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1Vadodara Stock Exchange Ltd.
PREFACE
It is quite true that the world outside your home is many times different from what you have perceived. Similarly, the theoretical knowledge in the classroom may differ from the practical knowledge.
Firstly I would like to express my deepest and sincere gratitude towards the respected professors of MSU BBA who gave this opportunity to know that what is actually happening in the company.
I had prepared the project report on VADODARA STOCK EXCHANGE LTD. At Vadodara, this is a great privilege for me as a student of T.Y. B.B.A.
In the following pages, I have tried to the best of my ability to include the maximum information that i have obtained during my project at VADODARA STOCK EXCHANGE LTD. A sincere attempt has been made to explain the working of the VADODARA STOCK EXCHANGE LTD.
ACKNOWLEDGEMENT
I hereby admit the truth that during the project at VADODARA STOCK EXCHANGE LTD. Many known and unknown persons had helped us directly or indirectly by giving us
maximum information. They had tried their level best in explaining the procedures of company. I feel highly obliged to Prof. JAGDISH THAKAR who gave me the opportunity
to be prepared project report on VADODARA STOCK EXCHANGE LTD.
Finally I must thank MSU BBA to give me a chance to pursue the BBA program and I also feel highly obliged to our Director and to the professors of our collage.
With warm regards,
Ansari Mo Mustak Jannathusen
TY BBA
Roll no:-04
Place: - VADODARA
Date:-
DECLARATION
This is to declare that the project report on the “VADODARA STOCK EXCHANGE LTD.” Is and original one and has not been submitted earlier to this university or any other institution for the fulfillment of the requirement of the curriculum of Bachelor of Business Administration.
With warm regards,
Ansari Mo Mustak Jannathusen
TY BBA
Roll no:-04
Place: - VADODARA
Date:-
GUIDE CERTIFICATE
THE MAHARAJA SAYAJIRAO UNIVERSITY OF BARODA
B.B.A. COLLAGE
ACKNOWLEDGEMENT
DATE:-
This is to certify that the project report on “VADODARA STOCK EXCHANGE LTD.” Has been conducted and completed by
Mr. ANSRI MO MUSTAK JANNATHUSEN it is being submitted for the partial fulfillment of the requirements of the Degree of Bachelor of Business Administration as per syllabus prescribed by THE MAHARAJA SAYAJIRAO UNIVERSITY OF BARODA. He has prepared this report during the academic year 2009-10 is appreciated.
GUIDE
(Prof. JAGDISH THAKAR)
EXECUTI V E SU M MERY
Indian stock markets are one of the oldest in Asia. Its history dates back to
nearly 200 years ago. There are 23 Stock Exchanges across the country.
Here I undertook this study to have a look on functioning of Stock
Exchanges. And to persuade this purpose I selected Vadodara Stock
Exchange as an model.
With this study I have interacted with the officials of VSE and tried
to understand the functioning of Vadodara Stock Exchange and its
subsidiary VSE Stock Services Ltd. I have visited various departments of VSE
and studied its functions. I have also analyzed financial condition of VSE and
with ratio analysis I have compared its current financial condition with
previous year.
On the basis of above, I gave some suggestions that is to promote their
strong points like low charges of DP services, to set up a marketing
team for promotion, various steps should be taken to continue to exist as
a RSE and other suggestions like to update their website regularly,
upgrading systems and better utilization of asset.
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STO C K EXCHANG E : AN INTR O DUCTION
An individual desires to invest whatever he has saved. The best financial
derivates, which give a mammoth yield, are the stocks of corporate
companies. In order to bring liquidity these instruments are traded
systematically in a Stock Exchange. In a Stock Exchange a person who
wishes to sell his security is called a seller, and a person who is willing to
buy the particular stock is called the buyer. The rate of stock depends on
the simple Law of Demand and Supply.
Stock Exchange is an organized secondary market where securities like
shares, debentures of public companies. Government securities and bonds
issued by municipalities, public corporations, utility undertakings, port
trusts and such other local authorities are purchased and sold. Since buying
and selling of different types of securities takes place in stock
exchanges, the prices of particular securities reflect their relative
demand and supply. The prices of individual security indicate the
financial health of individual company. The share prices over a period are
indicated as index of the financial status of an organization. Thus investor
can take decision about the suitability of particular securities for investment
in terms of safety, profitability and risk. Besides, he can change his
decision when necessary as liquidity of investment is provided by easy
transferability of securities through the stock exchanges. The stock
exchange not only offers the best bids but also the following advantages:
· One of the key advantages of stock exchanges is that they are an
efficient medium for rising of resources and channeling savings from
the general public by the way of issue of equity/debt capital by joint
stock companies which are listed on the stock exchanges.
· The second main benefit is the wide-spread dissemination of
information and the need to disclose adequate information not only
the quarterly or yearend financial results but also major events which
have an impact on
the working of the company.
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Hi st o r y of s t ock e x c h a n g e i n In d i a
Indian Stock Markets are one of the oldest in Asia. Its history dates
back to nearly 200 years ago. The earliest records of security dealings in
India are scanty and obscure. The East India Company was the dominant
institution in those days and business in its loan securities used to be
transacted towards the close of the eighteenth century.
By 1830's business on corporate stocks and shares in Bank and
Cotton presses took place in Bombay. Though the trading list was broader in
1839, there were only half a dozen brokers recognized by banks and
merchants during 1840 and 1850. The 1850's witnessed a
rapid development of commercial enterprise and brokerage
business attracted many men into the field and by 1860 the number of
brokers increased to 60.
In 1860-61 the American Civil War broke out and cotton supply from
United States was stopped; thus, the 'Share Mania' in India begun.
The number of brokers increased to about 200 to 250. However, at the end
of the American Civil War, in 1865, a disastrous slump began (for example,
Bank of Bombay Share which had touched Rs. 2850 could only be sold at Rs.
87).
At the end of the American Civil War, the brokers who thrived out of Civil
War in 1874 found a place in a street (now appropriately called as Dalal
Street) where they would conveniently assemble and transact business. In
1887, they formally established in Bombay, the "Native Share
and Stock Brokers' Association". In 1895, the Stock
Exchange acquired a premise in the same street and it was inaugurated
in 1899. Thus, the Stock Exchange at Bombay
was consolidated.
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VADODARA STOCK E X CHANGE LIMITED (VSEL)
Introduction
Vadodara Stock Exchange Limited (hereinafter, referred as “the Company”, “the
Exchange”, or “VSEL”), was established as a company limited by guarantee in
1990, but was subsequently converted into a company limited by shares in
2005. The main object of VSEL is to facilitate, assist, regulate and control
the trade of business in securities and effectively serve the interest of the
general public and the investors.
Under the Provisions of Securities & Contracts (Regulation) Act, 1956, VSEL
was accorded recognition by the Government of India on 5th January 1990
as Stock Exchange. VSEL is also regulated and controlled by the
Securities & Exchange Board of India (SEBI), which is a statutory body
established under the Securities & Exchange Board of India Act, 1992 .
