FINANCIAL

MARKET

BY HENNA PUNJABI
 Syllabus
• Financial Markets – Concept, functions and types
• Money markets and its instruments
• Capital market and its types (primary and secondary),
methods of floatation in the primary market
• Stock Exchange – Functions and trading procedure
• Dematerialisation
• SEBI – objectives and functions
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What is Financial Market ?
• Link between savers and borrowers
• Surplus holders to needy
• Investors are surplus units
• Business units are deficit units

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Functions of Financial Markets
• Mobilisation of savings and channelising them into
the most productive uses
• Facilitate price discovery
• Provide liquidity to financial assets
• Reduce the cost of transaction

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 Primary Market

Financial Market
Capital Market
Secondary Market

Treasury Bills

Commercial Paper

Money Market Commercial Bill

Certificate of
Deposit

Call Money
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 MONEY
MARKET

3. 4. 5.
1. Call 2. Treasury
Commercial Commercial Certificate
Money bills
bills papers of deposits

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 Money Market
• Short term funds
• Maximum 1 year maturity period
• Easy to buy and sell
• Low to moderate risk
• Not like a vegetable market or cloth market
• Temporary shortage of cash
• E.g. 15 days I have money, I can put it in money market
• If I need money in emergency can prefer money market
• Short term needs – Money market
• Long term needs – Capital market
• RBI, Commercial Banks, State Govt., Corporate Market
• Imp. For exams

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 1. Treasury Bills
• Issued by RBI on behalf of Government of India.
• Popularly known as T. Bills and Zero Coupon Bonds
• Less than a year maturity period
• Issued in form of promissory note. Promissory note is created by debtor. “I
promise to pay ____ on ___.
• They issue Treasury Bills at a discounted price and return money after
maturity on face value. The difference is your earnings.
• Treasury Bill Face value Rs.100, but purchased by investor at a discounted
price i.e. Rs.90, hence on maturity the bank will repay Rs.100 on maturity.

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 1. Treasury Bills
• Govt. needs money to meet short term expenses
• Safe and negotiable means of investment as its by GOI.
• They have high yield value ad are highly liquid in nature.
• Issued at a minimum price of Rs.25000 or in multiples thereof.
• E.g. I bought 4 T.Bills of Rs.25000 each at a discounted price of Rs.96,000.
Then on maturity (e.g. 3 months) I will get Rs.1,00,000 the face value of
T.Bills.

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 2. Commercial Paper
• Promissory note, Negotiable, unsecured
• Easily transferrable like notes
• Large and creditworthy companies issue commercial paper
• They are issued by companies at lower rates of interest than market rates.
• 15 days to 1 year
• Sold at a discount and paid at par.
• Fixed maturity period
• Seasonal and working capital needs
• An alternative to Bank borrowings
• Bridge Financing (meeting floatation costs)
• Brokers, valuers, underwriters
• To raise 3 cr. We need 10 lacs floatation that could be availed by Commercial paper.

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 3. Call Money
• Interbank transactions
• Short term
• 1 – 15 days
• Banks have to maintain reserves (CRR & SLR) with RBI
• The rate of CRR keeps changing and so to fill the gaps Banks are in need
of money.
• It is repayable on call i.e. on demand coming from funds provider
• Call rate is the rate charged and it keeps changing hour to hour
• Reserves to RBI is a security from banks e.g. 4%
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 4. Certificate of Deposit
• This is issued by Commercial banks and Financial Institutions.
• Issued to individuals, corporations and companies
• If deposits are less and loans are more in demand in the market, then
banks issue ‘Certificate of Deposit’.
• Banks issue them during periods of tight liquidity
• Bank issue CD when the deposit growth of banks is slow but the
demand for credit is high
• It is negotiable and unsecured
• 1 year maturity period.
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 5. Commercial Bills
• Bills of Exchange is created by creditor. “I order Mr._____ to pay
Rs.____ to me on date ___.”
• It is used to finance the credit sales of firms.
• B.o. Exchange is transferrable and can be given to banks
• When goods are sold on credit, the buyer becomes liable to make
payment on a specific date in future. The seller could wait till the
specified date or make use of a bill of exchange. The seller (drawer) of
the goods draws the bill and the buyer (drawee) accepts it.

