INDIAN STOCK EXCHANGE

UNIT – 1

Stock exchange – meaning and functions – world’s stock exchange – Indian stock exchange – origin and growth – organization structure – mode of organization – membership – stock exchange traders – stock exchange trading – jobbers Vs brokers – stock exchange dealing – trading of securities.

UNIT – 2

Stock exchange regulatory framework – under the SEBI act, BACC act, defines of India rule capital issues control act 1947, securities contract act 1956, securities contract rules 1957 – profit of Indian stock exchanges BSE, NSE,..etc.. – restructuring Indian stock exchanges – demutualsation.

UNIT – 3

Listing – meaning, characteristics, steps, legal provisions, benefits, consequences of non-listing – delisting – desire trading – speculation – speculation Vs gambling – investors Vs speculator inventor protection.

UNIT – 4

The security contract (Regulation Act 1956) – important provision – SEBI functions and working.

UNIT – 5

Internet stock trading – meaning and features – current scenario – regulations internet stock trading IPO’S on the internet EIPO – E-Commerce act and internet stock trading – stock index features.

UNIT – 1

MEANING AND DEFINITION OF STOCK EXCHANGE:

The term stock exchange refers to a market place for purchase and sale of industrial and financial securities.

The word “stock”- a fraction of the capital of the company

The word “exchange” – a place for purchase and selling somethings.

DEFINITION:

According to Hastings, “stock exchange or securities market comprises all the place where buyers and sellers of stock and bonds or their representatives undertakes transactions involving the sale of securities.

According to section 2(3) of the securities contract regulation (SCRA) act 1956, ”stock exchange has been defined as any body of individuals whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities”

FUNCTIONS OF STOCK EXCHANGE (OR) SERVICES OR FEATURES:

1. Evalution of securities2. Safety of capital and fair dealings3. Ready and continuous market for securities4. Agency for capital formation5. Facilities for speculation6. Regulation of company management7. Barometer of business progress8. Proper channelization of capital9. Providing safety to investors10. Liquidity11. Mobilization of savings12. Dissemination of market data(spread)13. Sound price setting14. Seasoning of securities15. Distribution of new securities

16. Investors education17. True market mechanisam18. Perfect market conditions19. Economic barometer20. Company regulation21. Fair price determination22. Business information

HISTORY OF STOCK EXCHANGE:

1. Bombay stock exchange (BSE) 18752. 18th century – trading in securities3. East India company’s office in india4. 1930s corporate stocks and shares (rise in the volume of business)5. 1936 – shares of banks were traded like,

(a). corporate bank(b). chartered bank(c). mercantile bank(d). Oriential bank(e). old bank of Bombay

6. 1839 – (a). union bank(b). Agra bank(c). Bengal bonded warehouse(d). docking company(e). steam tug company

7. 1840 – 50 : Brokers and Merchants8. 1850 : Joint stock enterprise9. 1860 : 60 brokers10. 1860 – 65 : Indian stock market – widest pread11. 1865 : The process of establishing the stock exchange in Bombay12. Promchand Roy Chand : The first broker13. Mid 19th century : rabid development of commercial activity.

(a). telegraph introduced(b). communication expanded

WORLD’S STOCK EXCHANGES:

i. Continential Europe:- The first stock exchange was established in humburg in 1538. Amsterdam in 1611 Veinna stock exchange in 1771

(a). Haly

1808 – Milan stock exchange 1819 – Caslo stock exchange 1850 – Geneva 1864 – Stock Holm stock exchange

ii. London stock exchange :- It is the oldest stock exchange in the world The merchant ventures began dealing in stocks and shares

during 17th century The council of associated stock exchange was formed in

1890. 6 regional stock exchanges were setup in 1967.

iii. NYSE ( Newyork Stock Exchange):- it was created in 1817 trading is dealer to dealer basis.

iv. AMEX ( American stock exchange ):- It was created in 1953 It is based on central market.

v. NASDAQ ( The National Association of Securities Dealers Automated Quotation Systems):-

It is the largest market in the world It was started in 1917 It is the third largest trading system Investors from around the world Dealing between major institutions

vi. Canadian exchanges It is the fourth largest public equity market in the world.

vii. Japan : (Tokyo) It was setup in 1878

Other stock exchange Nagoya Osaka fukuoka

viii. Hongkong:- It was setup in 1914. It is the least restrited market in the world.

ix. Australia Merbourne - 1865 Syntency - 1871

ORIGIN AND GROWTH OF INDIAN STOCK EXCHANGE

18th century - dealings with the stock transactions East India Company 1830 - trading of corporate shares 1850 - the establishment of companies act and the growth and development of

the stock exchanges across the country.

