University of Petroleum And Energy Studies, Dehradun

Uttarakhand

Securities Market Regulation

(COURSE CODE – CLCP4007)

Securities market infrastructure in India

Submitted to : Mr. Rafique Khan

Assistant Professor, School of Law
University of Petroleum and Energy Studies

Submitted by : Yash
Sap ID : 500085739
Enrolment no. : R760220133
Program : BBA LLB (HONS.)
(CORPORATE LAW)
SEMESTER- VII

1
 Table of Contents
Acknowledgements..................................................................................................3
Introduction..............................................................................................................4
Historical Background of Securities Market in India...............................................4
Role of Important Organisations and Institutions in India Securities Market
Infrastructure............................................................................................................6
Regulatory framework..............................................................................................7
Trading and settlement systems:..............................................................................8
Settlement Process and the Role of Depositories.....................................................9
Market Infrastructure Institutions...........................................................................10
Use of Technology and Data in Modern Securities Markets..................................12
Challenges Faced by Securities Market Infrastructure in India.............................13
Initiatives and Measures to Protect Investors and Promote Financial Literacy.....15
The IPO of Paytm (Case Study).............................................................................16
References:.............................................................................................................17

2
Acknowledgements

I would like to express my sincere gratitude to my university for supporting me. I would like to
express my special thanks of gratitude to my faculty Mr. Rafique Khan for his able guidance,
enthusiasm, patience, insightful comments, helpful information, and support in completing this essay.
His immense knowledge, profound experience, and professional expertise in Securities Market have
enabled me to complete this research successfully. Without his support and guidance, this project
would not have been possible.
I would also like to extend my gratitude to the library staff for providing me with all the resources in
terms of books and online research tools that were required for the primary research of this essay.

Yours Sincerely,
Yash
Sap id - 500085739
Enrolment no. - R760220133

3
Introduction

With their ability to facilitate investment, allocate capital, and promote economic growth,
securities markets are essential to the financial landscape of any given economy. The
importance of securities markets in India cannot be emphasized. The nation's financial
system is based on these markets, which allow the government to finance its operations,
investors to diversify their holdings, and companies to raise capital. The architecture of the
securities market's effectiveness and integrity is essential to India's overall economic growth
and stability.

As articulated by Joshi and Rezania (2018), "Securities markets are fundamental to the
functioning of any modern economy. They serve as a conduit through which savings are
channelled into productive investments, fostering economic growth and job creation." In the
Indian context, this statement finds resonance as the securities markets, comprising stock
exchanges, bond markets, and derivative markets, are integral to the nation's economic
framework.1

The Securities and Exchange Board of India (SEBI) regularly monitors the Indian securities
markets to guarantee fairness, investor protection, and market transparency. Stability in the
market and investor trust depend on this regulatory scrutiny. The Indian securities markets
have undergone substantial development throughout time, becoming more efficient and
accessible with the transition from the antiquated outcry method to extremely advanced
electronic trading platforms.

We will examine the historical history, major institutions and actors, regulatory framework,
technical advancements, and opportunities and problems associated with India's securities
market infrastructure in this research study. Comprehending the intricate aspects of this
infrastructure is crucial to appreciating its significance in the Indian economy and devising
tactics to augment its efficacy and efficiency.

Historical Background of Securities Market in India

When stock trading first began informally in the 19th century under banyan trees, India's
securities markets were born. These markets started to be formalized and regulated in the
early 1900s. Founded in 1875, the Bombay Stock Exchange (BSE) is widely regarded as the
forerunner of stock trading in India. This signalled the start of the nation's structured
securities industry.

An important turning point was the founding of the BSE, which gave investors and traders a
tangible marketplace on which to purchase and sell stocks. Historical perspectives highlight

1
Joshi, P., & Rezania, O. (2018). Capital Market Development and Economic Growth in India: An Empirical
Analysis. Economic Affairs, 63(2), 361-376. doi:10.30954/0424-2513.2.2018.15

4
two significant regulatory developments: the Securities Contracts (Regulation) Act of 1956
and the founding of the Securities and Exchange Board of India (SEBI) in 1992.