The operations of VSEL were shifted to its own, larger premises at, Fortune
Tower, in the year 1995.
Currently, VSEL has a network of 290 members and about 484 companies
are currently listed on the Exchange. Over the years, though there has
been a decline in the listing of securities & subsequent trading operations
on the Exchange, VSEL has diversified into Depository Participant (“DP”)
operations, which presently has over 47,000 client accounts. It has also
incorporated a subsidiary, VSE Stock Services Ltd., which acquired
membership rights of BSE cash segment & NSE cash segment. VSSL
currently has a network of 94 sub- brokers (who are members of VSEL),
dealing with over 33,000 clients, having a average daily turnover of Rs. 70
crores.
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Brief History & Background
VSEL is one of the several Regional Stock Exchanges in India. Earlier, all
the Stock Exchanges functioned under the framework of Bombay
Securit ies Contracts Act, 1925. The Securities Contracts (Regulations)
Act, 1956 was enacted thereafter and all the stock exchanges within India
were required to get recognition from the Ministry of Finance.
Accordingly, VSEL received the recognition as Stock Exchange from the
Government of India on 5th January
1990.
Originally incorporated in 1990 as a company limited by guarantee, VSEL
was later converted into a company limited by shares and a fresh
certificate of incorporation was issued on 2nd September, 2005.
VSEL went live on 17th July, 1996, marking a memorable event in its history and joining the stream of Indian Stock Exchanges having gone LIVE for electronic trading.
CMC Ltd. had facilitated implementation of fully automated stock trading, settlement and clearing system. The Exchange installed VECTOR (Versatile Engine for Central ized Trading and On-line Reporting), built around the Central Trading System (CTS). All the brokers interacted with CTS through Brokers Work Station (BWS). The Market operations and surveillance were connected to the CTS through their work stations Operations Work Station (OWS) and Surveillance Work Station (SWS) respectively.
In November 1999, SEBI issued a circular permitting the regional stock exchanges to acquire membership of NSE and BSE for facilitating stock broking activities and incorporation of a subsidiary company for this purpose. This lead to the birth of VSE Stock Services Ltd. (“VSSL”) (formerly VSE
Securities Limited) as a subsidiary of VSEL.
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In July 2000, VSEL also commenced providing online, real-time Depository
Participant (DP) services, of Central Depository Services Ltd. (CDSL), under
the name VSE Clearing House.
Capital Structure
The Issued, Subscribed and Paid-Up Share Capital of VSEL as on 31st March
2007 amounted to Rs. 29 lacs comprising of 290,000 equity shares of Rs.
10/- each.
The Company had recently offered 11,60,000 equity shares of Rs 10/- each
on Rights basis to its shareholders in the ratio of 4 equity shares for every 1
equity share held by each shareholder, aggregating to Rs.1,16,00,000/-.
The said Rights issue was subscribed to the extent of 2.37 times.
Consequent to the allotment of shares to the members pursuant to the
Rights issue, the paid-up equity share capital of the Company increased to
Rs. 140.27 lacs comprising of 14,02,754 equity shares of Rs 10/- each; the
allotment of
47,246 equity shares of Rs. 10/- each is kept in abeyance by the Company
pending the compliance with the Demutualisation Scheme & SEBI approval,
post which, the paid-up equity share capital will enhance to Rs. 145 lacs.
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Members
VSEL has a vast network of 290 Members, of which there are 54
corporate members and the balance 236 are individual members. Presently
there is no trading on the Exchange; the Trading Members are routing
their business through the subsidiary of the Exchange – VSSL. Presently,
90 members of VSEL also function as registered sub-brokers of VSSL.
Further, the geographical dispersion of Members of VSEL is evident from
the fact that nearly 100 members are located at Mumbai.
Corporate
M em bers19%
Individual Members81%
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Governance & Administration
VSEL has a strong governance and administration mechanism, which
encompasses a right balance of experts with highest level of
educational background, practicing professionals and independent experts in
various fields of Financial Sector.
The management and administration of VSEL’s operations are headed by
the Managing Director and a team of Senior Management Professionals who
are experts in the fields of Finance, Administration, Personnel, Technology,
Legal, and Education & Training.
The Board of Directors of the Exchange comprises of Nine members, of
which, one is a SEBI Nominee and Five (including the Chairman) are
Public Representatives, who are all eminent persons in the fields of
Finance & Accounts, Education, Law, Capital Markets, Banking and other
related fields. The Managing Director is an experienced member of
Institute of Company Secretaries of India and Indian Institute of Bankers,
and has over 20 years of experience in the field of Company Law,
Secretarial matters, Corporate Laws and Securities Laws; he also has
the experience of functioning as CEO of VSSL. There are two Member
Directors, who bring with them rich experience in Capital Market operations.
The aforesaid composition of Board of Directors is in compliance with the
Demutualisation Scheme, which restricts members’ representation in the
Board to 25%.
The Exchange has constituted four Statutory Committees -
D i s c ip l i na ry Committee, Arbitration Committee, Defaults Committee and
Investors Services Cell Committee. Apart from these Statutory Committees,
it has also formed other Sub Committees to assist in the administration –
Ethics Committee, Delisting Committee, Audit Committee,
Investment Committee and Membership Services
Committee. Besides, the Exchange has also formed three
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special purpose committees – SEBI Inspection & Compliance
Committee, Management Committee and Demutualisation Committee.
Existing Business Profile
As mentioned earlier, VSEL is currently engaged in providing
Depository Participant services to its clientele. In this regards, VSEL is
registered under SEBI (Depositories & Participants) Regulations 1996 vide
registration number IN-DP-CDSL-77-2000. A chart depicting the process
flow for DP operations of VSEL is given in Annexure ‘E’.
The Clearing House of VSEL, which carries out the DP operations,
has witnessed sustained growth during the last few years, primarily on
account of the buoyancy in the capital markets as well as competitive
services & rates offered by it. VSEL has continuously strived to improve
upon the compliances
and the service indicators.
Active &Dormant Total
50,000 50,000
40,000 40,000
30,000 30,000
20,000 20,000
10,000 10,000
0 0
2003-04 2004-05 2005-06 2006-07 June 2007
Active Accounts Dormant Accounts Total Accounts
As on June 2007, VSEL had over 46,000 client accounts, increasing by almost four times in four years, from 11,126 in 2003-04.
Year Total Accounts
Active Accounts
Dormant Accounts
2003-042004-052005-
11,12618,24029,57539,56946,220
8,843
14,732
24,31
2,283
3,508
5,26
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The primary source of revenue for the DP operations is the transaction
charges; besides, the Company also earns revenues in form of annual
maintenance charges, documentation charges, dematerialization /
rematerialisation charges, etc.
VSEL also provides a lot of other benefits & facilities to its clients such as
display of ISIN numbers of listed companies, informing the clients about
ISIN numbers of companies coming out with IPO (at the time of their initial
listing), investor education, investor awareness, assistance to the
customers in filling the instruction slips, executing bulk instructions with
minimum hassles to the clients, etc.