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 5. Commercial Bills
• On being accepted, the bill becomes a marketable instrument and is
called a trade bill. These bills can be discounted with a bank if the
seller needs funds before the bill matures. When a trade bill is
accepted by a commercial bank it is known as a commercial bill.
• It is also known as Trade Bill.

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 Treasury Bills Commercial Call Money Certificate of Commercial Bills
Paper deposit
Issue GOI → RBI Companies Companies Banks Banks

Form Promissory Note Promissory Note Loan Deposits Bill of Exchange

Risk ↓ ↑ ↓ ↓ ≈

Maturity 1 year 1 year 1 – 15 days 1 year 1 year

Misc. Discounted Bills Seasonal WC Interbank Bank has less WC needs

needs by transactions for Deposits and
Creditworthy CRR / SLR more loan
companies applications

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 CAPITAL MARKET
• Capital market can be defined as the mechanism which channelises
saving into investment or productive use. Capital market allocates the
capital resources amongst alternative uses. It intermediates flow of
savings of those who save a part of their income from those who
want to invest in productive assets.

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Features of Capital Market
• Link between savers and investment
opportunities
• Deals in long term investment
• Utilises intermediaries
• Determinant of capital formation
• Government rules and regulations

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Types of Capital Market
• PRIMARY MARKET (NEW ISSUE MARKET)
• SECONDARY MARKET (STOCK EXCHANGE)

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Primary Market
• New issues market
• Securities sold for first time
• Directly with investors

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Methods of Floatation of Securities in
Primary Market
• Public issue through prospectus
• Offer for sale (by brokers to general public)
• Private placement (by brokers to selected clients)
• Rights issue (rights to shareholders)
• Electronic Initial Public Offer (e-IPO)

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 Methods of Floatation of Securities in
Primary Market
1. Public issue through prospectus :
Offer through prospectus is the most popular
method of raising funds by public companies in the
primary market. This involves inviting subscription
from the public through issue of prospectus. A
prospectus makes a direct appeal to investors to
raise capital, through an advertisement in
newspapers and magazines. The issues may be
underwritten and also are required to be listed on at
least one stock exchange. The contents of the
prospectus have to be in accordance with the
provisions of the Companies Act and SEBI disclosure
and investor protection guidelines.
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Methods of Floatation of Securities in
Primary Market
2. Offer for Sale:
Under this method securities are not issued
directly to the public but are offered for sale
through intermediaries like issuing houses or
stock brokers. In this case, a company sells
securities enbloc at an agreed price to brokers
who, in turn, resell them to the investing
public.

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Methods of Floatation of Securities in
Primary Market
3. Private Placement:
Private placement is the allotment of
securities by a company to institutional
investors and some selected individuals. It
helps to raise capital more quickly than a
public issue. Access to the primary market
can be expensive on account of various
mandatory and non-mandatory expenses.
Some companies, therefore, cannot afford a
public issue and choose to use private
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Methods of Floatation of Securities in
Primary Market
4. Rights Issue:
This is a privilege given to existing shareholders to
subscribe to a new issue of shares according to the
terms and conditions of the company. The
shareholders are offered the ‘right’ to buy new shares
in proportion to the number of shares they already
possess.

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 Methods of Floatation of Securities in
Primary Market
5. e-IPOs:
A company proposing to issue capital to the
public through the on-line system of the stock
exchange has to enter into an agreement with
the stock exchange. This is called an Initial
Public Offer (IPO). SEBI registered brokers have
to be appointed for the purpose of accepting
applications and placing orders with the
company. The issuer company should also
appoint a registrar to the issue having
electronic connectivity with the exchange. The
issuer company can apply for listing of its
securities on any exchange other than the
exchange through which it has offered its
securities. The lead manager coordinates
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Distinction between Capital Market and
Money Market
• Participants
• Instruments
• Investment outlay
• Liquidity
• Safety