The Indian securities market changed from traditional dealing under banyan trees to a highly
automated, electronically driven marketplace, as stated by Kaur and Singh (2019).
Globalization of the market, legislative changes, and technology improvements have all
contributed to this shift."2

Traditional open outcry trading characterized the early history of the Indian securities
markets, but the advent of electronic trading in the 1990s revolutionized the industry.
Leading this technology transformation was the National Stock Exchange (NSE), founded in
1992. The National Exchange for Automated Trading, or NEAT, is the name of the NSE's
automated trading system that has improved market efficiency and transparency.

Many financial instruments, such as government securities, corporate bonds, equity shares,
and derivatives, have been introduced to India's securities markets over time. These
advancements have expanded the investing possibilities available to investors, encouraging
risk management and diversification.

In conclusion, the development of India's securities markets can be traced from unorganized
get-togethers beneath banyan trees to highly developed electronic marketplaces. It shows
how India's financial sector has expanded as a result of alterations to regulations and
improvements in technology.

Key Milestones and Developments in Indian Securities Market

1. The Bombay Stock Exchange (BSE): was established in 1875, which signified the
official start of stock trading in India. It remained one of the oldest stock exchanges in
Asia and offered a consolidated platform for stock trading (Bhandari, 2017).3

2. A 1956 act titled Securities Contracts (Regulation): One significant regulatory

development was the Securities Contracts (Regulation) Act. Its goal was to stop stock
price manipulation and unwanted securities transactions. The groundwork for
regulated stock exchanges in India was established by this statute.

3. Electronic trading and the National Stock Exchange (NSE): The NSE's founding
in 1992 was a pivotal moment. The introduction of automated trading systems by the
NSE led to the transition from open outcry stock trading to electronic trading (Vaidya,
2006).4

4. India's Securities and Exchange Board (SEBI): The establishment of SEBI in 1992
played a pivotal role in the supervision and management of the Indian securities

2
Kaur, J., & Singh, S. (2019). Securities Market in India: A Historical Overview. Asian Journal of Research in Banking
and Finance, 9(5), 72-83.
3
Bhandari, N. K. (2017). An Analytical Study of Bombay Stock Exchange with Reference to SENSEX. International
Journal of Research in Commerce, Economics & Management, 7(3), 9-12.
4
Vaidya, V. K. (2006). A Case Study on the Automated Trading System (SETS) of the National Stock Exchange of India.
SSRN Electronic Journal.
5
 markets. Investor protection, market integrity, and the promotion of honest and open
trade are all part of SEBI's mandate. 5

5. Security Dematerialization: The dematerialization of securities was facilitated by the

establishment of the Central Depository Services Limited and the National Securities
Depository Limited in the late 1990s. This decreased the hazards connected with
actual share certificates and improved the efficiency of trading and settlement.

6. The Establishment of Derivative Markets Derivatives markets: such the Nifty 50

Index futures and options offered by the National Stock Exchange of India (NSE) in
2000 and 2001, gave investors new tools for risk management and avenues for
speculation (NSE, n.d.).6

7. Indian markets are becoming increasingly globalized: as a result of the early 1990s
economic liberalization, which also attracted more international investment and
foreign institutional investors (FIIs) to the country's securities markets, increasing
their integration with the world's financial markets (RBI, 2005).7

8. Introduction of Market Indices: Investors now have benchmarks to monitor the

performance of the Indian stock market thanks to the establishment of many market
indexes, including the BSE Sensex and the NSE Nifty (BSE India, n.d.).8

The Indian securities market has been significantly shaped by these turning points and
advancements, which have improved its efficiency, accessibility, and integration with the
international financial system.

