Stock Exchange

Stock Exchange
• Securities mean financial instruments issued by corporate
organizations for collecting capital. It includes equity
shares, preference shares, debentures, bonds and others.
• Stocks: bundles, bunch or lots of securities
• Exchange: Transfer from one to another
• Stock Exchange: Stock or securities transfer from one to
another

2
 Definitions
• “A stock exchange is an exchange or stock market where stock brokers and traders can buy
and/or sell stock (also called shares), bonds and other securities.”
• “Stock exchanges are privately organized markets which are used to facilitate trading in
securities”. ____ Husband and Dockerary.
• “Stock Exchange is an association, organization or body of individuals, whether
incorporated or not, established for the purpose of assisting, regulating and controlling of
business in buying, selling and dealing in securities”. ____ Sec 2 (3), Securities Contracts
(Regulation) Act 1956.
• “Stock Exchanges are an organized marketplace, either corporation or mutual organization,
where members of the organization gather to trade company stocks or other securities”.
• “Stock Exchange is a secondary market of instruments where shares, debentures, bonds,
stocks and fund units of public companies or government companies are sold and bought”.

3
 Features
• Market for Securities
• Second Hand Securities
• Listed Securities
• Organized and Regulated Market
• Specific Location
• Trading only through Members

4
 Functions
1. Mobilization of Saving
2. Capital Formation
3. Pricing of Securities
4. Economic Barometer
5. Investor Protection
6. Liquidity
7. Providing Scope for Speculation
8. Promotes the Habits of Savings and Investment
9. Better Allocation of Capital
10.Contribution to Economic Growth
5
 Management of Stock Exchange
• Executive Committee
• Other Committees
 Organization of Stock Exchange
a) Voluntary Non-Profit Making Organizations
b) Company Limited by Shares
c) Company Limited by Guarantee
 Membership
• Eligibility Criteria
• Types of Membership
Professional Clearing Member (PCM)
Trading Cum Clearing Member (TCM) and Self Clearing
Member (SCM)
Trading Member (TM)
Limited Trading Member (LTM)

7
 Trading Procedure on Stock Exchange
1. Selection of Broker
2. Opening De-mat Account
3. Placing the Order
4. Contract Note/Executing the Order
5. Settlement
– Spot Settlement
– Forward Settlement
8
Stock exchange City Founded
Hamburg Stock Exchange Hamburg/Hanover 1558
Royal Exchange of England London 1571
Frankfurt Stock Exchange Frankfurt 1585
Euronext Amsterdam Amsterdam 1602
Copenhagen Stock Exchange Copenhagen 1620
Berliner Börse Berlin 1685
Euronext Paris Paris 1724
Euronext Lisbon Lisbon 1769
Wiener Börse Vienna 1771
Euronext Dublin Dublin 1793
Euronext Brussels Brussels 1801
London Stock Exchange London 1801
New York Stock Exchange New York 1817
Bombay Stock Exchange Bombay 1875
Hong Kong Stock Exchange Hong Kong 1891
9
 Major Stock Exchanges in India
• Bombay Stock Exchange
• National Stock Exchange
• Over the counter Exchange of India

10
 Bombay Stock Exchange
• The Bombay Stock Exchange
(BSE) is Asia's oldest stock
exchange. Based in Mumbai,
India, BSE was established in
1875 as the Native Share &
Stock Brokers' Association.
Prior to that brokers and
traders would gather under
banyan trees to conduct
transactions.
11
• 1850: Four Gujarati and one Parsi Stockbroker would gather under Banyan trees in front of
Mumbai’s Town Hall where Horniman Circle is now situated.
• 1874: Brokers found a permanent place is known Dalal Street.
• 1875: The Native Share and Stock Broker Association.(9th July)
• 1956: BSE became the first stock exchange recognised by Central Govt. under SCRA.
• 1986: Developed the BSE Sensex
• 1987: Introduced Investor Protection Fund
• 1995: Started online Trading System BOLT (14th March 1995), Website:- www.bse.co.in
• 2005: Incorporation of BSE
– 8th August: Incorporation Certificate
– 12th August: Business Commencement Certificate
– 19th August: BSE becomes a Corporate Entity
• 2010: Introduced Mobile-based Trading
• BSE was also established BSE Institute Limited which provide education and training
financial markets to people seeking employment with stock brokers
12
 Objectives
• To provide an efficient and transparent market for trading in
securities
• To provide a trading platform to small and medium companies.
• To ensure active trading and safeguard market integrity through
an electronically-driven exchange.
• To provide other services like risk management, clearing,
settlement, market data and education to market participants
• To conform to international benchmarks and standards.