As a result of its constant endeavor to provide qualitative DP services
at competitive rates, VSEL has, within a short span of time, built a
sound reputation & image for itself and is able to easily survive in an
intensely competitive environment, rubbing shoulders with several private
DPs. The DP operations of VSEL have also been rated as largest ‘no-branch’
DP operations of CDSL in the State of Gujarat.
Investor ServicesOver the decades, the exchange has actively focused on the
empowerment of investors in the market by providing information on the
market through the investor’s services centers established by the Exchange.
In addition to this, Investment Education/Training Center maintained by
the Exchange plays a vital role in enhancing the knowledge base of the
participants through seminars. The said Center is proposed to be made
available to the corporate sector for conducting external seminars &
conference as well in
Future.
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With a view to support the investors in resolving their grievances,
Exchange has established an Investor Services Center at Vadodara.
The center co- ordinates with the investors, companies and the members
in resolving their problems and also offers them counseling services. The
Investors Services Cell Committee comprising of Public Representatives,
SEBI Nominees and Members oversee the functioning of the Cell and they
are authorised to take appropriate steps for amicable settlement of the
Grievances.
The Exchange has established well equipped Library and Investor
Information Center to cater to the varied information needs of
investors, corporates, members and others. The center has a collection
of wide range of books, periodicals, journals, annual reports, prospectus
and research publications relating to Capital markets, Circulars &
Notifications issued by authorities are also available. Draft prospectus, offer
documents and other related information are displayed regularly.
The Exchange has set up an Investor Protection Fund for providing
compensation to individual investors in case of default by a member of
the Exchange. In case the member broker defaults in his obligation
towards investors in respect of deals that took place through the trading
system of the Exchange, then the concerned investors are compensated
from this fund.
VSEL’s website WWW.VSE-INDIA.COM also provides valuable information
about the latest market commentary, research reports about companies,
daily status of international markets, a separate module for internet
trading, information about listed companies and brokers and sub brokers of
the Exchange and its subsidiary.
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Corporate Governance ReportCorporate Governance is a process or set of systems and processes to
ensure that a company is managed to suit the best interest of all its
stakeholders. The Company does not view corporate governance as a
matter of creating checks and balances, rather, good corporate
governance is about creating an out- performing organization,
encompassing increasing employee, client and
stakeholders’ satisfaction and creating shareholder value. In line with the
spirit of corporate governance standards, the Company has
the principles of transparency, accountability, trusteeship and
integrity at the very core of its basic character. The company firmly
believes that, it is the right of its stakeholders to have information
regarding company’s financial performance. The Company’s corporate
governance philosophy is based on the principles of integrity, fairness,
equity, transparency, accountability and commitment to values.
The Exchange, consequent upon notification of VSE (Corporatisation &
Demutualization) Scheme, 2005 is required to attain 51% shareholding by
the members of public other than trading members. Exchange is
proactively making its best efforts to practice Corporate Governance in
spirit. For the purpose of effective administration and to inculcate best
practices various committees have been functional and majority
representation is by Public & Shareholders Representatives. The details of
the said committees are as follows:
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Infrastructure & Assets
VSEL owns a nine-storeyed (excluding basement as well as ground
floor) building – Fortune Tower – having an aggregate area of 156,238 sq. ft.
The said building is located at Sayajigunj in Vadodara, a
well-developed area surrounded by commercial complexes &
establishments, three star hotels, shopping complexes, & business
establishments, etc., complete with all basic infrastructure amenities &
facilities. The said building is in vicinity of the Vadodara railway station &
central bus stand and has good connectivity with the other parts of the
city. The said building is used by VSEL for carrying out
its operations and also houses the offices of several Members.
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VSEL also owns premises admeasuring 4,183 sq. ft. at Paradise
Complex, adjacent to Fortune Tower, at Sayajigunj.
VSEL has invested substantially in developing & maintaining
advanced technological systems for its operations. It has deployed
CROSS, a DP back office software, which is developed and maintained by
Acer E-solutions.
Personnel
VSEL & VSSL have combined staff strength of 50 personnel, comprising
of managerial & support staff. Over the years, the staff of the Exchange and
VSSL has acquired valuable skills, expertise and experience in securities
market. The staff is led by highly qualified and skilled professionals
who have rich experience in financial markets. The staff at VSEL
comprises of a mix of professionals, post-graduates, graduates, and
under-graduates. The average experience of the staff with VSEL / VSSL is
13-14 years, which highlights staff retention.
INVESTOR AWARENESSPROGRAMMES
Exchange is regularly inviting Experts in the field on Securities
Market, Financial Services Sector andTaxation to
share their knowledge and experience with the
brokers, sub brokers and the public at large. Programme on ‘Post Budget
Analysis’ has been regular feature at the Exchange.
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INVESTOR PROTECTION FUND TRUST
SEBI, in order to compensate the legitimate investment claims against
the defaulter member, issued comprehensive guidelines. In terms of the
guidelines the Exchanges are required to create a separate trust and the
administration of which to be vested with independent trustees distinct
from Exchange. As you are aware, the Exchange has already setup
“Vadodara Stock Exchange Limited Investor Protection Fund Trust”. The
independent trustees are looking after management and administration of
the trust since April, 2006 and also that a separate Balance Sheet has
been prepared for the current year
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VSE STOCK SERVICES LTD.
(VSSL) Brief History & Background
VSSL, a subsidiary of VSEL, was incorporated in May 2000. It has acquired
the Membership rights of Cash Market (CM) segment of The Bombay
Stock Exchange Ltd. and the CM Segment of The National Stock Exchange
Ltd. It provides Trading platforms of these larger Stock Exchanges to the
investors of the region, through a vast network of sub-brokers servicing
such investors. VSSL commenced its operations on BSE in May 2000 and
on the NSE in February 2005.
VSSL was initially incorporated as a wholly owned subsidiary of VSEL.
However, currently, VSEL is in the process of transferring 49% stake in
VSSL to the Members of VSEL, after the completion of which, VSEL’s holding
in VSSL will be 51%.
The Issued, Subscribed and Paid-Up Share Capital of VSSL as on 31st March
2007 amounted to Rs. 400 lacs comprising of 40,000 equity shares of Rs.
1,000/- each. However, currently, VSSL is in the process of sub-dividing
the equity share capital of VSSL into equity shares of face value of Rs. 10/-
each, consequent to which its share capital will comprise of 40,00,000
equity shares
of Rs. 10/- each
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Business Profile
VSSL does not have any proprietary interest in trading and also does not
deal in its own account. As a regulatory & business policy, it only provides a
trading platform to SEBI registered sub-brokers, who are also SEBI-
registered brokers
/ members of VSEL.
VSSL operates through a network of 94 registered sub-brokers, of which
88 were active during the year 2006-07. The company operates a total of
429 terminals of BSE and 35 terminals of NSE, which facilitates
trading / investments by over 33,000 clients. It currently has an average
daily turnover of Rs. 70 crores.