Role of Important Organisations and Institutions in India

Securities Market Infrastructure
SEBI, the Securities and Exchange Board of India:

India's securities markets are primarily supervised and regulated by SEBI, the regulatory
body. Its roles and contributions to the infrastructure of the securities market include:

1. Control & Supervision: SEBI creates rules and policies to guarantee the securities
markets are run in an orderly manner. It oversees a number of organisations, including
mutual funds, brokers, and stock exchanges, in order to preserve investor safety and
market integrity.

2. Investor Protection: SEBI promotes honest and open market practises in an effort to
protect investors' interests. It offers procedures for resolving investor grievances and
guarantees that market players follow moral principles.
5
SEBI. (n.d.). About Us. Securities and Exchange Board of India. https://www.sebi.gov.in/sebiweb/
6
NSE. (n.d.). Evolution of Indian Derivatives Market. National Stock Exchange of India. https://www.nseindia.com/
7
RBI. (2005). Report on Currency and Finance. Reserve Bank of India.
8
BSE India. (n.d.). About BSE. Bombay Stock Exchange. https://www.bseindia.com/

6
 3. Market Development: By launching new goods, promoting creativity, and making it
easier for new players to join the market, SEBI works to advance the growth of the
securities markets.9

Stock exchanges, such as the NSE and BSE: The venues for trading securities are stock
exchanges. Among their roles and accomplishments are:

1. Encouraging Trading: Stock exchanges offer a venue for the purchase and sale of
derivatives, bonds, and stocks.

2. Price discovery: Through the auction process and ongoing trade, they are essential
in establishing the fair market price of securities.10

3. Market Surveillance: To identify and stop fraudulent activity and market

manipulation, stock exchanges carry out market surveillance.11

Clearing Corporations, for example, CCIL, or the Clearing Corporation of India

Limited: Trade clearance and settlement are handled by clearing corporations. Among their
roles and accomplishments are:

1. Risk management: By serving as middlemen in the settlement process, clearing

companies control counterparty risk. They lower the risk of default by guaranteeing
the completion of trades.

2. Settlement: They guarantee the quick and easy exchange of money and securities
between buyers and sellers, which supports the market's smooth operation.

3. Central counterparty (CCP) services: They are offered by CCPs such as CCIL for a
range of financial instruments such as corporate bonds, government securities, and
foreign exchange derivatives.12

Together, these institutions and organisations work to build an infrastructure for the securities
market that is efficient, transparent, and well-regulated, promoting investor confidence and
advancing India's economy as a whole.

Regulatory framework
The regulatory structure that oversees the securities markets in India is intended to preserve
investor protection, uphold market integrity, and guarantee the markets' orderly operation.
The Securities and Exchange Board of India (SEBI) is the central authority responsible for
supervising and regulating the securities markets.

9
SEBI. (n.d.). About SEBI. Securities and Exchange Board of India. https://www.sebi.gov.in/sebiweb/
10
NSE India. (n.d.). About NSE. National Stock Exchange of India. https://www.nseindia.com/
11
BSE India. (n.d.). About BSE. Bombay Stock Exchange. https://www.bseindia.com/
12
Clearing Corporation of India Limited (CCIL). (n.d.). About Us. https://www.ccilindia.com/

7
SEBI's Function in Protecting Investors and Ensuring Market Integrity

In order to maintain investor safety and market integrity, SEBI plays a variety of roles, such
as:

1. Formulating Regulations: SEBI develops and implements regulations that control

the securities markets in a number of ways, including as listing criteria, disclosure
standards, and trading regulations. According to SEBI (n.d.), these rules are intended
to guarantee honest and open market practises.

2. Market Surveillance: To identify and stop fraudulent activity, insider trading, and
manipulation of the market, SEBI carries out market surveillance. Investor trust and
market integrity are preserved by this proactive monitoring.

3. Investor Protection and Education: SEBI takes a proactive approach to investor

education. To assist investors in making wise selections, it offers educational materials
and runs investor awareness campaigns. In order to safeguard the interests of
investors, it also creates grievance redressal procedures.