Before World War 1 :-

Indian stock market comprised three exchanges. Indian manufactures were faced with a boom.

Bombay stock exchanges

The association was established in 1875 It was first stock exchange in india. Native shares and stock brokers association

Ahmedabad stock exchange

It was established in 1894 It is the second stock exchange Under the name of “Ahmedabad shares and stock brokers association”

Calcutta stock exchange

It is the third stock exchange

It was established in 1908. Under the name of Calcutta stock exchange association.

After the world war 2:-

A sharp boom and mush room growth of Indian industries. During the second world war a sum new stock exchange was established such as

(a). Hyderabad

(b). Bangalore

(c). indore etc..,

ORGANISATION STRUCTURE

1. Governing Board

Governing board is headed by a president The governing board is over all management is the stock exchange Governing board is known as board of governers or board of directors of the

managing committee The nominees of the governing board consist of 13 members The governing board is consist of

President Vice president Executive director Elected director Public representative

Functions of Governing Board:

Making and amending the rules and regulations

Granding approvals Warning, fining and suspending

members

Governing Board

Six Members

Three Members

Three Public Representatives

President and vice president

Impose penalities Appointment of authorized clerks Regulation the stock exchange trading Directing, supervising and controlling all metters.

2. Six members:-

They are elected members shell retired at each AGM. 1/3 of the elected members shell retired 1 member shall be eligible for re election3. Three members

They are nominated by the government or board The nominees are not subject to retirement by rotation They can hold the office till the government desires

4. Three public representatives They are nominated by the board One executive director to be appointed by the stock exchange They are appointed for one year They are eligible for re election They are elected from various departments such as

Government department Government financial institutions Investment institutions RBI Educational institutions Industrialists Institute of CA ICWA Institute of company secretaries

5. President and vice president They are elected from the members of the governing board They are appointed for one year They are eligible for re election The president is chairman of the governing board

The governments guidelines and boards decisions of implemented effectively.

MODE OF ORGANISATIONS

In India stock exchanges are free to establish themselves in any form of organizations.

1. Voluntary association Ex: BSE, Ahmadabad stock exchange, Indore stock exchange

2. Public limited companies Ex: exchanges in Delhi, Bangalore, Mangalore, Kochin, Kanpur, are organized as public limited companies.

3. Companies limited by guarantee Ex: Exchanges in pune, Hyderabad

MEMBERSHIP IN THE STOCK EXCHANGE

Only individual can become member Sufficient knowledge and experience relating to stock exchange To follow the rules and regulation Application for membership made to the governing board Governing board as a right the accept or reject the application He should be deposit Rs.20,000 in cash or in securities He should purchased a card The minimum age limit is 21 years The government has prescribed some minimum experience for admission A minimum experience of two years as a authorized clerk The new member can be recommended by the two existing members of atleast 5

years standing

Classification of Member:-

1. Brokers He is a commission agent. He acts on behalf of non-member He deals in all varieties of stocks and shares Traders for a commission He is a paid a commission on the purchase and sales through him The investing public buys and sells and securities only through a

broker2. Jobbers

Jobbers acts for himself He is not to the agent of any non-member Trades for a price difference He buys and sells securities in his own name He jobber is generally a specialist who deals in certain types of

securities only

“””Purchase and selling price = The difference between 2 prices profit earned by the jobber”””

It is techniquely called as “jobbers turn”

STOCK EXCHANGE TRADERS

1. Remiser Remiser is one who acts as a agent of a stock exchange. He is a sub broker. He is a called as a Helf-commission man, he is very popular in BSE. He gets his remuneration in the form of commission for the business secured by him. He obtain business for his members.

2. Authorized clerks The employees of a member if stock exchange are called authorized clerks.

The member of the exchange are empowered to appoint a fixed number of authorized to clerk to transact business behalf of their employees on the floor of the stock exchanges. They are paid a salary, plus a commission upto 50% on the done by him.

3. Brokers4. Jobbers5. Dealers

Dealers are market makers. They are important intermediaries in the stock exchange, dealers are buy and sell, inventory of stocks.

