Jyoti Nivas College PG Centre

SEON

E-JOURNAL

(SEPTEMBER 2014)

STOCK EXCHANGES

INTRODUCTION:

Stock exchanges are of recent growth. The first stock exchange of the world i.e. London stock

exchange was founded only in 1773. And was re-organized in 1886.Following the example of

London stock exchange stock exchanges were developed in France and Germany. Stock

exchanges were developed in USA in 1865.Today stock exchanges is present not only in all the

developed countries but also in developing countries like India.

Need for stock exchange:

With the advent of joint stock company types of enterprises no doubt it has become possible

even for people with moderate means to participate in industrial and commercial enterprises by

becoming their shareholders. But generally the investing public will be prepared to invest their

savings in companies only when they have facilities for converting their investment into cash

whenever they want. The issuing companies cannot return their capital to the investors during

their existence. So naturally there arises the necessity for the organization of stock exchanges

where it will be possible for investors to sell their shares to others when they want to dispose of

their shares.

There are some who consider a stock exchange as a race course or gambling den where fortunes

are made or lost. There are few who consider a stock exchange as “open sesame for treasure’’,”alibabas treasure” where quick money is made.

Stock exchange is an indispensible institution as long as the joint stock companies operate.

Why should you invest in stock market?

1. INVESTMENT GAINS: One of the primary benefits of investing in the stock market is the

chance to grow your money. Over time, the stock market tends to rise in value, though the prices

of individual stocks rise and fall daily. Investments in stable companies that are able to grow

tend to make profits for investors. Likewise, investing in many different stocks will help build

your wealth by leveraging growth in different sectors of the economy, resulting in a profit even if

some of your individual stocks lose value.

2. DIVIDEND INCOME: Some stocks provide income in the form of a dividend. While not all

stocks offer dividends, those that do deliver annual payments to investors. These payments arrive

even if the stock has lost value and represent income on top of any profits that come from

eventually selling the stock. Dividend income can help fund a retirement or pay for even more

investing as you grow your investment portfolio over time.

3. DIVERSIFICATION: For investors who put money into different types of investment

products, a stock market investment has the benefit of providing diversification. Stock market

investments change value independently of other types of investments, such as bonds and real

estate. Holding stock can help you weather losses to other investment products. Stock also adds

risk to a portfolio, as well as the potential for large, rapid gains, helping investors avoid risk-

averse or overly conservative investment strategies.

4. OWNERSHIP: Buying shares of stock means taking on an ownership stake in the company

you purchase stock in. This means that investing in the stock market also brings benefits that are

part of being one of a business's owners. Shareholders vote on corporate board members and

certain business decisions. They also receive annual reports to learn more about the company.

Owning stock in the company you work for can be a way to express loyalty and tie your personal

finances to the success of the business as a whole.

It plays a vital role in the economy of a country. Stock exchanges are also the barometers of the

general economic conditions of a country as stock exchanges are highly sensitive to social,

political and economic changes in the country .A stock exchange is also the mart of the world or

the market where the business of businesses is carried on as the securities of various business

enterprise spread all over the world are dealt in stock exchange.

BY:

NAGASHREE

HARINI

SUJA

AMITA.V

1st MFA

Various participants of stock market:

INVESTORS: Investors, also referred to as stockholders or shareholders, are those who own

shares of stock of a publicly listed company. They are accorded certain privileges like the right

to fair and equal treatment, the right to vote and exercise related rights, and the right to receive

dividends and other benefits due to stockholders. They are classified as either retail or

institutional, and local or foreign.

STOCKBROKERS : A stockbroker or trading participant is licensed by the Securities and

Exchange Commission (SEC) and is entitled to trade at the Exchange. They act as an agent

between a buyer and seller of stocks in the market. For their services as stockbrokers, they

receive from their clients either a buying or a selling commission. The PSE originally issued 184

trading rights. To date, the PSE has 133 active stockbrokerage houses. The representatives

(licensed salesmen) of these accredited stockbrokers convene daily, at certain specified hours, on

the “trading floor” of the exchange, where they sell and buy shares of stocks for the account of

their clients. They execute orders in the market to the greatest possible advantage of their

customers, by buying at the lowest possible price or by selling at the highest possible price.There

are two (2) types of stockbrokers:

• Traditional – those who assign a licensed salesman to handle your account and to take your

orders via a written instruction or a phone call

• Online – those whose main interface is the internet where clients execute their orders and

access market information online

LISTED COMPANIES: Listed companies, also called “issuers”, are those whose shares of stock are traded on the Exchange. These companies qualified with the stringent listing and

reportorial requirements of the PSE, and have gone through initial public offering (IPO) or

listing by way of introduction. As of August 2011, the PSE there are 249 listed companies in the

PSE. These are classified into six different sectors: Financials, Industrial, Holding Firms,

Property, Services, and Mining and Oil.