4. Market Intermediaries: Brokers, mutual funds, and depositories are examples of the
types of market intermediaries that SEBI oversees. By keeping an eye on things, this
supervision makes sure that these organisations uphold the greatest moral standards.

5. Market Development: By launching fresh financial goods and fostering creativity,

SEBI advances market development. Both the expansion of the securities markets and
the admission of new players are made possible by it.

Damodaran (2005) pointed out that "SEBI has been essential to the expansion and
advancement of the securities markets in India. The market has become transparent,
equitable, and investor-friendly as a result of its regulatory actions.13

In a developing nation such as India, SEBI's dedication to market integrity and investor
protection is paramount. It promotes trust between local and foreign investors and helps the
Indian securities markets expand and remain stable.

Trading and settlement systems:

Over time, trading systems in India have seen substantial evolution. The emergence of
computerised trading platforms has revolutionised the buying and selling of stocks. An
outline of India's trading practises, encompassing electronic trading platforms, is provided
below:

1. Open Outcry System: Historically, traders gathered in person on the trading floor to
place orders by yelling and utilising hand gestures. This was the method used by
Indian stock exchanges. Among the well-known exchanges that first made use of this
technique was the Bombay Stock Exchange (BSE).
13
Damodaran, N. (2005). SEBI: A Regulatory Success Story. Economic and Political Weekly, 40(18), 1831-1834.
8
 2. Electronic Trading's Introduction: Early in the 1990s, open outcry trading gave way
to electronic trading. The National Stock Exchange (NSE) was a trailblazer in the
implementation of automated trading systems, having been founded in 1992.Among
the first electronic trading platforms in India were the National Exchange for
Automated Trading (NEAT) of the NSE and the BOLT (BSE Online Trading) of the
BSE.14

3. Order Matching Systems: Order matching systems are used by electronic trading
platforms. They automatically match buy and sell orders according to priority and
price. As a result, being physically present on the trade floor is no longer necessary.

4. Algorithmic and High-frequency Trading: In India, algorithmic and high-frequency

trading have also been facilitated by electronic trading. To increase market efficiency
and liquidity, traders execute trades quickly using computer algorithms.

5. Mobile and Online Trading : Online trading platforms and mobile apps have grown
in popularity as a result of the widespread use of mobile and internet technology. The
markets are accessible to individual investors from the comfort of their own devices.

Settlement Process and the Role of Depositories

The exchange of securities and money between buyers and sellers is a part of the settlement
procedure in Indian securities markets. Depositories are essential to this procedure because:

1. Securities Dematerialization: In India, the majority of securities are held in a

dematerialized or electronic format. Investors can hold and trade securities
electronically by opening demat accounts with depository participants (DPs).

2. Trade Confirmation: The depository receives a trade confirmation from the

exchange following an execution of a trade. Information about the securities
purchased or sold is included in this confirmation.

3. Settlement: T (Trading) day and T+2 (two working days following the trading day)
are the two stages of the settlement procedure. The transfer of securities from the
seller's demat account to the buyer's demat account and the transfer of money from the
buyer's bank account to the seller's bank account are made easier on T+2 by the
depository.

4. Depositories in India: The Central Depository Services Limited (CDSL) 15 and the
National Securities Depository Limited (NSDL)16 are India's two central securities
depositories. These depositories keep up-to-date electronic ownership records for a
variety of financial assets, including bonds, equities, and mutual fund units.

14
National Stock Exchange of India (NSE). (n.d.). Trading System. https://www.nseindia.com/
15
Central Depository Services Limited (CDSL). (n.d.). About Us. https://www.cdslindia.com/
16
National Securities Depository Limited (NSDL). (n.d.). Home. https://nsdl.co.in/

9
 5. Participants in the Depository (DPs): DPs act as middlemen between depositories
and investors. They offer services pertaining to the transfer and upkeep of securities as
well as assistance to investors in opening and managing Demat accounts.