During the past few years, VSSL has witnessed tremendous increase in
the business volumes and turnover:
Trading Volume (Rs.)
30000
25000
20000
15000
10000
5000
0
3999
8250 908512183
13784
25127
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
The peak daily turnover of VSSL during the year 2006-07 was Rs 83 crores &
recently crossed Rs. 100 crores. Around 10% of turnover is in delivery
segment and balance 90% is in trading segment.
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The services provided by VSSL are as under:
ü Trading at BSE & NSE Cash Segment
ü Electronic Contract Notes
ü Efficient Pay Out of Securities and Funds
ü All Demat related Services
ü Strong Risk Management Features
ü Direct Billing of Clients
ü Auto Pay In for VSSL clients having Demat Accounts in VSE CDSL DP
IT Infrastructure
VSSL has placed a great deal of emphasis on Information Technology
to strengthen its functioning and performance of Online Trading Platform for
BSE and NSE trading operations. It has strived to continuously
upgrade its hardware, software and networking systems to enhance
the quality and standard of services provided to its counterparts.
VSSL uses ODINTM – Integrated: Multi-Exchange, Multi-Segment Front Office
Trading System. ODIN is developed and maintained by Financial
Technologies (India) Limited, Mumbai. The major modules in ODIN are
ü ODINTM – Integrated Manager
ü ODINTM – Market Information Server
ü ODINTM – EICON Server
ü ODINTM – Integrated Administrator
ü ODINTM – Integrated Trader Workstation
ü ODINTM – Database
ü ODINTM – IML Server
ü ODINTM – Secondary Broadcast Server (SBS)
ü ODINTM – Integrated Mini Administrator
VSSL uses TRADE PLUS, a Back office software, which is developed
and maintained by Acer E-Solutions, which is connected to the sub-
brokers through browser based software, TRADE NET.
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It has installed multiple Intel servers supplied and installed by
multinational suppliers like HP / IBM. All software’s are running on WINDOWS
Platform.
Connection to BSE is through 128 Kbps Leased line, with VSAT serving as
a back-up. It is connected to NSE through VSAT. VSSL has network of
around
450 terminals, out of which, 275 are on LAN and balance 175 are on WAN
connected through leased Line / ISDN / PSTN and VPN connected through
Internet.
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STRUCTURE OF VSEL
BSE/NSE
Member BrokerOf BSE VSEL
VSSL DP
VSE Stock Services Ltd Subsidiary Of VSEL & DP having 46,000 clients account
VSEL Have 94Sub-Broker is
also Member OfVSEL
BROKERS
CLIENTS 34,000 Clients DealingUnder 94 Sub-Brokers
Over the years, though there has been a decline in the listing of securities and trading operations on the Exchange, VSEL has diversified into Depository Participant (“DP”) operations, which presently has over 46,000 client accounts. It has also incorporated a subsidiary, VSE Stock Services Ltd. (“VSSL”), which acquired membership rights of BSE cash segment and NSE cash segment.
In July 2000, VSEL also commenced providing online, real-time Depository Participant (DP) services, of Central Depository Services Ltd. (CDSL), under the name VSEL Clearing House.
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Vadodara Stock E
xchange Ltd.21
REGISTERED AND CORPORATE OFFICE:3RD FLOOR, FORTUNE TOWER, SAYAJIGUNJ, VADODARA – 390
005
BOARD OF DIRECTORS
BANKERS
UTI BANK LTD.
RACE COURSE BRANCH
VADODARA – 390 007
DR. EDWIN G. MACWAN, CHAIRMAN
SHRI VISHNUBHAI I. PATEL, TRADING MEMBER
DIRECTOR SHRI KAMAL KISHORE NARIA, TRADING MEMBER
DIRECTOR SHRI V.K.KHUBCHANDANI, SEBI
NOMINEE DIRECTOR SHRI DEVESH A. PATHAK,
PUBLIC INTEREST DIRECTOR
DR. MAHESH K. THAKAR, PUBLIC INTEREST DIRECTOR
SHRI SANJEEV S. SHAH, PUBLIC INTEREST DIRECTOR
SHRI JAIDEEP VERMA, PUBLIC INTEREST DIRECTOR
SHRI DIPAK RAVAL, MANAGING DIRECTOR
AUDITORS
M/S. D. C. PARIKH AND
CO. CHARTERED
ACCOUNTANTS VADODARA
– 390 005
ADVISORS: HARIBHAKTI MRI CORPORATE SERVICES PVT. LTD., MUMBAI
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KEY MILESTONES OFVadodara Stock Exchange Limited
Incorporation of VSEL 22/01/1990
Formation of Brokerage Subsidiary-VSE Stock Services Ltd 29/05/2000
Commencement of Trading on BSE cash segment 29/05/2000
Commencement of Online real time depository services 01/07/2000
Trading and settlement in Demate scripts 2002
Commencement of Trading on NSE cash segment 16/02/2005
Approval of Demutualization Scheme 15/09/2005
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Brain Function
Automation Department
B
Veins & VesselsBanks
Heart Function H Account Department
K Kidney FunctionRight Hand Margin
BSELeft Hand
NSE
Right Leg Left LegCDSL NSDL
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Brain function Automation department
The human brain is the sources of the conscious, cognitive mind. The mind
is the set of cognitive process related to perception, interpretation,
imagination, memories, and crucially language of which a person may or
may not be aware. The brain regulates autonomic processes related to
essential body functions such as respiration and heart beat, especially
through the autonomic nervous system.
Likewise automation department regulates the automatic process from
brokers to exchange / exchange to brokers. Without automation stock
exchange cannot exist, because all transaction take place through
computerize network system. Automation work as intermediary of sub-
brokers to member-brokers(VSE) / member-brokers to the BSE/NSE.
Heart function Account Department
The heart is a specialized muscle that contracts regularly and
continuously, pumping blood to the various parts of the body and the
lungs. The pumping action is caused by a flow of electricity through the
heart that repeats itself in a cycle.
Like wise account department works as a heart and pumps fund from
brokers to BSE/NSE and BSE/NSE to brokers. Money is working like blood in
human body. Account department works as a collection of cheques for pay-
in and get issue the cheques for pay-out to the client or sub-brokers.
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Kidney function Margin department
Two kidneys are vital organs that perform many functions to keep blood
clean and chemically. They are located near the middle of our back.
Kidneys are sophisticated reprocessing machine. Every day our kidney
process about 200 quarts of blood to sift out about 2 quarts of west product
and extra water.
Likewise margin department’s function is like kidney. The main function
of margin department is to collect a margin for NSE/BSE pay-ins.
Without margin no account physibility is possible. Margin department
collects margin from various brokers for pay-ins to BSE/NSE. Few out of all
brokers do fail to pay margin so their limit is decrease and in long-run of
defaultment, there terminals also kept close for some time up to the
settlement of margin.
Veins and Vessels
Banks
Veins are flexible and acted its activities in extreme condition. The vein
valves are necessary to keep blood flowing towards the heart, but they
are also necessary to allow blood to flow against the force of gravity. The
vein valves provide footholds for the blood as it climbs its way up. Blood
vessels are hollow tubes that circulate our blood.