CLEARING HOUSE : Securities Clearing Corporation of the Philippines (SCCP).The SCCP is

a wholly owned subsidiary of the Exchange. It was established to ensure the orderly settlement

of equity trades executed at the PSE. The SCCP uses the Central Clearing and Central Settlement

(CCCS) system purchased from the Capital Markets Co. (CAPCO) of Belgium.SCCP is

responsible for establishing the cash and securities liabilities and entitlements of its clearing

members, synchronizing the settlement of funds and the transfer of securities based on the

delivery-versus-payment model or multilateral net settlement; guaranteeing the settlement of

trades in the event of a trading participant’s trade default in order to ensure the finality and irrevocability of all Exchange trades through its fails management procedures; implementing

appropriate risk management measures in order to mitigate risks inherent in the clearing and

settlement of Exchange trades and the maintenance and administration of the Clearing and Trade

Guarantee Fund (CTGF).

DEPOSITORY :Philippine Depository and Trust Corp. (PDTC)

The PDTC acts as securities depository or “custodian” of listed shares of stock that are traded at the PSE. It was organized to establish a central depository in the Philippines and to implement

scripless trading.The PDTC performs book-entry transfer of securities:

1. From seller’s to buyer’s accounts during settlement of Exchange trades;

2. From one PDTC participant to another per client instruction, and;

3. From lender’s to borrower’s account for loan transactions.

SETTLEMENT BANKSThe PSE has three (3) accredited banking institutions where trading

participants make and receive payments for stock transactions.The settlement banks accept

deposits of funds for payment of securities bought, confirm payments of due clearing obligations

to SCCP, debit buyer’s cash account and credit seller’s cash account during settlement, and receive and/or return cash collateral put up by clearing members to cover their daily trade

negative exposures.

TRANSFER AGENTS

The stock transfer agent is considered the “official keeper” of the corporate shareholder records. The stock transfer agents provide the issuer or the listed company with a list of holders of its

securities. They effect transfer of beneficial ownership and process corporate actions like stock

or cash dividends, stock rights, stock splits, and collation of proxy forms.

By

Adelyn C F

2nd

MFA

ADVANTAGES AND DISADVANTAGES OF STOCK ECXHANGE

Introduction:

This brings our guide to a close. Hopefully it has shown you that despite all the mystique which

surrounds the stock exchange, it is more a case of depth than complexity and with study and

research any investor stands a chance of building a profitable portfolio. We hope we've shown

that you need not be frightened by financial jargon, and that some of it encapsulates complicated

ideas quite neatly.

Anyone can enjoy the benefits of direct investment in shares. As the private investor community

grows, we can expect the doors to open further. Investments professionals are being encouraged

to pay more attention to the private investor and as a result, new products and services, such as

Exchange Traded Funds are available to us all.

The guide has explained what shares are and how to buy and sell them. We have shown you how

you might like to start some of your own research, and how important it is to do it. Using off and

online news sources, company accounts and by making a few assumptions, you should start to

develop a technique for valuing shares.

Focused on investing in shares, you should now look into other investment types: Spreadbets and

CFDs for example. All of these investments should be candidates for inclusion in your portfolio,

as they lead to a greater diversification of risk. You should include or eliminate these candidates

according to the fit they may have with your portfolio strategy, see the finance guides for more

information on these other financial products.

The internet is a powerful too the private investor. An unprecedented access to live information

puts you on a level with the professionals and with the advances in online trading, you can be

equally responsive to fast changing market conditions.

A stock exchange is the place where investors go to buy/sell their shares. Once a company's

public offering is complete, it gets listed in a stock exchange. After listing it would be available

for trading to all investors in the stock exchanges where they are listed. In India we have two

major stock exchanges. They are:

1. The national stock exchange (NSE) &

2. The Bombay stock exchanges (BSE)

National stock exchange:

The NSE is India’s largest and the world’s third largest stock exchange in terms of transaction volumes & amounts. The NSE is based out of Bombay. The NSE has set up its trading platform

as a nation-wide, fully automated screen based system. This enables anyone in any part of the

country to trade on shares listed in the NSE.

NSE index or nifty:

The NSE index or the nifty index as it is popularly known, is the index of the performance of the

50 largest & most profitable, popular companies listed in the index. Each company that is part of

the index has its own weight age in the value of the index. The value of the nifty index is the

weighted average of the prices of these 50 companies.

Bombay stock exchange:

The BSE is the oldest stock exchange in Asia. It is situated in dalal street in Mumbai. It is the

third largest stock exchange in south Asia and the tenth largest in the world. BSE has over 5000

companies that are listed in it. The objectives of the BSE are similar to that of the NSE. BSE also

uses the latest technologies in the it field to provide a single place where traders from across the

world can buy/sell shares in the Indian share market.