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 SECONDARY MARKET
• The secondary market is also known as the stock market or stock
exchange. It is a market for the purchase and sale of existing
securities. It helps existing investors to disinvest and fresh investors to
enter the market. It also provides liquidity and marketability to
existing securities. It also contributes to economic growth by
channelizing funds towards the most productive
• investments through the process of disinvestment and reinvestment.
Securities are traded, cleared and settled within the regulatory
framework prescribed by SEBI. Advances in information technology
have made trading through stock exchanges accessible from anywhere
in the country through trading terminals. Along with the growth of the
primary market in the country, the secondary market has also grown
significantly during the last ten years.

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 Stock Exchange
• A stock exchange is an institution which provides a platform for buying and
selling of existing securities. As a market, the stock exchange facilitates the
exchange of a security (share, debenture etc.) into money and vice versa.
Stock exchanges help companies raise finance, provide liquidity and safety
of investment to the investors and enhance the credit worthiness of
individual companies.
• According to Securities Contracts (Regulation) Act 1956, stock exchange
means any body of individuals, whether incorporated or not, constituted for
the purpose of assisting, regulating or controlling the business of buying and
selling or dealing in securities.

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(Extra)

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(Extra)

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 Functions of Stock Exchange
1. Providing Liquidity and Marketability to
Existing Securities
2. Pricing of securities
3. Safety of transactions
4. Contributes to economic growth
5. Spreading of equity cult
6. Providing scope for speculation
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1.Providing Liquidity and
Marketability to Existing Securities
• The basic function of a stock exchange is the
creation of a continuous market where
securities are bought and sold. It gives
investors the chance to disinvest and reinvest.
This provides both liquidity and easy
marketability to already existing securities in
the market.

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2. Pricing of securities :
• Share prices on a stock exchange are
determined by the forces of demand and
supply. A stock exchange is a mechanism of
constant valuation through which the prices of
securities are determined. Such a valuation
provides important instant information to both
buyers and sellers in the market.

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3. Safety of transactions :
• The membership of a stock exchange is
well- regulated and its dealings are well
defined according to the existing legal
framework. This ensures that the
investing public gets a safe and fair deal
on the market.

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4. Contributes to economic
growth :
• A stock exchange is a market in which existing
securities are resold or traded. Through this
process of disinvestment and reinvestment
savings get channelised into their most
productive investment avenues. This leads to
capital formation and economic growth.

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5. Spreading of Equity Cult :
• The stock exchange can play a vital role
in ensuring wider share ownership by
regulating new issues, better trading
practices and taking effective steps in
educating the public about investments.

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6. Providing scope for
speculation :
• The stock exchange provides sufficient
scope within the provisions of law for
speculative activity in a restricted and
controlled manner. It is generally
accepted that a certain degree of healthy
speculation is necessary to ensure
liquidity and price continuity in the stock
market.
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 Electronic Trading System screen-based
trading has certain advantages:
1. It allows participants to see the prices of all securities in the market while
business is being transacted.
2. It increases efficiency of information being passed on, thus helping in fixing
prices efficiently.
3. It increases the efficiency of operations, since there is reduction in time, cost
and risk of error.
4. People from all over the country and even abroad who wish to participate in the
stock market can buy or sell securities through brokers or members without
knowing each other, thereby improving the liquidity of the market.
5. A single trading platform has been provided as business is transacted at the
same time in all the trading centres.

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 SENSEX AND NIFTY (extra)
• Stock Market Index
• BSE – SENSEX (Sensitive Index)
• NSE – NIFTY (NSE Fifty)

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 What is NIFTY ? (extra)
• The full form of NIFTY is the National stock exchange FIFTY. It is also
recognized as Nifty 50.
• The NIFTY 50 is a benchmark Indian stock market index that
represents the weighted average of 50 of the largest Indian companies
listed on the National Stock Exchange. Nifty is one of the two main
stock indices used in India, the other being t he BSE SENSEX.
• Nifty 50 is owned and managed by NSE Indices (previously known as
India Index Services & Products Limited), which is a wholly owned
subsidiary of the NSE Strategic Investment Corporation Limited. NSE
Indices had a marketing and licensing agreement with Standard &
Poor's for co-branding equity indices until 2013. The Nifty 50 index
was launched on 22 April 1996, and is one of the many stock indices
of Nifty.