6. Tarawaniwalas The tarawaniwalas are to acts as dealers. In there are own name, they are

some times linked to the jobbers of the London exchange such dealers specialized in one or two securities only. They are also allowed to act as brokers. They are purchase securities from claims at lower price and sell his securities higher price.

7. Commission brokers Generally he transact business on behalf of the members non-members on

a commission. He is similar to the broker of the London exchange. The kinds of commission broker is very little in number.

8. Budliwalas The budliwalas are the financiers of operating on the securities market.

STOCK EXCHANGE TRADING

The act of buying and selling of securities on a stock exchanges true authorized tradings agents or brokers. Normally stock trading is done through registered is known as stock exchange trading.

Steps in Trading of Security (or) Steps in Stock Trading

Methods of stock trading

1. Auction trading system

This is an order- driver or a custom-driver trading system where customers buy and sell orders are matched at a central point. The newyork stock exchange is an order driven action market.

Advantages:

The investors a better price Growth of the markets

Client Registration

Agreement

Order Placing

Order Information

Trade Confirmation

Contract Note

Delivery and Clearing

Share Transfer

Settlement

2. Dealers trading system3. Hybrid trading system4. Margin trading system

STOCK EXCHANGE DEALING

1. Spot delivery contract Where in a contract the payment and delivery of securities take place on spot, on the same day or on the next day.

2. Ready delivery contract Where in a contract the payment (settlement) and a delivery take place with in a fixed time period not exceeding 7 days.

3. Forward delivery contract Where the payment (settlement) and the delivery of security take one

place at security and every fort night through clearing house only

DIFFERENCE BETWEEN JOBBERS AND BROKERS

S.NO

JOBBERS BROKERS

1 Agent Jobbers is an independent dealer and dealing in his own name and a willing to buy and sell securities

Broker is an agent to buy or sell securities on behalf his client

2 Specialization Jobber is a specialist, he deals certain type of securities only

Brokers is a generalist he deals all varieties of securities

3 Dealing with Public

Jobbers deals only with brokers and not with no direct sale or purchase in the market

Brokers deals with a jobber on behalf of his client. He is a middleman between the jobber and real buyer and seller

4 Price Quotation Jobber quotation to the broker(a). one for buying(b). one for sellingSales quotation is higher than the purchase quotation

Broker has to negosiate terms and conditions of sale or purchase. He lives on commission paid by his client which is fixed by the exchange.

5 Margin Jobbers profit margin is fixed by competitions among themselves as dealers

Lower brokerage rate is fixed by rules and the higher rate by competition

UNIT – 2

STOCK EXCHANGE REGULATORY FRAMEWORK

Under the SEBI act 1988 Under the BSCC act (Bombay Security Contract Under the Defence of India rule 1943 Under the capital issues control act 1947 Under the securities contract regulation (SCRA) act 1956 Under the securities contracts regulation rules 1957 Under the companies act 1956

UNDER THE SEBI ACT

The securities and exchange board of India (SEBI). It was first setup April 12, 1988.

SEBI Activities

Registration of brokers Control over mutual funds Issue of insider trading regulations Surveillance Authorized of merchant bankers Clearing house Issue of guidelines foe investor protection Regulating port folio managers Regulating the working of stock brokers, underwriters To make rules about the manipulative activities

UNDER THE SCRA ACT (Securities Contract Act) 1956

Powers:-

Granting recognition of stock exchange

With drawal of recognition Calling for periodical returns Maintaining records and books Power to call for annual reports Power to make rules Regulation of trading practices Control of contract to listing Power to suspend business of recognized stock exchange Power to declare contract Power to prohibit members in certain cases Power to prohibit contract in certain cases Power to provide license to dealers Power to compel listing by public companies Power to make

Listing Trading practices Trading hours Settlement of contracts

UNIT – 3

LISTING

MEANING

Every stock exchange maintainance a list containing a names of selected companies who securities can be traded in that stock exchange.

The list is called “official trade list”. Unlisted securities cannot be dealed in the stock exchange

The company which wants is securities to be traded in a recognized stock exchanges should applied to stock exchange gets name included in the official trading.

DEFINITION

The inclusior of the name if company in the official trade list of stock exchange is called listing.

Listing was optional but its now made compulsory for all public limited companies.