Likewise banks also a perform the job of transferring funds from one place
to another 24*7 for the easy settlement of the funds on both the ends (
viz BSE/NSE & brokers).
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Two hands BSE and NSE
Our two hands are same but some task being assigned to them is different,
still they work like competitor. Same as in the stock market BSE and NSE is
same but competitor company work as two hands in mechanism of stock
market. Each and every broker has terminals of NSE & BSE and they works
on both.
Two legs CDSL and NSDL
A man can not stand or walk without their legs. Likewise stock market can
not stand or walk without CDSL / NSDL.
Two autonomous bodies inter dependent for transferring securities,
and holding securities of each other. This depositories are able to provide
various services to the investors and clearing member.
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27Vadodara Stock Exchange Ltd.
FUNCTIONS AND VARIOUS DEPARTMENT OF VSE
Vadodara Stock Exchange and its subsidiary consist of various
department enumerated below:
1. Settlement Department
2. Margin Department
3. Surveillance Department
4. Listing Department
5. Account Department
6. Automation Department
7. Personal Department
8. Membership Departed
9. Central Depository (VSE Clearing House)
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28Vadodara Stock Exchange Ltd.
1. Settlement Department
Settlement department mainly deals with those transactions, which have
taken place during the course of the day and by member brokers. The
transaction of securities of companies which have made arrangements for
dematerialization of their securities are settled only in Dematerialized
mode on T+2 on net basis, i.e. buy and sell position of a member broker in
the same scrip are netted and the net quantity and value is required to be
settled
DAY A C TI V I T Y
T= trading on BOLT and daily downloading of statements showing details
of transaction and margins at the end of each day.
=Downloading of provisional securities and fund obligation statements
by member-broker
=6A/7A entry by the member broker/confirmation by the custodians.
T+1= confirmation of 6A/7A data by the custodian up to 11:00 am.
Downloading of final securities and funds obligations statement by member
– brokers.
T+2= pay-in of funds and securities by 11:00 am and pay-out of funds
and securities by 1:30 pm
The member –brokers are required to submit the pay-in instructions for
funds and securities to banks and depositories respectively at 11:00am
T+3= auction on BOLT at 11:00am
T+4= auction pay-in and pay-out of funds and securities by 12:00 noon and
1:30 pm respectively
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The delivery order/receive order provides information like the script
and quantity of securities to be delivered/received by the member broker
through clearing house. The money statement provides script wise/item
wise details of payment/receipts of monies by the member brokers in the
settlement. The securities, as per the delivery orders issued by the
exchange, are required to be delivered by the member broker to the
Clearing House on the day designated for securites pay-in i.e. T+2 day.
D E M A T PAY - I N
As regard to CDSL, the member broker gives pay-in instruction to
their respective DP’s. the securities are transferred by the DP’s to Clearing
Member (CM) Principal Account. The member brokers are required to give
confirmation to their DP’s, so that securities are processed towards pay-in
obligation.
FUNDS PAY-IN
After the reconciliation of securities completed, the bank account of
member broker maintained with 9 clearing banks are
directly debited through computerized posting for their fund
settlement obligation. Once the pay-in of securites and funds is completed,
the Clearing Member arranges for the pay- out of securities and funds.
S E CU R I T IES PAYO U T
Securites are credited by Clearing house in the pool account of member
broker. The exchange also provides facility to directly to the clients BO
account. Inter depository settlement takes place if transfer is there from
one depository to another. In case of physicals securities, the receiving
members are required to
collect the same from clearing house on Pay-out day.
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FUNDS PAYO U T
The bank account of member brokers having pay out of funds are credited
by the Clearing House with the clearing bank on the same day. This
process is called as funds pay-out. if a member fails to deliver the
securities, then the value of shares delivered short is recovered from him at
standing/closing price of script on trading day.
AUC TION
An auction tender is issued by the exchange to the member broker
informing them about the names of the script short or not delivered,
quantity slated for auction and date and time of the auction session on the
BOLT/the auction for the undelivered quantity is conducted on T+3 day
between 11:00am and 12:00 noon for all the script’s under CRS except
those in “Z” group and on “trade to trade” basis which are directly closed.
In auction, the highest offer price is allowed up to close out rate of scrip
and the lowest offer price be 20% below the
closing price of the scrip on a day prior to day of auction i.e. pay-in day.
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2. Margin Department
VSE act as broker to Mumbai Stock Exchange.
Margin trading is trading with borrowed funds/securities. It is essentially a
leveraging mechanism which enables investors to take exposure in the
market over and above what is possible with their own resources.
Corporate brokers with net worth of at least Rs 3 crores are eligible for
providing margin-trading facility to their clients subject to their entering into
an agreement to that effect. Before providing margin-trading facility to a
client, the member and the client have been mandated to sign an
agreement for this purpose in the format specified by SEBI.
The facility of margin trading is available for Group 1 and those
securities, which are offered in the initial public offers and meet the
conditions for inclusion in the derivatives segment of the stock exchanges.
For providing the margin trading facility, a broker may use his own
funds or borrow from scheduled commercial banks or NBFCs regulated by
the RBI.
The “total exposure” of the broker towards the margin trading facility
should not exceed the borrowed funds and 50% of his “net worth”. While
providing the margin trading facility, the broker has to ensure that the
exposure to a single client does not exceed 10% of the “total exposure” of
the broker.
Initial margin has been prescribed as 50% and the maintenance margin
has been prescribed as 40%. In addition, a broker as to disclose to the
stock exchange details on gross exposure including name of the client,
unique number under the SEBI (central database of market participants)
regulations,
2003, and name of the scrip. If the broker has borrowed funds for the purpose
of providing margin-trading facility, the name of the lender and amount
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borrowed should be disclosed latest by the next day. The stock exchange,
in turn, has to disclose the scrip-wise gross outstanding in margin accounts
with all brokers to the market. Such disclosure regarding margin trading
done on any day shall be made available after the trading hours on the
following day.
There are following margin practice at VSE:
ü Volume margin
ü Loss/mark to market
ü Volatility margin
ü Scrip margin
ü Intra day gross trading limit margin
ü Net exposure margin
3. Surveillance Department
One of the objectives of the Exchange is to promote and inculcate
honorable and just practices of trade in securities transactions and to
discourage malpractices. The Securites and Exchange Board of India (SEBI)
had directed the stock exchange in August 1995 to set up a
separate Surveillance Department with staff exclusively assigned to
surveillance functions. The exchange has set up a separate SB to keep a
close watch on price movement of scrip’s, detect market manipulations
like price rigging, etc., monitor the member-broker’s position to
ensure that defaults do not occur. The SB monitors exposure of the
members on a daily basis. It also scrutinizes the prices and volumes of the
scrip’s on a daily basis.