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 What is SENSEX ? (extra)
• The term Sensex was coined by Deepak Mohoni, a stock market analyst in
1989. BSE Sensitive Index then was at about 750 points. it is a portmanteau
 of the words Sensitive and Index.
• The BSE SENSEX (also known as the S&P Bombay Stock Exchange
Sensitive Index or simply SENSEX) is a free-float market-weighted 
stock market index of 30 well-established and financially sound companies
listed on the Bombay Stock Exchange. The 30 constituent companies
which are some of the largest and most actively traded stocks, are
representative of various industrial sectors of the Indian economy.
Published since 1 January 1986, the S&P BSE SENSEX is regarded as the
pulse of the domestic stock markets in India. The base value of the
SENSEX was taken as 100 on 1 April 1979 and its base year as 1978–79. On
25 July 2001 BSE launched DOLLEX-30, a dollar-linked version of the
SENSEX.
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National Stock Exchange - NSE
The National Stock Exchange is the latest, most modern and technology
driven exchange. It was incorporated in 1992 and was recognized as a
stock exchange in April 1993. It started operations in 1994, with trading
on the wholesale debt market segment. Subsequently, it launched the
capital market segment in November 1994 as a trading platform for
equities and the futures and options segment in June 2000 for various
derivative instruments. NSE has set up a nationwide fully automated
screen based trading system.

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 Objectives of NSE
a. Establishing a nationwide trading facility for all types of
securities.
b. Ensuring equal access to investors all over the country through
an appropriate communication network.
c. Providing a fair, efficient and transparent securities market
using electronic trading system.
d. Enabling shorter settlement cycles and book entry settlements.
e. Meeting international benchmarks and standards. Within a
span of
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 Market Segments of NSE The Exchange
provides trading in the following two segments.
i. Whole Sale Debt Market Segment: This segment provides a trading
platform for a wide range of fixed income securities that include
central government securities, treasury bills, state development
loans, bonds issued by public sector undertakings, floating rate
bonds, zero coupon bonds, index bonds, commercial paper,
certificate of deposit, corporate debentures and mutual funds.
ii. Capital Market Segment: The capital market segment of NSE
provides an efficient and transparent platform for trading in equity,
preference, debentures, exchange traded funds as well as retail
Government securities

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Bombay Stock Exchange - BSE
• BSE Ltd (formerly known as Bombay Stock Exchange Ltd) was
established in 1875 and was Asia’s first Stock Exchange. It was
granted permanent recognition under the Securities Contract
(Regulation) Act, 1956. It has contributed to the growth of the
corporate sector by providing a platform for raising capital. It is
known as BSE Ltd but was established as the Native Share Stock
Brokers Association in 1875.

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 BSE has the following objectives:
a) To provide an efficient and transparent market for trading in equity,
debt instruments, derivatives, and mutual funds.
b) To provide a trading platform for equities of small and medium
enterprises.
c) To ensure active trading and safeguard market integrity through an
electronically-driven exchange.
d) To provide other services to capital market participants, like risk
management, clearing, settlement, market data, and education.
e) To conform to international standards.

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 Listing of Companies
Paytm CEO Vijay
Shekhar Sharma strikes
the gong during the
listing ceremony at the
BSE

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 Trading and settlement procedure
1. Selection of Broker
(documents)
2. Opening Demat Account
3. Placing the order
4. Match the share and best price
5. Executing order
• 6. Issue of contract note
• 7. Delivery of share and making
payment
• 8. Settlement cycle Pay in day
• 9. Pay out day
• 10. Delivery of shares

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1. Selection of broker :
• If an investor wishes to buy or sell any security he has to first approach a
registered broker or sub-broker and enter into an agreement with him. The
investor has to sign a broker-client agreement and a client registration
form before placing an order to buy or sell securities. He has also to
provide certain other details and information. These include:
• PAN number (This is mandatory)
• Date of birth and address.
• Educational qualification and occupation.
• Residential status (Indian/ NRI).
• Bank account details.
• Depository account details.
• Name of any other broker with whom registered.
• Client code number in the client registration form.
• The broker then opens a trading account in the name of the investor
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2. Open a Demat account
• The investor has to open a ‘demat’ account or
‘beneficial owner’ (BO) account with a
depository participant (DP) for holding and
transferring securities in the demat form. He
will also have to open a bank account for cash
transactions in the securities market.