CHARACTERITICS OF LISTING/FEATURES

1. Agreement Agreement between stock exchanges and company

2. Purpose To facilitate clear transperancy , to protective interest of the investor

3. Restriction Company securities traded in any no of stock exchange and listed on the regional stock exchange

4. Investor protection The SEBI act should framed the rules for the regulating the listing of security. The brokers cannot make practices.

STEPS IN LISTING

1. Initial listing This involves making a simple application by the payment of initial listing fee prescribed by the respective stock exchange.

2. Final listing This involves getting the approval of the recognized stock exchange for the listing.

3. Registration and Recording This involves registering and placing on record the corporate securities

openly. This is done for the purpose of trading by the registered members of the stock exchange and official announcement of the securities price.

4. Continued listing This step involves making efforts by the corporate enterprise for the

purpose of continued to remain listed on the stock exchange. Until it is delisted from the records of the stock exchange.

LEGAL PROVISIONS

1. Section 21 of the SCRA Act (Security Contract Regulation Act) To prescribe necessary condition for listing of securities

2. Section 11(B) of SEBI Act (Security Exchange Board of India) To formulate regulations governing working of the listing mechanism

3. To frame rules To frame rules for the regulations of listing of securities

4. Section 73 of the companies act 1956 It aims at protecting to interest of the investor.

CLASSIFICATION OF LISTED SECURITIES

1. Cleared securities Securities in which formed trading can be done. It is also known as

securities forward list.2. Non – cleared securities

Securities are traded in spot transaction there are called “securities in cash list”

ADVANTAGES OF LISTING

Easy marketability Liquidity Higher status Tax advantages Higher prices for securities Safety to the funds Protection to the investors Evolution of the securities Published in newspaper and periodicals More public confidence Safeguard general public interest Quick transfer registration If offers wide publicity Easily buying and selling of securities It assures finance

OBJECTIVES OF LISTING

1. Easy marketability2. Liquidity to the securities3. Transferability of shares4. Protection of interest of investor5. Higher status6. Evolution of the securities

CONDITIONS FOR LISTING OF SECURITIES RULES

Particulars to be furnished..

1. Copies of memorandum of association of company.2. Copies of articles of association of company.3. Copies of prospectus of a company4. Copies of offer for sale and surcular5. Copies of balance sheet for the last 5 years6. Copies of auditor accounts for last 5 years7. Certified copies of agreements8. Certified copies of underwriters 9. Certified copies of every letter, report, contract and other documents10. Statement of history of the company since its incorporation11. Particulars of shares and debentures12. Particulars of any commission, discount, brokerage13. A list of higher 10 holders each class of securities 14. The list of the no of shares and debenture held by the holders15. The list of address of each share holders16. Particulars of shares forfeited 17. Certified copies of agreement with secretaries, selling agent, directors, G.M18. Certified copies of court order and other document19. Particulars of all material contract, collaboration, agreement etc.20. Particulars regarding its capital structure21. The company must offer atleast 60% of its issued capital for public subscription22. Listing agreement with the necessary initial and annual listing fee23. A statement of dividend or interest, if any

CONSEQUENCES OF NON-LISTING

Allotement or shares of application shall be void Application money collected is to be refunded with in 8 days Liability to every director of a company to repay the amount with interest

DELISTING

Delisting means removal of the securities of the listed companies from the official list of the stock exchange.

TYPES OF DELISTING

1. Compulsory Delisting Where a companies name is removed for trading from a official list of the

stock exchange at the instance of the stock exchange, it is a case of compulsory delisting

Causes of compulsory delisting

Non-payment of listing fees Non-compliance with listing requirements Non-compliance with provisions of the listing agreement Absence of trading Unfair trading practices Duplicate shares certificates Promoters and directors not known Reduction in the No of public holders Non-redressal of investors compliants

2. Voluntary Delisting Where a companies name is removed from the official list of the stock

exchange with the consequence of the company both and the stock exchange incase of voluntary delisting

Causes of voluntary delisting

Heavy fees Low holdings

Lossess Absence of trading Suspension (business) Small capital Regional imbalance

SPECULATORS

The speculators buy securities with a hope to sell them at a profit in future. The do not retained their investments for a length period. They are not “genuine investors”

They are not regular investor Earning profit quickly They are interested only in the fluctuations Risk is high