As per the guidelines issued by SEBI, the exchanges are required to apply
a daily Circuit Filter of 20% on all the scripts except on the script’s on
which derivative products are available or are included in the indices
on which derivative products are available. On these script’s exchange
has imposed
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dummy circuit filters to avoid punching error by members, if any.
The imposition of circuit filters on scripts ensures that the price of the scrip
cannot move upward or downward beyond the limit set for a day.
The large variation in the prices as well as the volumes of the script’s
are scrutinized and appropriate actions are taken. The script’s, which reach
new high or new low and companies, which have high turnover, are
watched. The prices and volumes in the newly listed scripts are monitored.
In case certain abnormalities are notices, then circuit filters are reduced
to make it difficult for the price manipulators to increase or push down the
prices of a script within a short period of time. The exchange imposes
special margin in the scripts where it is suspected that there is an attempt
to ramp up the prices by creating artificial volumes. The exchange imposes
special margin in the scripts where it is suspected that there is an attempt
to ramp up the prices by creating artificial volumes. The exchange also
transfers the scripts for trading and settlement if a trade-to-trade basis
would result into giving/taking delivery of shares on a gross level and
no intra-day/settlement netting off/squaring off facility would be
permitted. In cases where the abnormal movements continue despite the
aforesaid measures, trading in the scrip is suspended.
The exchange has developed an Online Real Time (OLRT) Surveillance
System, which has been commissioned from July15, 1999. Under this
system, alerts are generated by the system online, in real time, based
on certain preset parameters like the price and volume variation in
script’s, members taking unduly large positions not commensurate with
their financial positions or having concentrated positions in one or a few
script’s etc.
This system includes databases such as company profile, member’s profile and
historical database of turnover and price movement in scripts, member’s
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turnover, their pay-ion obligations, etc. the system generates alerts on
the basis of pre-set parameters during the trading hours and corrective
action based on further investigations is taken in such cases.
4. LISTING DEPARTMENT
Listing department of VSE lists the securities of corporate bodies at
the Exchange by making an agreement with the companies, which fulfills the
terms and conditions as required by VSE. This agreement is prepared in
order to secure the rights of investors and to control/guide the risk of
investor to some extent.
There are around 51 clauses in listing agreement that a company has to
fulfill. Some of the mail clauses of listing agreement are clause 35, 41, 47
and 49.
Clause 31: defines shareholding pattern
Clause 41: defines declaration and publication of unaudited result
Clause 47: appointment of company secretary as a compliance
officer Clause 49: corporate governance
According to this agreement it is the duty of each company to inform
VSE about any major decision which can affect the functioning of the
company so that VSE can inform its member broker and in turn they can
inform their respective clients who are investors in the company. Thus, the
investors can decide upon whether to invest in the company or not and in
this manner VSE controls/guides the risks of investors by informing them
about the decision of the company in which they are investing.
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5. Accounts Department
Accounts department at VSE does not have a wide scope. But in general,
its main activity is of handling monetary effects in cash and cheque
for all companies i.e.
ü Vadodara Stock Services Exchange Limited-Listing fee
ü VSE Stock Services Limited-BOLT
ü (Membership card of Mumbai Stock Exchange purchased by VSSL is
known as BOLT.
ü VSE clearing/CDSL
ü Activities of accounts department
Ü Collection of cheque for pay-in and pay-out bills from members
and depositing the same. Pay-in and pay-out summary of
rolling/regular and auction and settlement is inserted in PC and
cheques of members are entered in pay- in slip. Thereafter it is
deposited in bank and debit/credit take place in account of member as
per the transaction.
ü Depositing cheque of listing fee, which is collected for membership
card of VSE Ltd.
ü Calculating staff’s salary after considering leave, loan, advance
salary, half day etc. of each employee.
ü All govt formalities in monetary terms are programmed and
calculated example income tax, municipal tax etc.
ü Billing of any material purchased for these 3 companies.
ü Calculating of monthly rent of BOLT terminals allotted to members.
ü Collection of maintenance charges from members.
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6. Automation Department
Activities:
ü VSE Ltd. has around 80 sub-brokers; their connectivity of terminals with
Mumbai Stock Exchange is checked by Automation Department.
ü Mumbai Stock Exchange has given equipment ‘VSAT’ to VSE, which is
connected to IDU. Through IDU automation department can
check connection of those members who are sub-brokers of VSE
securities Ltd.
ü This dept solves problems occurring between VSAT and IDU.
ü In each office of member there are 3 network connections and on
each floor there is 1 HUB room is connected with another.
Automation dept has to check and solve all problems related to HUB
room.
ü It has to check the file of transactions sent to them by Mumbai Stock
Exchange everyday.
ü They have to prepare Data Cumulative of shares, which are
transacted by sub-brokers by taking file from surveillance and
entering the same in software.
ü They have to provide various information to other departments like
data cumulative, pay-in, pay-out billing and contracts to
members; pay- in/pay-out billing to accounts department
ü Data regarding delivery of shares as per transaction to clearing house.
ü Although VSE has its trading days from Tuesday to Monday but
here only those members are active who are sub-broker to it and
who deal with Mumbai market, all other remaining members are
inactive.
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7. Personnel Department
They keep all the information of the employees. Functions:
ü Man-power planning
ü Recruitment
ü Probation
ü Promotion and transfer
ü Training
ü Performance appraisal system
Exchange continues to focus on training needs of the employees. Efforts
are directed toward upgrading the knowledge, skills and attitude of
employee by deputing them to various workshops, seminars. Most of the
staff members have been trained for depository operations and are holding
DP System Certification.
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8. MEMBERSHIP DEPARTMENT:-
As we have seen that the Listing Department lists the securities of
Corporate bodies at VSE.Whereas the Membership
Department of VSE registers individual persons as
members of VSE and issues them a membership card. The main activity of
this dept. is of record and registration of the members, Collecting turnover
fee, Collecting audit reports and working as a middleman between SEBI
and members of VSE. At present there are 290 members at VSE
Individual Members
Corporate Members
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TOTAL 290
Initially when VSE was established all the members were selected
after conducting an interview for them. 6 Directors, 1 Executive director
and 1
Government nominee were in the interview panel. The criteria decided for
a person to be a member of VSE are
· AGE: 21 years
· QUALIFICATION : 10+2 (old SSC will also do)
· NET WORTH : minimum 5 Lac
· EXPERIENCE : 3 years in capital market
· CERTIFICATES : No Objection Certificate of other stock exchange if he is
a member of other stock exchange.
Minimum 3 years working as a member in a stock exchange is compulsory
for multiple membership. A person can become member of all recognized
stock exchanges in India but only after providing the NOC of other stock
exchange.
If any of these members sell their membership card to other person then
this dept. registers the name of other person at SEBI and transfer their
name on
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the card after checking that whether he falls in the criteria for a member
of VSE and no interview is conducted for him. In case if that person does
not fall in the criteria to become a member of VSE than his membership
card gets automatically canceled. SEBI has the right to cancel the
membership card of any member due to any reason which SEBI feels
satisfying.