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• Money – Bank a/c – Bank – RBI
• Shares – Demat a/c – DP – Depository

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 3. Placing an order to buy / sell
• Theshares
investor then: places an order with the broker to buy or sell shares.
Clear instructions have to be given about the number of shares and the
price at which the shares should be bought or sold. The broker will
then go ahead with the deal at the above mentioned price or the best
price available. An order confirmation slip is issued to the investor by
the broker.
• “Buy 100 equity shares for not more than Rs.500 of Reliance.”
Yes Sir
Buy Order
100 shares Placed Share Broker
Of RIL @
Rs.1280
Per
share

Investor Current Rate

@NSE

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4. Matching of requirements by
broker :
• The broker then will go on-line and connect to the
main stock exchange and match the share and best
price available.

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5. Execution of order :
• When the shares can be bought or sold at the
price mentioned, it will be communicated to
the broker’s terminal and the order will be
executed electronically. The broker will issue a
trade confirmation slip to the investor.
Sir your order
executed @
Rs.1280.
Please transfer
money within a day

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 6. Issue of Contract Note
• After the trade has been executed, within 24 hours the
broker issues a Contract Note. This note contains details
of the number of shares bought or sold, the price, the
date and time of deal, and the brokerage charges. This is
an important document as it is legally enforceable and
helps to settle disputes/claims between the investor and
the broker. A Unique Order Code number is assigned to
each transaction by the stock exchange and is printed on
the contract note.
• No of shares
• Price per share
• Date of trading
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7. Pay-in day
• Now, the investor has to deliver the shares
sold or pay cash for the shares bought. This
is called the pay-in day.
• Demat a/c.
• Trading a/c.

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 8. T+2 day
• Cash is paid or securities are delivered on pay-in day,
which is before the T+2 day as the deal has to be
settled and finalised on the T+2 day. The settlement
cycle is on T+2 day on a rolling settlement basis,
w.e.f. 1 April 2003.

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 9. Pay out day
• On the T+2 day, the exchange will deliver the
share or make payment to the other broker. This
is called the pay-out day. The broker then has to
make payment to the investor within 24 hours
of the pay-out day since he has already received
payment from the exchange.

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 10. Delivery of shares :
• The broker can make delivery of shares in
demat form directly to the investor’s demat
account. The investor has to give details of his
demat account and instruct his depository
participant to take delivery of securities directly
in his beneficial owner account.

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Parties involved
• Buyer Investor
• Seller Investor
• Broker of buyer
• Broker of seller
• Depository
• Demat a/c.
• Clearing agency

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 When was demat introduced in India ?
(extra)

• 1996
• Each time a share was bought and sold, a certificate had to be
created. To do away with this paperwork, India introduced the
Demat Account system in 1996 for trades on NSE. Today,
there's no paperwork involved, and physical certificates are no
longer issued.

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 DEMATERIALISATION
• Dematerialisation is a process where securities held by
investor in physical form are cancelled and the investor is
given an electronic entry or number so that he / she can hold
it as an electronic balance in account. It refers to holding of
securities in electronic form.

• SEBI has made it mandatory to deal in Demat account.

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 DEMATERIALISATION
• All trading in securities is now done through computer terminals.
• buying and selling of securities are settled through an electronic book entry form.
• It eliminates problems like theft, fake/forged transfers, transfer delays and paperwork associated
with share certificates or debentures held in physical form.
• For this, the investor has to open a demat account with an organisation called a depository.
• In fact, now all Initial Public Offers (IPOs) are issued in dematerialisation form and is settled by
delivery in the demat form.

