WORKING OF SECURITY MARKET 1st place Regulated by SEBI Buyer 2nd place Buyer Broker Exchange NSE/BSE Broker Seller Seller .

Definition • An exchange is defined as any body of individuals. whether incorporated or not. there is active bidding and a two way auction trading takes place •The effective functioning of the stock exchange creates a climate conductive for a growing primary market for new issues •An active secondary market leads in existing securities leads to a better psychology of expectations . constituted for the purpose of assisting. regulating or controlling the business of buying. selling or dealing in securities •The stock exchange provide an organized market place for the investors to buy and sell securities freely. •In the stock exchange.

•Companies. This is typically done through a syndicate of securities dealers. Dealers earn a commission that is built into the price of the security offering. •Primary markets creates long term instruments through which corporate entities borrow from capital market. •The process of selling new issues to investors is called underwriting. . In the case of a new stock issue. this sale is an initial public issue (IPO). governments or public sector institutions can obtain funding through the sale of a new stock or bond issue.Primary Market •The primary market is that part of the capital market that deals with the issuance of new securities.

rather than from issuing companies themselves is called secondary market •In any secondary market trade. the cash proceeds go to an investor rather than to the underlying company/entity directly Functions of Secondary Market •Price discovery process which results from the interactions of buyers and sellers in the market when they trade assets •Provision of liquidity by providing a mechanism for an investor to sell financial assets •Low cost of transactions and information . •A market where investors purchase securities or assets from other investors. These secondary market are called stock market or stock exchange.Secondary Market •Capital market apart from the primary market also include markets were securities which have been issued in the past are traded.

participants: organization directly responsible for the settlement of trade 3. Trading system 4.Stock market trading Wholesale debt market segment (WDM) Capital Market segment Trading in central central government securities segment Wholesale debt market segment (WDM): the WDM provides the facility for institutions to enter into high value transactions in instruments such as government securities. units of Mutual fund so on. Market type: trading in debt or other instruments 5. The players are 1. Trading members: recognized members of exchange 2. public sector undertaking bonds. T-bills. Clearing and settlement .

Clearing and settlement 5.Capital Market segment: this segment provides an efficient and transparent platform for trading of equity and preference shares. coupons and exchange traded funds. BSE and OTCEI 2. Clearing and settlement systems 5. Trading recording 6.order driven. screen based trading system of stock exchange 1. Pay-in and pay-out of funds and securities Trading in central central government securities segment: to encourage wider participation of all class of investors. 1. Members eligible to trade in government securities 4. warrants. trading in Government Securities has been introduce a nation wide . debentures. Settlement of funds and securities . Transaction charges 4. Eligible stock exchanges: presently RBI permitted transaction through NSE. Online IPO’s 3. Eligible securities: 3. Trading mechanism: the trading system NEAT( national exchange for automated trading system is used as an online software 2.


NATIONAL STOCK EXCHANGE (NSE) was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 with an equity capital of Rs 25 cr. as a tax-paying company unlike other stock exchanges in the country. infrastructure leasing and financial services Ltd(IL&FS) &stock holding corporation The National Stock Exchange (NSE) is India's leading stock exchange covering various cities and towns across the country. fully automated screen-based trading system with national reach NSE is a national market for shares. PSU bonds. insurance companies. The promoters for NSE were financial institutions. debentures and government securities since infrastructure and trading facilities are provided . banks and SBI capital market ltd.

efficient & transparent securities market using Electronic trading system. Ensuring equal access to investors all over the country through an appropriate telecommunication network. Several members undertake jobbing because of ease of entry and exit and narrow margin resulting in improvement of liquidity and reduction of transaction cost .OBJECTIVE OF NSE Establishing nationwide trading facilities for all types of securities . Providing fair . Meeting international benchmark and standards ORDER DRIVEN MARKET NSE has an order driven system and allows members to undertake jobbing in securities of there choice.

The criteria for determining the measure of liquidity of a security are: frequency of trading. Whole sale Market 2. average daily value of trading and average daily number of trades MIMINUM PAID UP CAPITAL With regard to companies whose shares are already listed on another exchanget here will now be a requirement of a minimum market capitalization of Rs 20 cr for companies with a paid up capital of at least Rs 10 cr TRADING : 1. NSE calculates the mark to market margin as the cumulative loss in excess of 50% of the initial security deposit kept with the exchange by way of cash deposit.MARK TO MARKET NSE is the first exchange in the country to introduce mark to market system of margin which reduces the risk of default by members. bank guarantee or approved securities PRICE BANDS The price bands are based on the liquidity of company’s shares and not on volatility alone as the potential for price manipulation’s is more in the case of illiquid securities. average daily volume of trading. Capital Market .

watch system is a computer system designed and programmed to monitor market activity and identify aberrations from historical patterns SETTLEMENT The settlement cycle is completed within eight days of the last day of the trading cycle COUNTER GUARANTEES NSE’s clearing corporation stands guarantee to all trades done in the cash market on the exchange.ELECTRONIC TRADE MONITORING SYSTEM The stock. either of payment or delivery takes place for trades done on NSE . The counter guarantee of the clearing corporation ensures that no default.


The OTCE was incorporated under section 25 of the company Act. delays in payment and delivery and uncertainty about prices at which shares are bought and sold. OTCE has been set up to meet a long felt need for a second tier market where companies with small paid paid-up capital and with less onerous condition could have the advantage of listing OTC exchange is promoted by all India financial institutions. liquidity. Companies listed on OTC Exchange enjoys the same status as companies listed on any other stock exchange in the country OTC Market in USA: OTCEI with ASTOCS is modelled on National Association of Securities Dealers Automated Quotation System (NASDAQ) in the United States of America Objective of OTCEI: OTCEI has been set. merchant banks and established as recognized stock exchange.up to help small investors who face the problem of access. and companies who face the problem of issue cost and restricted access to the market .

Hold the script till project completion 5. partnership firms and individual having a net worth of Rs 5 lakhs and 2 independent references from the bank regarding financial standard • dealers are expected to have adequate financial strength to be able to carry on the trading and market making function • Dealer should possess adequate organizational infrastructure to carry on the functions of investment. Value the script 3. share transfer rules and laws . stock valuation.Members: They are financial institutions. mutual funds. Arrange for an additional market Dealers: • it would be a corporate body. venture capital funds and large financial companies having a minimum net worth of Rs 2. Appraise and evaluate proposals 2. banks. Sponsor the script to other market participants 4.5 cr The functions of the members are 1. trading and market making • Dealer should have adequate knowledge of trading.

2. 5. 3. Appraise the project of a company Value the script to be listed on OTC Exchange Sponsor the scrip to other members and licensed dealers and place the entire script with them Make market for three years from the date script are offered for public trading Arrange for one more member. licensed dealer to make market for the scrip for at least one year 4.Members n being appointed by the company act as sponsors to listing of new script which include the following function: 1. .

Companies with an issued equity capital of more than Rs300 lakhs seeking listing on the OTC will have to comply with the listing requirements and guidelines as are applicable . For companies with an issued shares capital of more than Rs 30 lakhs but less than Rs 300 lakhs. The minimum issued share capital of more than Rs 30 lakhs 2. the minimum public offer should be 25% of the issue capital or Rs 20 lakhs of worth of shares whichever is higher 3.Listing on the OTC Exchange: Listing on OTCEI may be done by companies with equity capital of less than Rs 10 cr Listing requirements of OTCEI 1.

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