VSE has stopped issuing more membership cards and making more
members because at present these 307 members are also not functioning
properly as market has slow down. To fasten the business of the members
of VSE, VSE Securities Ltd. has become a member of The Mumbai Stock
Exchange and so the members of VSE are becoming sub-brokers of The
Mumbai Stock Exchange so that they can have a wide scope for their
business. Until now 80 such members of VSE has become the sub-broker
of The Mumbai Stock Exchange to get some business even from Mumbai
market.
9. CLEARING HOUSE
VSE has its own Clearing House known as VSE Clearing House. As the
depositories are important intermediaries in the securities market that is
scrip- less or moving towards such a state. The principle function of
depository is to dematerialize securities and enable their transactions in
book-entry form. Dematerialization of securities occurs when securities
issued in physical form is destroyed and an equivalent number of
securities are credited into the beneficiary owner’s account. All the
players have to be conversant with the rules and regulations as well as
with the technology for processing. The intermediaries in this system
have to play strictly by the rules.
A depository established under the Depositories Act can provide any
services connected with recording of a l lotment of
securities in the record of a depository. A
depository cannot directly open accounts and provide services to
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clients. Any person willing to avail of the services of the depository can do so
by entering into an agreement with the depository through any of its
Depository Participants.
Depository Participant (DP)
A Depository Participant is describing as an agent of the depository. They
are the intermediaries between the depository and the investors. The
relationship between the DPs and the depository is governed by an
agreement under the Depository Act, 1996. In a strictly legal sense, a
DP is an entity who is registered as such with SEBI under the provisions of
SEBI Act. As per this Act, a DP can offer depository related services only
after getting certificate of registration from SEBI.
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Vadodara Stock E
xchange Ltd.
VSE CLEARING HOUSE - VSEL
Counter 1 (1) Billing
(3) Billing
(3)DIS Accept System
(4)DRF Accept
(5)AOF Accept
Counter ll (All types Form & DIS)
(6) Modification Misc forms
(7) DIS RequestForm verification
(8) DIS Stamping issue
Holding / Txn / Demat / General / IPO Inquiry
(10) (11) Holding txn Demat IPO
(11) Holding txn. Demat IPO
(12) AOF Entry
(13) DRF Entry
DIS ENTRY (14) Off Market
(15)Inter Depository
(16)On Market
DIS Maker / cheker(17)
DIS Authorized All segment & UploadInteraction with DIS BO
(18)DIS Authorized All Segment & Upload
Interaction With DIS BO
MISC (19)AOF Scan / System Bill Printing
(20)MAY I HELP YOU
42Vadodara Stock Exchange Ltd.
CDSL Performs the following functions through DP
· Enable the surrender and withdrawal of securities to and form the
depository
· Dematerialization and Rematerialisation.
· Maintains investor holdings in the electronic form.
· Effect settlement of securities traded on the exchanges.
· Carries out settlement of trades not done on the stock exchange.(Off-
market trade)
· Transfer of securities.
· Pledging/unpledging of dematerialized securities.
· Electronic credit in public offering of companies or corporation actions.
· Receipt of non-cash corporate benefits like Bonus rights, etc. in
electronic form.
· Stock lending and Borrowing.
· Freezing/locking of investor’s account.
DEMATERIALISATION
Introduction:
· Dematerialization is the process by which a BO can get his physical
securities converted into electronic form. Pre-requisites for
dematerialization are:
· Investor should have a Demat account with any DP of CDSL.
· Securities to be dematerialized must have been admitted in CDSL I.e.
ISIN for the securities should be available in CDSL.
· Investor should be the registered holder for the securities in the books
of the company.
The BO submits a request to the DP in the Dematerialization Request Form
(DRF) along with the certificates. The DP verifies the information on the DRF
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and physical certificates and enters the details in the system to set up
a request electronically. The DP sends the physical documents to the
concerned Issuer / RTA .if the issuer/RTA finds the DRF and certificates in
order, it registers CDSL as the registered holder of the securities and
conform the DRN electronically to CDSL. On receiving such conformation,
CDSL credits the BO account.
If the issuer / RTA reject all or some of the certificates in a Demat request
then the same are sent back to the DP mentioning the rejection(s). DP will
then ask the BO to rectify the rejection and send
the certificates again for dematerialization under a fresh
Demat request.
Dematerialization Process
1
BO DP7
3 6 2
5Issuer/RTA
4CDSL
1) DRF with certificate 5) Conforms electronic request
2) Setup electronic request 6) Credit in the BO’s account
3) DRF with Certificate 7) Access electronic request
4) Statement of holding
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REMATERIALIZATION
Rematerialisation is the process of converting securities, held in a
Demat account (i.e. electronic form) to physical form. A BO intending to
convert the securities into physical form submits a remat request to
the DP in a Rematerialisation Request Form (RRF).
DP verifies the information on the RRF and enters the details in the system
to setup a request electronically. The system generates a unique serial
number called as Rematerialisation Request Number (RRN), which can be
used for future reference. The DP sends the RRF to the Concerned Issuer/
RTA. If the remat request is in order, the issuer/RTA approves the same and
confirms the RRN electronically to CDSL. On receiving such confirmation,
CDSL debits the BO account. Physical certificates are sent by the Issuer /
RTA directly to the investor. The process flow of a remat request is given
below:
1
BO DP7
8 3 6 2
Issuer/RTA 5 CDSL
41) RRF with Certificate 5) confirms electronic request2) Setup electronic request 6) Credit in the BO’s account3) RRF 7) Statement of holdings4) Accesses electronic request 8) Physical Certificate
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Off-Market Transaction
Off-Market transaction can be used for transfer securities from one
BO accounts to another BO account. Both accounts are in CDSL. Both
accounts may with same DP or different DPs. In off-market transactions
the buyer account or the receiving account is not with a CH/CC.
Following combination of off-market transactions are possible:
· BO account to BO account
· BO account to CM account for pay-in
· CM account to BO account for pay-out
· CM account to CM account
On-Market Transaction
· In on-market transaction receiving account / buyer account is always
with CH/CC.
· Investor buy / sell securities on the trading mechanism provided by
the stock exchange through SEBI registered CM’s.
· The day on which the trade is executed is called as the trading day
or the “T” day. On receiving confirmation from the CM, of execution
of the trade, the buyer BO has to deliver the funds to the CM and the
seller BO has to deliver the securities to the CM. the CM delivers the
funds and securities receive from BO to the CH/CC of the stock
exchange before the stipulated time specified by the stock exchange.
· The CH/CC of the stock exchange then delivers the securities to
the buying CM’s and funds to the selling CM’s, who have executed
trades on
behalf of their clients.
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· This activity of the CH / CC of the stock exchange of delivering
funds and securities to the respective sellers / buyers is known as
“settlement of market trades”. The date on which settlement has
taken place is known as “settlement date”.
· The process of delivery of securities by the seller CM to the CH/CC
for settlement is known as “pay-in of securities” and the process of
delivery of securities by the CH / CC to the buyer CM is known as
“pay-out of securities”.