Kinds of Speculators

1. BULL (TEJIWALA) He is also known as “Tejiwala” He is an optimistic speculator His trend is called “Bullish trend”

2. BEAR (Mandiwala) He is apersimistic speculator The bear is said to be “short selling” This situation is called bearish trend

3. STAG He is a carefull speculator He purchased only new companies shares He expects to sell at a premium He is also called “premium hunter” He generally applies for a large no of shares

4. LAND DUCK There are bear brokers & they will lose in the market He is not able to sell the securities He is unable to meet his immediately

SPECULATIVE TRANSACTIONS

The various type of transactions, which facilitate speculative dealings can be classified into following:

I. Option dealings Kinds of Option dealings

Call option Put option Call and put option Gale option

II. Margin tradingIII. ArbitrageIV. Wash salesV. Blank transfer

VI. Carry over or Budla transactionsVII. Cornering

VIII. Rigging the market

DIFFERENCE BETWEEN SPECULATION AND GAMBLING:

Speculation

It is consists of buying and selling securities in the hope of a profit from anticipated of changes of value.

Gambling

It is an illegal activity in involves taking high risk. It has no benefit of the economy. It is unplanned and non-scientific It is uncertainty It involves high returns and also for thrill and excitement It is based on change of events happening

S.N SPECULATION GAMBLING

O1 Legality It is lawful activity & it is

enforceabilityIt is an lawful activity

2 Agreement Speculators agreement is not void but enforceable

The gambers agreement is void and it is not enforceable

3 Social Welfore Speculation is considered useful to the procedure & stock exchanges

It is antisocial & illegal

4 Economic benefits Speculation, if properly carried out, commands certain economic benefits

Gambling has no use for the community at large

5 Risk In speculation, risk is existed & it depends on price changes of securities

In gambling risk is antified and unnecessary risks and created.

6 Rationality Speculation is based on knowledge foresight regarding anticipated price changes

It is based on blind chance without any rational basis

7 Nature of Activity Speculation is a planned activity

Gambling is an unplanned one

8 Types of Analysis Speculator attitude makes a scientific analysis and very interested in market action & price movements

Gambling is a non-scientific one

9 Orientation and Focus

His attention of taking business dealings that carry risk and make profits in a systemmetic manner

His attention on easy and quick money

10 Types of Return Expected

A speculator, to make a profit out if anticipated change in priceEg: investment in shares, securities

A gambling expectations of high returns and making thrill and excitementEg: horse race, lotteries, etc..,

INVESTORS

MEANING OF INVESTOR

The investors buy the securities with a view to invest their savings in profitable income earning securities & investor in interested in safety of his investments.

They are also called “genuine investors”. They generally retained the securities for a length of time.

RIGHTS OF INVESTORS

To receive all benefits To obtain all services from the company To subscripe to additional issue of capital To obtain delivery of shares

FACTORS AFFECTING INVESTORS INTEREST

1. Insider trading2. Short selling3. Restricted trading4. Dominance of few stock exchanges5. Restricted trading hours and days6. Grievances against listed companies7. Grievances against member of stock exchanges8. Price rigging9. Excessive speculation10. Lack of transparency

DIFFERENCE BETWEEN INVESTORS AND SPECULATORS

S.NO

INVESTORS SPECULATORS

1 Safety More concerned with the safety of funds

More concerned with the quick profits

2 Delivery Investors makes an immediate settlement after the completion of

He does not make any immediate settlement of the trades

trade3 Type They can be small

investors & othersThey are different type of speculators such as(a). bulls (b). bears (c). stag(d). land duck

4 Purpose For the purpose of realization cash and getting an income

For the purpose of making profit from future price movements

5 Types of Analysis Evaluate the securities through a scientific analysis

Evaluate the securities through a market action & price movements

6 Risk To involve minimum risk To involve high risk

7 Attitude An investor is careful & conservative

A speculator is careless

8 Stability Stable income Profit is uncertain

9 Types of contract Incase of investment the type contract is that of creditors nature

It is of ownership nature in speculators

10 Income Investors, income depends on the earnings of the enterprise

His profit depends on the change in the market

11 Period In investment the length of commiteement is long term & holdings for the longer period

Tries to sell the securities quickly his commitement is for a short period

12 Types of Purchase In investment securities are purchased our rightly

In speculation, it is often on margin.

