You are on page 1of 45

Stock Exchange

The stock exchange is the market for old securities I.e those which are already been issued. A market in which securities are bought and sold: "the company was floated on the Stock Exchange (WIKI)

Characteristic Stock Exchange


Risk/Return Liquidity Global Regulated Volatility

Stock Exchange Relationship with New Issue market


The stock exchange provides the continuous platform to buy and sell the securities issued in stock exchange market, making the stocks highly liquid

Listing on stock exchange adds to the prestige of the firm, that helps the number of subscriptions in first issue market Listing in stick exchange gets the stock exchanges involved in issue which helps them making a fair issue

Both the market are integrated into each other, if the stock the stock prices go up so will the new issue.

Functions of stock market


Liquidity and marketability Safety of funds. Supply of long term funds Flow of capital to profitable venture Motive for improved performance Promotion of investment Reflection of business cycle

Contd
Marketing of new issues Miscellaneous Services

Recognition of stock exchanges


The stock exchanges in India have to be recognized by the central government under SCRA (securities and contract regulation act 1956) and SEBI, any Stock exchange which needs Recognition under SEBI act has to submit an --

Contd
-- application in prescribed manner to the government, the application must comply the following 1. A copy of bylaws of the stock exchange for its operations 2. A copy of rules its constitution, governing body, powers and duties of office bearers etc.

Grant of recognition:- this will be granted by government provided the following has been fulfilled 1. The rules and by-laws of the stock exchange applying for registration must ensure fair dealing and protect the interest of the the investors

2. The stock exchange concern must be willing to comply with any other conditions that may be imposed by the government from time to time. 3. The grant of recognition will be in the interest of trade as well as in the public interest.

Renewal of recognition
If any stock exchange intends to renew its recognition, it must once again make an application to central government in the aforesaid manner 3 months prior to expiry of current recognition.

Withdrawal of recognition
The central government may withdraw the recognition granted to any of the Stock exchanges in the country at any time if it opines that the recognition granted is against the interest of trade or public interest, While doing so there should be ample opportunity given to SE to explain the position. How ever such withdrawal will have no effect on the contracts entered before the withdrawal

Organization of SE in India
The following stock exchanges perform as AOP( Association of persons)

The Following are the list of stock exchanges in India

List of the stock exchange


Bombay Stock Exchange (BSE) National Stock Exchange of India (NSE) Indian Commodity Exchange (ICEX) United Stock Exchange of India (USE) Multi Commodity Exchange (MCX) Over the Counter Exchange of India (OTCEI) Inter-connected Stock Exchange of India (ISE) Madras Stock Exchange (MSE) Coimbatore Stock Exchange (CSX) Ahmedabad Stock Exchange (ASE) Bhubaneshwar Stock Exchange (BhSE) Cochin Stock Exchange (CSE) Hyderabad Stock Exchange (HSE) Calcutta Stock Exchange (CSE)

Delhi Stock Exchange (DSE) Bangalore Stock Exchange (BgSE) Madhya Pradesh Stock Exchange, Indore Jaipur Stock Exchange (JSE) Magadh Stock Exchange, Patna UP Stock Exchange (UPSE) Vadodara Stock Exchange,Vadodara (VSE) Guwahati Stock Exchange Ltd Ludhiana Stock Exchange Association Ltd Kanara Stock Exchange Ltd

Mangalore Stock Exchange Ltd Pune Stock Exchange Ltd Saurashtra Kutch Stock Exchange Ltd Meerut Stock Exchange Ltd Intrex Trade Exchange Ltd United Stock Exchange of India Mahurat trading

Management
The recognized stock exchanges are managed by Governing Boards. The governing boards consists of elected member directors from stock brokers members, public representatives, government nominee, and nominees nominated by SEBI.

The Powers of Management


Selection of office bearers and setting up of committees like listing committee, arbitration committee, Defaulters committee etc. Admission and expulsion of members. Managing of properties and finances of the exchange Framing and interpreting of rules bylaws etc for the regulation of stock exchange

Adjudication of disputes among members or outsiders. Managing the best interest of affairs of the stock exchange in the best interest of the investors and public interest

Members
To become a member of stock exchanges a person must possess the following qualification. He should be citizen of India He should not be less than 21 years of age He should not have been adjudged bankrupt or insolvent.