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 Benefits of Dematerialisation
• Convenient to handle
• Helps to get loans
• No danger of loss, theft or forgery of share certificates
• Reduces paper work
• Broker’s responsibility to credit the correct no. of shares in investor’s
account.
• Securities can be held in a single demat account

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 WORKING OF DEMAT
SYSTEM
1. A depository participant (DP), either a bank, broker, or financial services company, may be
identified.
2. An account opening form and documentation (PAN card details, photograph, power of
attorney) may be completed.
3. The physical certificate is to be given to the DP along with a dematerialisation request form.
4. If shares are applied in a public offer, simple details of DP and demat account are to be
given and the shares on allotment would automatically be credited to the demat account.
5. If shares are to be sold through a broker, the DP is to be instructed to debit the account with
the number of shares.
6. The broker then gives instruction to his DP for delivery of the shares to the stock exchange.
7. The broker then receives payment and pay the person for the shares sold.
8. All these transactions are to be completed within 2 days, i.e., delivery of shares and
payment

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 What is a Depository ?
• Depository is an institution or a kind of organisation which
holds securities in Demat form. Securities can be stocks,
bonds, mutual funds, debentures.

• A DEPOSITORY : Its a bank / institution which holds shares,

debentures, etc. e.g. NSDL , CDSL

• A DEPOSITORY PARTICIPANT : Its an agent. An investor

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How Depository work ?

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 NSDL AND CSDL (extra)

• The Central Depositories Services India Ltd. (CDSL) and  National Securities Depository Ltd.(NSDL) are
depositories for the Indian markets.
• The Government of India promulgated the Depositories Ordinance in September 1995, followed by the
passing of The Depositories Act by the Parliament in August 1996. 
• The NSDL was soon established in 1996 followed by the CDSL in 1999. These two act as depositories to
the two exchanges in the country; the NSDL to the NSE and the CDSL to the BSE. The Demat accounts
mentioned earlier are actually just a front for the CDSL and NSDL holding your shares.
• The depositories are to securities what banks are to cash. Just like a bank holds your cash and allows you to
access it through an electronic form, the depository holds our shares, bonds, mutual funds, etc. for all
shareholders in electronic form. These entities have played a pivotal role in the digitalization of the Indian
Stock Markets. 

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NSDL vs. CSDL (extra)

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 What is Stock Market Index ? (extra)
• A stock index, or stock market index, is an index that measures a stock
market, or a subset of the stock market, that helps investors compare
current stock price levels with past prices to calculate market performance.

• Two of the primary criteria of an index are that it is investable and transparent:
The methods of its construction are specified. Investors can invest in a stock
market index by buying an index fund, which are structured as either a mutual
fund or an exchange-traded fund, and "track" an index. The difference
between an index fund's performance and the index, if any, is called tracking
error. For a list of major stock market indices, see List of stock market indices.

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 SEBI – Securities Exchange Board of
India
• To control malpractices from the side of stock brokers SEBI was
formed.
• It keeps a check on malpractices and protect interest of investors.
• It provides a marketplace for issuers
• Protection and fair information to investors
• Professional setup to intermediaries

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 Purpose of SEBI
• To the issuers, it aims to provide a market place in which they can
confidently look forward to raising finances they need in an easy, fair
and efficient manner.
• To the investors, it should provide protection of their rights and
interests through adequate, accurate and authentic information and
disclosure of information on a continuous basis.
• To the intermediaries, it should offer a competitive, professionalized
and expanding market with adequate and efficient infrastructure so
that they are able to render better service to the investors and issuers

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 Objectives of SEBI
1. To regulate stock exchanges and the securities industry to promote
their orderly functioning.
2. To protect the rights and interests of investors, particularly
individual investors and to guide and educate them.
3. To prevent trading malpractices and achieve a balance between self
regulation by the securities industry and its statutory regulation.
4. To regulate and develop a code of conduct and fair practices by
intermediaries like brokers, merchant bankers etc., with a view to
making them competitive and professional.