SAFEGUARDS FOR INVESTORS / INVESTOR PROTECTION MEASURE

I. Investors services callII. Selecting the brokers & sub – brokers

He should deal with only registered brokers & membersIII. Formal agreement

Registration agreement

IV. Transacting business Specifying exchange

Contract noteV. Brokerage

2.5% of the trade valueVI. Ensuring settlement

Delivery Demat account Depository participant

VII. delivery

SOLVING INVESTORS GRIEVANCES PROCESS / INVESTOR GRIEVANCE REDRESSAL MECHANISAM

1) Awareness programmes2) Investor protection fund3) Arbitration process between members & investors4) BSE training institute5) BSE official website6) Settlement by mutual agreement7) Trade guarantee fund8) Publication of corporate information & results9) IGRC (Investors Grievance Redressal Committee10)To protect the interest of the investors11)To promote the development & regulation of the secondary market

INSIDERS

Insiders are the persons. Who have connection with the company in such a way to have access to price sensitive information

CATEGORIES OF INSIDER

1. Primary insider Directors of company Directors of stock exchange Merchant bankers Registers

Brokers Top executives Auditors banks

2. Secondary insider Dealers Agents Employees of the company

INSIDER INFORMATION

Financial report of the company Declaration of dividends Issue of bonus shares Major plans and new projects Amalgamation & merger Any information regarding the earnings of the company Changes in policies and plan Information regarding the changes Operation of the company

UNIT – 4

SEBI

The SEBI was setup an administrative body in April 1988. It was given statutory status on 30-1-92.

The basic purpose of establishing SEBI is to protect the interest on investors in securities & to promote develop & regulate the securities market.

ROLE AND FUNCTIONS OF SEBI / WORKING OF SEBI

1) Regulating the business in stock exchanges2) Registering & regulating the working of the stock broker

Sub brokers Share transfer agent

Underwriters Bankers to an issue Merchants bankers Registers to an issue

3) Registering & regulating the work of the depositories Participants Foreign investors Credit rating agencies

4) Registering & regulating the work of collection investment schemes5) Promoting & regulating self regulatory organization6) Promoting investors education & training of inter mediaries7) Prohibiting unfair trade practices8) Prohibiting insider trading9) Determine fees & other charges10)Conducting research11)To conduct enquiries and audits of the stock exchanges12)Issuing guidelines for foreign investors for portfolio investments13)Exercising powers under the SCRA & Capital issues control act

UNIT – 5

INTERNET STOCK TRADING

MEANING

Method of trading in securities where by information about

a) Securitiesb) Brokersc) Dealersd) Prices etc.,

are communicated through official websites of concerned stock exchange. So has to facilitate buying and selling of securities. Is known as internet stock trading.

FEATURES

1) Method of trading in securities2) It is an on-line trading3) Order routing system (ORS)4) Safety and integrity5) Reliability and confidentiality6) A system based control on the trading7) It is possible for the investor to the investor to buying and selling securities8) To provide informations about securities, brokers, prices etc.,9) Official websites of concerned stock exchange10)Trades are executed by registered stock brokers

CURRENT SCENERIO / RECENT DEVELOPMENTS

Exchange use the internet as part of their market infrastructure.

1. A variety of information to the public.2. Own websites3. To provide market information4. Around the world5. Information on individual security prices6. Information on trading volume7. Information on contract terms8. Information on trading mechanism9. Information on rules of exchange10. To provide links between brokers and dealers and investors11. To provide information on the listed companies12. Exchanges using the internet for communicating with the member13. It is possible for an order transmission14. It helps to trade executions15. Clearance and settlement16. The websites contain a list of exchange members.

REGULATION INTERNET STOCK TRADING

A. Section 56(1) of the companies act 1956 It provides that companies prospectus to a public issue

B. Section 56(3) of the companies act 1956 It states that from of application for securities

C. Section 64 of the companies act 1956 It’s provides that allotements & offering to the public for subscription

D. Section 69(3) of the companies act 1956 The amount payable on application on each share shall not be loss than 5

percent of the nominal value of the share.E. Section 73(3) of the companies act 1956

The application money kept in a separate bank accountF. Section 72(5) of the companies act 1956

The revocation of a application till the expiry of 5 days after the time of opening of subscription list

G. Rule 19(2)(6) of the SC(R) It provide that atleast 25 percent of each class of securities be offered to

the public for subscription

IPO – INITIAL PUBLIC OFFERING

It can sell to the public The securities are offered to the public They can be sold to the highest bidder They can be sold at fixed price It is brought out by underwriters To draft the prospectus

Procedure for IPO

To obtain the approval of the board of directors of company.