Listings Of securities
The securities in BSE are listed in 3 different groups 1. Group A 2. Group B 3. Group c

Group A criteria
The company has equity base of Rs 10 crore The Market capitalization of Rs 254-30Crore The public holing's of 35-40% Have a share holders 15000 to 20000

He should not have been convicted for an offence involving fraud or dishonesty. He should not be engaged in any other business except dealing in securities. He should not have been expelled by any other stock exchanges in the country

Group B
All companies not included in group A, care clubbed under this category. B1 is ranked higher than B2. B1 and B2 groups will be merged as a single Group B effective from March 2008.

Group c
In group c only odd lots and permitted securities are included. A number of securities that are less than the market lot are known as odd lots.

Advantages of listings
Facilitates buying and selling of securities Ensures Liquidity Offers wide publicity Assures finance Enables borrowing Protects investors

limitations
Leads to speculations Degrades companies reputations Discloses vital information to competitors

Listing procedure
Certified copies of memorandum and articles of association, prospectus or statement in lieu of prospectus, underwriting agreements, agreements with vendors and promoters etc Specimen copies of shares and debentures, letter of call and allotment Copies of Balance sheet

Copies of offers for sale and circulars or advertisements offering any securities for subscription or sale during last 5 years Certified copies of arrangements with managerial personnel Certificates of dividends and bonus paid during last 10 years

A statement showing dividend or interest in arrears ( if any). A brief history of company Particulars regarding its capital structure. Particulars of shares and debentures for which permission to deal is applied for their issue

A statement showing the distribution of shares along with list of highest 10 share holders of each class or kind of securities of the company stating the numbers of shares held by them. Particulars of shares forfeited Certified copies of agreements if any with the industrial finance corporation, icici etc

Listing agreement with necessary initial and annual listings fee

Criteria for listings


At least 60% of each class of securities issued must be offered to the public for subscription and minimum issued capital should be Rs 3 Crore The minimum public offer for subscription should atleast 25% of each issue The issue must be advertised for 2 days at least in News Papers

The company should be of fair size 9 having broad based capital) There must be at least 10 public shareholders for every rs 1 lakh share for fresh issue capital and 20 in case of subsequent issue A company having more than rs 5 crore paid up capital must be listed on more than one SE, listing on regional SE is compulsory

The company must pay interest on interest on the excess application money received at the rates ranging between 4% 15% depending upon delay beyond 10 weeks

The certificate to the effect the shares form promoters quota are not sold or transferred for a period for 3 years must be submitted

Listing obligations
The company has to notify the stock exchange The date of board meeting at which the declaration or recommendation of dividend or the issue of right or bonus share will be considered Any change in company Mananagment by death, resignation removal or otherwise

Any issue of new shares ( before intimating to share holders) Any change in company's capital structure Any material change in general character or nature of companies business Any reissue of fortified securities or issuing reserve securities.

Any action that will result in redemption, cancellation or retirement of in securities Any intention of drawing of listed securities Any information necessary to enable the share holders to apprise the companies position in SE

Additional Obligation
The company must recommend or declare all dividend/ cash at bonus at least 5 days before the commencement of the closer of the transfer books The company must advice the SE in writing of all such dividend/ cash bonus recommended or declared immediately after board meeting has been held

The company must close the transfer books only for the purpose of declaration of dividend or for the issue of rights/ bonus shares The company must grant to shareholders the right of renunciation in all cases of the rights issue

The company must undertake to maintain all the letters of allotment regret, acceptance and rights serially and to issue letters allotment and regret simultaneously at the same time The company must issue receipt for all securities deposited for registration/ exchange/ subdivision or for any other purpose and it should not change any fee for it

Listing Agreement
The stock exchange authorities will scrutinize the application carefully and if they are satisfied with all the particulars/ documents submitted, they will call upon the company to execute a listing agreement. The agreement contains rules and regulations which the company should strictly follow or the SE will have the right to suspend or withdraw the listing facility