· Pay-in and pay-out of securities takes place at pre-determined
timings decided by the stock exchanges.
Settlement of on-market trades is currently done on a T+2 basis i.e.
settlement take place on 2nd working day after the trade has been
executed by the CM. settlement of funds effected by clearing banks and
depository plays no role in this whereas settlement of securities in
dematerialized form is effected through depository system.
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PLEDGE AND UNPLEDGE
The depository act, 1996 permits the creation of pledge and Unpledge
against securities, securities held in a depository account can be pledged or
Unpledge against a loan, credit, or such other facility availed by the
beneficial ownEr of such securities. For this purpose, both the parties have
to the agreement, i.e., the pledgor and pledgee must have a beneficiary
account with CDSL. However, both parties need not have their account
with the same DP. The nature of control on the
securities offered as collateral determines whether the
transaction is a pledge or Unpledge. If the lender (pledgee) has unilateral
right (without reference to borrower) to appropriate the securities to his
account if the borrower (pledgor) defaults or otherwise, the transaction is
called a pledge. If the lender needs concurrence of the borrower (pledgor)
for appropriating securities to his account, the transaction is called
Unpledge.
CDSL
Confirmation Request Confirmation Request
Pledgee’s DP Pledgor’s DP
Confirmation Request RequestAgreement
Pledgee Pledgor
LOAN
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· Agreement is signed between the pledgor and pledgee outside the CDSL
system.
· Pledgor gives a pledge creation request to his DP who enters it in
the system. Securities are transferred from ‘free balances’ head to
‘pledged balances’ head in the pledgors account.
· The request reaches the Pledgee’s DP through the CDSL system.
Pledgee is intimated by his DP.
· Pledgee gives a pledge confirmation to his DP who enters it in the system.
Status of pledge instruction is changed to ‘pledged’.
· Loan is given by pledgee to pledgor outside the CDSL.
FREEZE AND UNFREEZE OF ACCOUNT
Freezing is an action performed on a BO account as a whole or individual
ISIN balances held with in a BO account to safeguard the balances present
in the BO account. Freezing represents temporary blocking of entire
balance or part of balance in a BO account as such. If the freeze is initiated
by the BO then the BO will continue to get all the corporate action, cash /
non cash benefits. If the freeze is initiated by DP / CDSL, The Issuer / RTA
may choose to keep the benefits in abeyance.
Multiple freezes can exist for the same account since freeze can be initiated
by BO/DP/CDSL. If freeze initiated by DP is released then the other freeze will
still be active.
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FI N ANC I AL CONDITION O F VSE C O MPARED T O
L A ST YEAR.
BALANCE SHEET AS AT 31ST MARCH 2008
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PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED ON 31ST
MARCH 2008.
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RATIO ANALYSIS OF V SE LTD.
SR.NO. RATIO 2008 20071. CURRENT RATIO:
CURRENT ASSETS CURRENT LIABILITIES
3.07 1.81
2. DEBT EQUITY RATIO:D E BT
EQUITY
0.28 0.39
3. RETURN ON TOTAL ASSETS: PAT *100
TOTAL ASSETS
1.77% 3.39%
4. RETURN ON CAPITAL EMPLOYED: P B DT *100EQUITY+DEBT
69.35% 42.88%
5. RETURN ON EQUITY: PAT *100
EQUITY+RESERVES & SURPLUS
4.37% 2.04%
A N AL Y S I S:
Ø Current ratio of VSE Ltd. clearly shows high amount of unutilized
current asset.
Ø Debt equity ratio of VSE Ltd. shows better position in debt compared
to equity of VSE Ltd. compared to last year.
Ø Return on total asset ratio shows major decline compared to last year.
Ø ROCE & ROE shows better position of VSE compared to last year.
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52Vadodara Stock Exchange Ltd.
SU G GES T I O N S
P R O M OT I ON O F ST R ONG P OI N TS:
Vadodara Stock Exchange should promote their strong points to compete
with other broking firms.
VSE has its own clearing house. They provide services through other brokers
in three places apart from VSE like Anand, Bharuch, Surat. It has huge
63000 plus DP accounts but brokers for all of these is not VSE brokers.
So VSE should target those accounts who have their accounts with other
brokers.
VSE has very low charges of DP services of VSE Clearing house compared
to other DP service providers. So they should undertake marketing
activities to promote such low charges.
Many VSE brokers have DP accounts with other firms. So VSE should
promote its DP services among VSE brokers.
VSE should try to provide DP services to broking firms. Thus this can be a
major source or revenue if efforts are made in this direction. As the charges
are already less the distribution network of broking firms can be used to
increase the account base.
S ET UP A MAR K ETI N G T EAM:
VSE should set up a marketing team for promotion of their strong points
which we discussed above. Calcutta Stock Exchange already have a
marketing team, so VSE should take cue from it and set up a marketing
team.
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S TE PS TO B E T A K E N TO CO N T IN U E T O EXIST AS A R S E :
Demutualised stock exchanges have usually listed on the stock exchange
itself and regulatory conflicts have been addressed through specific
provisions in the listing agreement. This will lead to better corporate
governance.
Due to the access to the national trading platform through the subsidiary
route has reduced the incentive of VSE to trade in its own cash segment.
So VSE should make efforts to re-commence trading in
the shares which are exclusively listed on the
exchange by joining with some other RSE and forming an alternative trading
platform.
After recommencing trading in its cash segment VSE should also diversify
in the derivatives & commodities. Only being in equity isn’t going to work
in the long run. In order to survive in the competitive market VSE should
provide an electronic equities exchange for the shares listed on the
exchange.
It can also create a platform for book building for initial public offerings (IPOs).
The exchange can try to create its own distinct identity once trading starts
in its cash segment. For instance, Nasdaq in US is renowned for
technology companies. Similarly, AIM at London attracts SMEs from all
over the world. Thus they can study the pattern of transactions happening
to create their own niche.
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54Vadodara Stock Exchange Ltd.
O T H E R SUG G E S T IONS
VSE should update their systems for more effective and speedy
work. VSE should update its website more often.
VSE has a hall on the ground floor of its building, which was used
extensively for trading during the “open-outcry” system but today,
the screen based trading has rendered it redundant. VSE currently rents
it for commercial purposes like Employment Fairs and Art of Living
Seminars etc. But the fees charges are very nominal. Moreover the hall it
rented hardly for round about
30-40 times a year. Thus VSE needs to use this asset more efficiently
by raising the charges for use and by marketing it further to increase
the
frequency of use.
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55Vadodara Stock Exchange Ltd.
RE FE RENCES
Websites
http://www.sebi.gov.in/corpo/vadodaraorder.html
http://www.munothfinancial.com/stock_faq.php
http://www.bseindia.com/about.asp
http://www.bseindia.com/hist.pdf
www. ma yin.o rg/a ja ysha h/ A/SEBI_RSEr epo rt.pdf
Other References
Information memorandum of
VSE Annual Report of VSE
Hooper, Vincent J., “A World of Regional Stock Exchanges”, May 2002.
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