Depositories play a crucial role in streamlining the settlement procedure, cutting down on
paperwork, and lowering the possibility of fraud or loss connected to actual share
certificates.

Market Infrastructure Institutions

Role of Market Infrastructure Institutions in Facilitating Securities Markets

Depositories, custodians, and registrars are examples of market infrastructure institutions that
are crucial to the smooth operation of the securities markets in India. They support the
market's transparency, safety, and efficiency. Below is a summary of their functions and the
ways in which they support the securities markets:

1. Depositories:
These central organisations facilitate the efficient transfer of ownership by holding securities
in electronic form. The National Securities Depository Limited (NSDL) and the national
Depository Services Limited (CDSL), two national securities depositories in India, are
crucial institutions.

Function:

 Dematerialization: To make securities easier to trade and transfer, depositories

help convert physical securities into electronic or dematerialized form.

 Safekeeping: They offer a safe haven for the preservation and storage of
securities, lowering the possibility of theft.

 Efficient Settlement: Depositories streamline the settlement process and

guarantee correct and timely transfer of securities by keeping electronic records
of ownership.

2. Custodians:
Financial institutions or specialised businesses, such as foreign portfolio investors (FPIs) and
institutional investors, are among the investors for whom custodians hold and protect
securities.

Function:

 Safekeeping and custody: Custodians guarantee the secure custody of

securities, thereby alleviating investors' operational burden.

10
  Company acts: They help investors handle company acts like rights issues,
dividends, and interest payments.

 Foreign Investors: Custodians are essential in helping foreign investors stay in

compliance with regulations and make investments in the Indian market.

3. Registrars and Transfer Agents (RTAs):

RTAs handle corporate actions, update the investor database, and keep track of bondholder
and shareholder information.

Function:

 Shareholder Services: RTAs oversee dividend distribution and share

registration, which includes issuing and transferring shares.

 Communication: They serve as a liaison between businesses and their

stockholders, promoting correspondence and providing updates on business-
related issues.

 Compliance: RTAs assist businesses in meeting legal obligations pertaining to

corporate actions and shareholder records.

Collectively, these market infrastructure organisations improve how well the securities
markets operate by:

 Simplifying Ownership and Transfer: Depositories make the transfer of

securities simple, cutting down on paperwork and fraud risk.

 Encouraging Institutional Participation: Custodians facilitate institutional

investors' entry into the market, particularly those from overseas.

 Regulatory Compliance: Registrars assist businesses in keeping correct

shareholder records, which guarantees adherence to legal and regulatory
obligations.

 Improving Transparency: These organisations work together to support the

securities market's integrity and transparency, which is essential for
maintaining investor confidence and market stability.

To safeguard investors and maintain market integrity, the Securities and Exchange Board of
India (SEBI) oversees and regulates the functions and activities of these organisations in
India.17

Use of Technology and Data in Modern Securities Markets

17
Securities and Exchange Board of India (SEBI). (n.d.). Depositories. https://www.sebi.gov.in/sebiweb/
11
The way financial instruments are traded, cleared, and settled has changed in the modern
securities markets as a result of the use of technology and data. The infrastructure of the
market has been greatly improved by technological breakthroughs, which have increased
accessibility, efficiency, and transparency. An outline of how technology is used and how it
affects market infrastructure is provided below:

1. Platforms for Electronic Trading:

Use of Technology: Traders can execute orders electronically through electronic trading
platforms, such as order matching systems on stock exchanges. These platforms run quickly
and match buy and sell orders using sophisticated algorithms.
Effect on Market Infrastructure: The efficiency and liquidity of the securities markets have
grown as a result of electronic trading. It has made trading possible from any location with an
internet connection and diminished the significance of conventional open outcry systems.

2. Algorithmic and High-frequency Trading:

Use of Technology: To execute trades at incredibly fast speeds, high-frequency and
algorithmic trading rely on sophisticated algorithms and supercomputers. These algorithms
have the speed to execute trades in milliseconds and analyse big databases.
Effect on Market Infrastructure: By lowering spreads and increasing liquidity, these trading
techniques have enhanced market efficiency. They have, however, also sparked worries about
the fairness and stability of the market, which has prompted regulatory examination.

