project I came to a conclusion that BSE & NSE is one of the best broking houses among all
the other firms existing in India have changed dramatically over 3 to 4 years. New and advanced
technologies have barriers and have brought the countrywide market to doorsteps.

The introduction of on-line trading would influence the investors resulting in an increase in the business
of the exchange. It has helped the brokers handling a vast amount of transactions and this can be an
efficient trading delivering, settlement system with adequate protection to investors.

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Due to investors of online trading there has been greater benefit to the investors as they could sell/buy
shares as and when required and that to with online trading.

The broker’s has a greater scope than compared to the earlier times because of invention of online
trading.

The concept of business has change today, this is a service oriented industry hence the survival would
require them to provide the possible service to the clients.

RECOMMENDATIONS

 The exchange should take steps to educate investors about their rights and duties.

 The exchange authorities should increase the investor’s confidence.

 The exchange authorities should be vigilant to curb wide fluctuations of price.

 Necessary steps should be taken by the exchange to deal with the situations arising due to break
down in online trading.

 Every stock broking firm must have a risk management department to keep a strict watch on
market.

 Employees with proper qualifications must be appointed as brokers or sub brokers so that such
qualified staff help in reducing mistakes and errors as they have a proper understanding of the
procedure.

 The clients should be asked to call dealers on the phones only on which the conversation can be

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 recorded. Thus, clients’ calls on personal phones should be avoided. It helps to reduce the
miscommunication and conflicts between client and broker.

 All the documents along with applications for client and sub broker must be verified thoroughly
and all the requirements (e.g. Letter from bank, copy of  passbook, signature, letter of landlord in
case of tenant etc) must be fulfilled.

 The senior officers of brokers must visit periodically to keep a check and understand their
problems.

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 Some suggestions to BSE & NSE Ltd.

 It needs to open more branches to be a topper in market because it has a low distribution network.
 Link as many account as client wants to for online banking.
 Need to tie up with major banks like SBI, Allahabad, and bank of Baroda etc.
 The company should focus on customer satisfaction only not on just taking money from their
pockets.
 Some promotional activities are required for the awareness of the customer.
 Seminars should be held for providing information to prospective and present customers.

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 BIBLIOGRAPHY

Websites:

www.BSE & NSE.com

www.economictimes.com

www.bseindia.com

www.nseindia.com

www.investopedia.com

www.sebi.gov.in

www.wikipedia.com

Newspapers:
The Times of India
The economic times
Business Standard

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