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 Functions of SEBI
Regulatory Developmental Protective
Functions Functions Functions
• Registration of brokers • Training of • Training of
• Registration of intermediaries intermediaries
schemes • Research and • Controlling insider
• Regulation of takeover information trading
bids • Developing markets • Protection of investor
• Inspection, enquiries for IPOs • Fair practices
and audits
• Levying fee
• Security Contracts
Regulation Act, 1956

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REGULATORY FUNCTIONS
1. Registration of brokers and sub-brokers and other players in the market.
2. Registration of collective investment schemes and Mutual Funds.
3. Regulation of stock brokers, portfolio exchanges, underwriters and
merchant bankers and the business in stock exchanges and any other
securities market.
4. Regulation of takeover bids by companies.
5. Calling for information by undertaking inspection, conducting enquiries
and audits of stock exchanges and intermediaries.
6. Levying fee or other charges for carrying out the purposes of the Act.
7. Performing and exercising such power under Securities Contracts
(Regulation) Act 1956, as may be delegated by the Government of India.
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 What Is an Underwriter ? (extra)
• An underwriter is any party, usually a member of a financial organization, that evaluates and
assumes another party’s risk in mortgages, insurance, loans, or investments for a fee in the
form of a commission, premium, spread, or interest.
• Agents and brokers represent both consumers and insurance companies, while underwriters
work for insurance companies.
• An underwriter is any party, usually a member of a financial organization, that evaluates and
assumes another party’s risk in mortgages, insurance, loans, or investments for a fee in the
form of a commission, premium, spread, or interest.
• Underwriters work in many areas of finance, from the insurance industry to mortgage lending.
• Underwriters determine the level of risk for lenders.
• Underwriters are critical to the mortgage industry, insurance industry, equity markets, and
common types of debt security trading because of their ability to ascertain risk.
• A book runner is another name for a lead underwriter.

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DEVELOPMENTAL FUNCTIONS
1. Training of intermediaries of the securities market.
2. Conducting research and publishing information useful
to all market participants.
3. Undertaking measures to develop the capital markets
by adapting a flexible approach.

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 PROTECTIVE FUNCTION
1. Prohibition of fraudulent and unfair trade practices like making
misleading statements, manipulations, price rigging etc.
2. Controlling insider trading and imposing penalties for such practices.
3. Undertaking steps for investor protection.
4. Promotion of fair practices and code of conduct in securities market.

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 The Organisation Structure of SEBI
• As SEBI is a statutory body there has been a considerable expansion in the
range and scope of its activities.
• Each of the activities of the SEBI now demands more careful, closer, co-
ordinated and intensive attention to enable it to attain its objectives.
• Accordingly, SEBI has been restructured and rationalised in tune with its
expanded scope. It has decided its activities into five operational
departments.
• Each department is headed by an executive director. Apart from its head
office at Mumbai, SEBI has opened regional offices in Kolkalta, Chennai, and
Delhi to attend to investor complaints and liaise with the issuers,
intermediaries and stock exchanges in the concerned region.
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 The Organisation Structure of SEBI
• The SEBI also formed two advisory committees. They are the Primary
Market Advisory Committee and the Secondary Market Advisory
Committee.
• These committees consist of the market players, the investors
associations recognised by the SEBI and the eminent persons in the
capital market. They provide important inputs to the SEBI’s policies.

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 The Organization Structure of SEBI
• Five operational departments
• SEBI has opened regional offices in Kolkalta, Chennai,
and Delhi.
SEBI

5 Operational Two Advisory

Departments Committee

Primary Market
Executive
Advisory
Director
Committee

Secondary
Executive
Market Advisory
Director
Committee

Executive
Director

Executive
Director

Executive
Director

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a. To advise SEBI on matters relating to the regulation of
intermediaries for ensuring investors protection in the primary
market.
b. To advise SEBI on issues related to the development of primary
market in India.
c. To advise SEB I on disclosure requirements for companies.
d. To advise for changes in legal framework to introduce simplification
and transparency in the primary market.

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THANK YOU

By Henna Punjabi 89