3. Artificial Intelligence and Data Analytics:

Utilisation of Technology: Artificial intelligence (AI) and data analytics are used to process
massive amounts of market data in real-time. AI systems are able to recognise trade trends,
forecast changes in the market, and evaluate risk.
Impact on Market Infrastructure: Trading methods, risk management, and market
surveillance have all improved thanks to data analytics and artificial intelligence.

4. Distributed ledger technology and blockchain:

Technology Use: Distributed ledger technology (DLT) and blockchain have been investigated
for clearing and settlement procedures. They provide a decentralised, unchangeable
transaction ledger.
Effect on Market Infrastructure: DLT has the potential to improve transparency, minimise
counterparty risk, and expedite clearing and settlement, even if it is not yet extensively used.
Also, it can make the post-trade procedure simpler.

5. Trading using Mobile and Online:

Technology Use: Retail investors can now access the securities markets from their computers
and cell phones thanks to the widespread availability of online trading platforms and mobile
apps.
Impact on Market Infrastructure: By facilitating retail investing, these platforms have
expanded market participation and improved retail investors' access to the market.

6. Risk management with big data:

Use of Technology: Financial institutions use big data technologies to process and analyse
large datasets in order to uncover opportunities, assure compliance, and assess market risks.

12
Impact on Market Infrastructure: Risk management has been enhanced by big data analytics,
enabling market players to react quickly to changes in the market and make better
judgements.

7. Distribution of Market Data and Information:

Use of Technology: Digital channels and data suppliers enable the distribution of information
and real-time market data feeds.
Market Infrastructure Affected: For well-informed decision-making, timely and reliable
market information is essential. Real-time distribution of market data has been made possible
by digital platforms.

Challenges Faced by Securities Market Infrastructure in India

India's securities market infrastructure has a number of obstacles to overcome, including

market volatility, technological advancements, and regulatory compliance. Let's examine
these difficulties and point out areas that offer room for improvement:

1. Adherence to regulations:
Challenge: The complicated and ever-changing regulations governing India's securities
market can make it difficult for market players to comply. It might be difficult to keep up
with the constant changes in rules, tax concerns, and reporting needs.

Possibility: Encouraging regulatory stability and streamlining procedures can improve

market efficiency. Market players can comply with regulations more easily if they are given
clear instructions and have access to user-friendly compliance tools.18

2. Technological
Challenge: Although India has made great progress in implementing electronic trading
systems, there are still issues with data management, cybersecurity, and technical
infrastructure. It is imperative to guarantee the robustness of technological systems and
safeguard against cyberattacks.

Opportunity: The securities market may be made more effective and resilient by boosting
cybersecurity awareness, investing in cutting-edge technology infrastructure, and
encouraging innovation. Promoting the use of fintech solutions can increase the efficiency
and accessibility of the market.

3. Volatility of the Market:

Challenge: Investors may face risks and uncertainties due to market volatility, which is
impacted by both domestic and international causes. Volatility in the market can cause
investor mistrust and interfere with trade.

Opportunity: Effective risk management procedures, improved market surveillance, and

better risk assessment tools can all assist investors lessen the effects of market volatility.
Furthermore, the market might become more resilient to market swings by creating and
encouraging diversified investment options.

18
SEBI. (n.d.). About SEBI. Securities and Exchange Board of India. https://www.sebi.gov.in/sebiweb/
13
 4. Education for Investors:
Challenge: One enduring issue in India is the lack of investor knowledge and financial
literacy. It's possible that many investors—retail investors in particular—don't completely
comprehend the intricacies of the securities markets.

Possibility: Encouraging investor education via programmes such as conferences, workshops,

and online materials can provide investors the knowledge they need to make wise choices.
Investors with greater education are more likely to engage in the market actively, which fuels
its expansion.

