Transcript
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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.

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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:-

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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:-

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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)

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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

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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

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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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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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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

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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

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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

236

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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

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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

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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

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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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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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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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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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