The company can appoints lead managers to the issue such as,

a) Merchant bankersb) Underwritersc) Registersd) Transfer agentse) Co-Managersf) Advisor

The lead manager co-ordinates the public issue process.

Appointment of intermediaries To determine the public offer price To consider companies management To consider market price of the securities Company operating result History of the company & industry Prevailing market & economic conditions

IPO’S ON THE INTERNET

To protect the internet of the investors To promote the development of securities market To regulate the securities market To issue guidelines To protect the rights of investors The filling of offer documents with SEBI Protecting of share issue

E – IPO

The publishing of the contents of a prospectus through the internet.

The information contained in a website It includes notice, circular & advertisement Inviting deposit from the public Inviting offers from the public Subscription or purchase of shares and debentures Electronically linked transparent facility is used The application can be made for IPO:

1. An application from prospectus2. Minimum amount has to be paid3. Money to be kept in separate account4. Investors application to be protected5. Collection of money

E – COMMERCE ACT AND INTERNET STOCK TRADING

The Electronic Commerce Act was passed in the year 1998. It provides and the purposes of the act are,

Legal infrastructure Electronic contracting Security of electronic transactions Integrity of electronic transactions Use of digital signature Other issues

E – COMMERCE RELATING TO INTERNET STOCK TRADING

According to section 3 to 21:

1) According to sec 3 Relating to electronic communication2) According to sec 4(a) part 1 – Relating to electronic records and signature

Sec 4(b) Relating to electronic contract3) According to sec (5) Relating to generating receiving under processing record4) According to sec (6) It provides that legal recognition of electronic records &

signature5) According to sec (7) It deals with networks with in electronic contracting6) According to sec (8) Regarding to enforceability of electronic signature7) According to sec (9) Regarding rules of law requirement & electronic records8) According to sec (10) It provides that electronic records & signature shall be

admitted as evidence9) According to sec (11) It relating to documents records & informations10)According to sec (12) & (13) It deals with secure electronic records “Secure

Electronic Signature”11)According to sec (14) to variefy the electronic record & signature through

security procedure12)According to sec (15) It deals with formation & validity of electronic contracts13)According to sec (16) It provides that validity & enforceability of electronic

records14)According to sec (17) It provides a framework for electronic records15)According to sec (18) Acknowledgement of the receipt of electronic records

16)According to sec (19) It deals with the time & place of the dispatch & receipt of an electronic records

17)According to sec (20) It deals with the dispute18)According to sec (21) Use of electronic records & electronic signature by

governmental entities

STOCK INDEX FEATURES

Stock Index

A stock index is a composition of selected securities traded on an exchange

For example:

“sensex is a composition of 30 blue chip securities activity being traded on BSE

Stock Index Futures

It is introduced by the L.C.Gupta committeeIt is admitted by BSE on 9th June 2000It was admitted by NSE on 12th June 2000The index was based on the sensex of BSE and Nifty of NSE

FEATURES OF STOCK NDEX FUTURES (SIF)

1. It is one of the type of a future contract2. It is based on a value line index3. A value line index was introduced by the KCBT4. S &P 500 index future

It is introduced by the Chicago Mercantile Exchange (CME). At present, an S & P 500 index in the most activity traded future contract in the world.

5. Specifications a) Contract sizeb) Trading cyclec) Price ranged) Expiry daye) Settlement pricef) Mode of settlementg) Date & month of delivery

6. Multiple or market lot size The SIF can be bought or sold only in a specified lot size

7. Margin requirement There are three types of margin a future market. SIF market are required

to keep good faith deposits which are adjusted on a daily basis account for the gains or losses

a) Initial marginb) Maintenance marginc) Margin call

8. Life time contract9. Settlement

The contract is settled in cash on the settlement date10. Trading in SIF

a) The orders will punched in the systemb) Confirmationc) Market large sized) Separate bid & quotationse) Order confirmation

11. Pricing SIF F = Se (r-y)t

Where,

F = Future price

S = Spot value of index

E = Exponetial constant with value 2.718

Y = Carry return

T = Time

R = Cost of carry (or) interest cost