5. Market Liquidity and Depth:

Challenge: It can be difficult to guarantee deep and liquid markets for all kinds of assets,
especially for smaller businesses and less liquid securities.

Possibility: Increasing market depth and liquidity can be achieved by luring foreign
investment, supporting the growth of bond markets, and encouraging the listing of new
businesses. Additional contributors include market makers and other liquidity sources.19

6. Accessibility and Inclusion:

Challenge: It's still difficult to make the securities market more inclusive and accessible,
especially for small and remote investors.

Possibility: Increasing the use of digital and mobile platforms, streamlining investment
procedures, and promoting financial inclusion can all help a larger group of investors have
greater access to the market.

7. Worldwide Integration:
Challenge: Although India has made steps to integrate with international financial markets,
more work needs to be done to harmonise laws and boost involvement from other countries.

Possibility: By fostering global market integration, bringing in foreign institutional

investment, and enhancing international cooperation, India's securities market can become
deeper and liquid by integrating with other global markets.

In conclusion, despite the numerous obstacles that India's securities market infrastructure
must overcome, there are chances for expansion and improvement provided these obstacles
are carefully addressed. India's economic growth and stability can be greatly enhanced by a
well-managed, technologically sophisticated, and investor-friendly securities market.

Initiatives and Measures to Protect Investors and Promote

Financial Literacy

The integrity and viability of the securities markets depend heavily on investor protection
and financial literacy. Around the world, governments and regulatory agencies—including
19
BSE India. (n.d.). About BSE. Bombay Stock Exchange. https://www.bseindia.com/
14
those in India—have put in place a number of programmes and policies aimed at protecting
investors and raising the level of financial literacy. I'll look at a few of the most important
programmes and policies here, with an emphasis on India, and citations where appropriate:

1. The Securities and Exchange Board of India (SEBI):

Investor Education and Protection Fund (IEPF): To protect investors' interests, SEBI
established the IEPF. Shares and unclaimed dividends are deposited into this fund, and
attempts are undertaken to reunite them with their legitimate owners (SEBI, n.d.).
Investor Grievance Redressal Mechanism: In order to quickly handle investor complaints and
concerns, SEBI has put in place a strong grievance redressal structure.

2. Programmes for Investor Awareness:

Investor Education and Protection Fund (IEPF) of SEBI: To inform investors on the benefits
and hazards of investing in securities, SEBI holds a number of investor awareness
programmes, workshops, and seminars throughout India.20

3. Regulatory Measures:
Financial intermediaries are mandated by regulatory bodies to furnish investors with risk
assessment tools and guidelines so that they can make well-informed investment decisions
(SEBI, 2016).21
Required Disclosures: Financial institutions and listed businesses are required by regulatory
bodies to provide thorough disclosures. Investors are better able to comprehend the financial
stability of the companies in which they invest because to this transparency (SEBI, 2019).

4. Programmes for Financial Literacy:

The National Institute of Securities Markets (NISM) is a vital resource for market players'
and investors' education and training. It provides a large selection of courses and certification
programmes to improve financial literacy (NISM, n.d.).
National Stock Exchange (NSE) Academy: To educate traders and investors, NSE Academy,
a division of the NSE, provides a range of financial literacy courses and programmes (NSE
Academy, n.d.).

5. Funds for Investor Protection:

Investor Protection Funds of Stock Exchanges: In the event that trading members or
stockbrokers’ default, investors will be compensated by the stock exchanges in India. For
investors, these funds offer a safety net (NSE, 2022).