13
 National Stock Exchange
• The National Stock Exchange (NSE) operates a nation-wide, electronic market, offering
trading in Capital Market, Derivatives Market and Currency Derivatives segments including
equities, equities based derivatives, Currency futures and options, equity based ETFs, Gold
ETF and Retail Government Securities.
• NSE was set up by Central Govt. on the recommendations of Pherwani Committee in 1991.
• NSE was promoted by leading Financial Institutions, banks and insurance companies at the
behest of the Government of India and was incorporated in November 1992 as a tax-paying
company unlike other stock exchanges in the country.
• June 1994: Wholesale Debt Market (WDM) segment
• November 1994: The capital market (equities) segment
• June 2000: Derivatives segment
• April 1996: S&P CNX Nifty Index
• May 1998: NSE’s Web-site: www.nse.co.in
• Feb 2000: Commence Internet Trading (NEAT)
• Jan 2007: Launch of NSE- CNBC TV 18 media Centre. 14
 Objectives
• Establishing a nationwide trading
facility for all types of securities.
• Ensuring equal access to investors
all over the country.
• Providing a fair, efficient and
transparent securities market.
• Enabling shorter settlement cycles
and book entry settlements.
• Meeting with international
standards and benchmarks

15
 Over the Counter Exchange of India
• OTCEI is established in October 1990 and promoted by the Unit Trust of India, the Industrial Credit and
Investment Corporation of India, the Industrial Development Bank of India, the Industrial Finance
Corporation of India, and other institutions, and is a recognised stock exchange under the SCR Act. OTCEI was
set up by Central Govt. on the recommendations G.S Patel Committee and Abid Hussain Committee.
• Over the counter exchange of India was started functioning in 1992 after the role models of NASDAQ
(National Association of Securities Dealers’ Automated Quotation) and JASDAQ (Japan Association of
Securities Dealers Automated Quotation).
• The corporate office is situated in Bombay. OTCEI has been linked to 42 centers all over India through
computers. OTCEI operates with the use of internet and Telecommunication the country’s first public
switched data network and Telex – the first nationwide information dissemination network and RABMN –
Remote Area Business Message Network.
• Any counter in any of the four hundred cities in India can receive the scrip prices, which are generated by
OTCEI’s central computer in Bombay. Any person or Indian citizen can apply for dealership or membership of
the OTC provided he adheres to the prescribed conditions.
• he OTCEI is no longer a functional exchange as the same has been de-recognised by SEBI vide its order dated
31 Mar 2015
16
• This is the country’s first ring less and
scrip less electronic exchange where
trading of the securities is done on the
computer through a networking of the
computers. It aimed at creating a fully
decentralized and transparent market.
• It provides a trading plat form to small
and less liquid companies that could not
afford the listing fees of the large
exchanges and did not fulfill minimum
requirements for listing.
• It provides the option for primary as well
as secondary markets.
• It provides investors the choice to choose
stocks as per their requirements.
• Information can flow freely market
makers to customers directly.
17
 Terms Related to Stock Exchange
• Listing of Securities
Group ‘A’ Shares: large equity base, large cap
Group ‘B’ Shares: mid-cap
Group ‘C’ Shares: odd lots and special permitted
Group ‘Z’ Shares: defaulted, risky
Group ‘G’ Shares: Government Securities
• Market Capitalization:

Small Cap: less than Rs 2 Crores

Mid Cap: Rs. 2 Crores – Rs. 10 Crores
Large Cap: Rs 10000 crores or more
18
• Broker: commission agent who transacts business on behalf of non-member of the
stock exchange.
• Jobber: He is a speculator or dealer in the stock exchange.
• Bull: purchase securities at a lower price and sales them at higher price in future.
• Bears: securities at higher price and repurchase the same securities at lower price.
• Stage: belong to Primary Market
• Lame Duck: bear loss due to wrong moves in the stock market
• Wolves: fast and smart speculators
• Remisiers: agents of full-fledged members of a stock exchange
• Authorized Clerk: employees of the member of a stock exchange
• Trading Ring: floor of the stock exchange
• Settlement: complete the transactions
• Contract Note: agreement between investor and broker
19
• Insider Trading: trading in shares on the stock exchanges with sensitive
information
• Day Trading: buying & selling securities on same day
• Stock Market Index: measurement of performance of entire stock market
or section of the stock market.
• BSE Sensex: index of BSE, 30 largest and actively traded stocks, 1986
• Nifty: index of NSE, 50 stocks, 1996
• Rally: Upward movement
• Crash: Downward movement
• Stop-Loss: order by investor to broker buy or sell at certain price
• Derivatives:
• Mutual Fund:
20
 Securities an Exchange Board of India
 In 1850 started securities trading in India
 In 1875 established first stock exchange BSE in India.
 Then established ASE, KSE, CSE, MSE and other stock exchanges
 In 1935 Reserve of Bank of India established as per 1934 Act
 Controller of Capital Issues was the regulatory authority before SEBI came into existence; it derived
authority from the Capital Issues (Control) Act, 1947.
 In 1956 enacted Companies Act and Securities Contract Regulation Act.
 In April 12, 1988 the SEBI was constituted as the regulator of capital markets in India under a
resolution of the Government of India (as a non-statutory body).
 It was later made a statutory body on April 4,1992 and it came to be known as the SEBI Act,1992.
 The mission of SEBI is to make India as one of the best securities market in the world and SEBI as one
of the most respected regulator in the world.
  In the year of 1995, the SEBI was given additional statutory powers by the Government of India
through an amendment to the Securities and Exchange Board of India Act 1992.
 It is the apex body to develop and regulate the stock market in India.
 It is known as the watchdog of Indian Capital Market. 21
 Definitions
 SEBI (Securities and Exchange Board of India) is a centrally controlled
body that is entrusted with the task of protecting the interest of
investors in securities and promoting the growth of securities market
by implementing suitable rules and norms”.
 “It is a body set up in response to the provision of
the Securities and Exchange Board of India Act of 1992 with the aim
of protecting the interest of investors, promoting the development
of investments in securities, and controlling the security market”

22
 Role of SEBI
• For Issuers, it provides a market place in which they
can raise finance fairly and easily.
• For Investors, it provides protection and supply of
accurate and correct information.
• For Intermediaries, it provides a competitive
professional market.

23
 Objectives
To protect the interest of investors so that there is a steady flow
of savings into the capital market.
To promote the development and to regulate the securities
market.
Ensure fair practices by the issuers of securities so that they can
raise resources at minimum cost.
To promote efficient services by brokers, merchant bankers and
other intermediaries so that they become competitive and
professional.
24
 Powers of SEBI
Power to call periodical returns from recognized stock exchange.
Power to control and regulate stock exchange.
Power to levy fees or other charges for carrying out the purpose of regulation.
Power to direct enquiries to be made in relation to affairs of stock exchanges
or their members.
Power to make or amend bye-laws of recognized stock exchanges.
Power to grant registration to market intermediaries.
Power to declare applicability of section 17 of the Securities Contract
(Regulation) Act 1956 in any state or area to grant licenses to dealers.
Power to compel listing of securities by public companies.

25
 Functions of SEBI

Regulatory Development Protective

26
 Regulatory Functions
• Registration and regulation of stock brokers, sub-brokers, registrars of all issues,
share transfer agent, merchant bankers, underwriters, portfolio managers, trustee
of trust deed etc.
• Registration and regulation of the working of venture capital fund and collective
investment schemes including mutual funds.
• Registration and regulation of the working of Depositories, Depository Participants,
Custodians of Securities, foreign institutional investors, credit rating agencies, etc.
• Regulating substantial acquisitions of shares and takeover of companies.
• It conducts inspections, enquiries and audits of stock exchanges.
• Perform and exercise such power under Securities Contracts Regulation Act, 1956,
as may be delegated by the Government of India.

27
 Development Functions
• SEBI promotes investor education and training of intermediaries
of the securities market.
• Conducting research and publishing information useful to all
market participants.
• SEBI tries to promote activities of stock exchange by adopting a
flexible and adaptable approach in various ways, such as internet
trading, optional underwriting, IPOs through the stock
exchanges, etc.
• Promotion of self regulatory organizations
28
 Protective Functions
• Prohibition of fraudulent and unfair trade practices.
• Controlling insider trading and price rigging &
imposing penalties for such malpractices.
• Undertaking steps for investor protection.
• Promotion of fair practices and code of conduct in
securities market.

29