These programmes and actions highlight the dedication of regulatory agencies, academic
institutions, and players in the financial markets to safeguarding investors and improving
their financial literacy. The goal is to provide investors with the information and resources
they need to make wise decisions about their investments while protecting their interests.22

20
Securities and Exchange Board of India (SEBI). (n.d.). Investor Education and Protection Fund (IEPF).
https://www.sebi.gov.in/sebiweb/
21
Securities and Exchange Board of India (SEBI). (2016). Circular: Standardization of Risk-O-Meter.
https://www.sebi.gov.in/sebiweb/
22
ecurities and Exchange Board of India (SEBI). (2019). Circular: Continuous Disclosures under SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015. https://www.sebi.gov.in/sebiweb/
15
The IPO of Paytm (Case Study)

One of the top providers of digital payments and financial services in India, Paytm made its
initial public offering (IPO) in November 2021. This incident is a real-world example of how
India's securities market infrastructure functions.

Vital Points:

1. IPO Procedure: A number of market infrastructure components were involved in

Paytm's IPO. In order to obtain regulatory permission, the firm submitted its
prospectus to the Securities and Exchange Board of India (SEBI).23 The company's
financials, disclosures, and compliance with listing standards are all carefully
examined as part of the approval process (SEBI, 2021).
2. Price discovery: As part of the IPO, the issue price was ascertained using book-
building. The ultimate offer price was determined by taking into account the demand
from investors, who made bids at several price points (NSE, 2021).24
3. Stock Exchanges: Two of the major participants in India's securities market
infrastructure, the National Stock Exchange (NSE) and the Bombay Stock Exchange
(BSE), have listed Paytm's shares (BSE, 2021).25
4. Depositories: Following the initial public offering (IPO), shareholders who purchased
Paytm shares received electronic statements of their ownership from depositories
including the National Securities Depository Limited (NSDL)26 and the Central
Depository Services Limited (CDSL) (NSDL, n.d.; CDSL, n.d.).27
5. Regulatory Oversight: SEBI was essential in maintaining investor protection,
regulatory compliance, and market integrity during the process (SEBI, 2021).
The Paytm IPO serves as a practical illustration of the operations of the Indian securities
market infrastructure, encompassing the functions of depositories, stock exchanges,
regulatory bodies, and the IPO procedure itself.

References:

Securities and Exchange Board of India (SEBI). (n.d.). Investor Education and Protection
Fund (IEPF). https://www.sebi.gov.in/sebiweb/

Securities and Exchange Board of India (SEBI). (2016). Circular: Standardization of Risk-
O-Meter. https://www.sebi.gov.in/sebiweb/

23
Securities and Exchange Board of India (SEBI). (2021). Prospectus for Public Offer/ Rights Issue/ Debt Issue.
https://www.sebi.gov.in/sebiweb/
24
National Stock Exchange (NSE). (2021). Paytm IPO. https://www.nseindia.com/
25
Bombay Stock Exchange (BSE). (2021). Paytm Limited IPO. https://www.bseindia.com/
26
National Securities Depository Limited (NSDL). (n.d.). Home. https://nsdl.co.in/
27
Central Depository Services Limited (CDSL). (n.d.). Home. https://www.cdslindia.com/

16
Securities and Exchange Board of India (SEBI). (2019). Circular: Continuous Disclosures
under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
https://www.sebi.gov.in/sebiweb/

National Institute of Securities Markets (NISM). (n.d.). Home. https://www.nism.ac.in/

National Stock Exchange Academy (NSE Academy). (n.d.). Home.
https://www.nseacademy.com/

National Stock Exchange (NSE). (2022). Investor Protection Fund (IPF).

https://www.nseindia.com/

Securities and Exchange Board of India (SEBI). (2021). Investor Alerts.

https://www.sebi.gov.in/sebiweb/

National Stock Exchange of India (NSE). (n.d.). Trading System. https://www.nseindia.com/

Central Depository Services Limited (CDSL). (n.d.). About Us. https://www.cdslindia.com/

National Securities Depository Limited (NSDL). (n.d.). Home. https://nsdl.co.in/

Joshi, P., & Rezania, O. (2018). Capital Market Development and Economic Growth in
India: An Empirical Analysis. Economic Affairs, 63(2), 361-376. doi:10.30954/0424-
2513.2.2018.15

17