BSE index or sensex:

The BSE index or the sensex as it is popularly known is the index of the performance of the 30

largest & most profitable, popular companies listed in the index. Each company that is part of the

index has its own weight age in the value of the index. Since the number of companies is lesser,

the index variations are higher when compared to the nifty index.

ADVANTAGES OF STOCK EXCHANGE

Economies of Scale

One of the advantages of the stock exchange is that is enjoys economies of scale because so

much money passes through it. This helps to keep costs low, making it less expensive to buy and

sell stocks.A stock exchange can use millions of transactions to spread fixed costs of setting up

and maintaining orderly and secure trading, whether it's done on the computer or the exchange

floor. The bigger a stock exchange is, the cheaper it is to trade an individual stock on it.In the

U.S., the two biggest exchanges are the New York Stock Exchange, or the NYSE, and the

Nasdaq Stock Market, usually referred to as the Nasdaq.

Investor Protection

Stock exchanges require listed companies to meet strict regulatory requirements with regard to

financial reporting, corporate governance and disclosure. In the U.S., the regulatory agency is the

Securities and Exchange Commission. Investors get access to all relevant information about the

listed companies so they can make informed decisions about whether to buy or sell shares.

Secure Clearing

A stock exchange provides a reliable and secure clearing mechanism. You can be sure that the

stocks you buy will be delivered to you, no matter what happens to the party you bought them

from.

Investment gains

One of the primary benefits of investing in the stock market is the chance to grow your money.

Over time, the stock market tends to rise in value, though the prices of individual stocks rise and

fall daily. Investments in stable companies that are able to grow tend to make profits for

investors. Likewise, investing in many different stocks will help build your wealth by leveraging

growth in different sectors of the economy, resulting in a profit even if some of your individual

stocks lose value.

Dividend income

Some stocks provide income in the form of a dividend. While not all stocks offer dividends,

those that do deliver annual payments to investors. These payments arrive even if the stock has

lost value and represent income on top of any profits that come from eventually selling the stock.

Dividend income can help fund a retirement or pay for even more investing as you grow your

investment portfolio over time.

Diversification

For investors who put money into different types of investment products, a stock market

investment has the benefit of providing diversification. Stock market investments change value

independently of other types of investments, such as bonds and real estate. Holding stock can

help you weather losses to other investment products. Stock also adds risk to a portfolio, as well

as the potential for large, rapid gains, helping investors avoid risk-averse or overly conservative

investment strategies

Ownership

Buying shares of stock means taking on an ownership stake in the company you purchase stock

in. This means that investing in the stock market also brings benefits that are part of being one of

a business's owners. Shareholders vote on corporate board members and certain business

decisions. They also receive annual reports to learn more about the company. Owning stock in

the company you work for can be a way to express loyalty and tie your personal finances to the

success of the business as a whole.

Disadvantages of stock exchange:

• Stocks are volatile investments. The price of a single stock can vary quite widely from day to

Day, and the factors that cause these price fluctuations are beyond the control of the

investor.

• Buying a widely diversified basket of stocks can be difficult for all but the wealthiest

investor. Small investors are better off buying a quality stock mutual fund. Mutual funds

pool the investments of many different people in order to buy a diversified set of stocks.

This diversified approach helps to reduce the risk inherent in the stock market.

• As investors near retirement, the amount of stocks in the portfolio should be reduced.

Investors who are close to retirement age can no longer afford to take chances with their

money, and that means moving a significant portion of their retirement funds to safer and

more stable investments.

• Buying and selling stocks costs money in the form of brokerage commissions, and many

brokerage firms charge account maintenance fees as well. It is important to look for low cost

alternatives when buying and selling stocks.

Investing and trading in the stock market is no different from any other worthwhile endeavor.

Doing it well requires an understanding and an application of techniques and a lot of practice

trading stocks.

The world’s first electronic stock market, NASDAQ, now trades more shares in terms of volume and value than any other major exchange in the world. It lists a wide range of companies

covering the complete economic spectrum from agriculture, mining, construction and

manufacturing to transportation, retail, banking, insurance and high tech.

By

Supraja

Lekha

Sri Raksha

Neha

2nd

MFA

REASONS FOR THE LEVEL OF RISK INVOLVED IN THE STOCK

MARKET

There can be no investment that is earned without risk. There maybe a sense of safety & security

even when financial advisers consider the probable and most possible risks that are involved in

the stock market, it is first and for most an essential fact that even the advisors must be aware of

all the risks, identifty their origin and protect with variance means of Hedging so that an investor

is ensured profits at minimul losses. Leaving money in risk-free investments such as high-yield

savings accounts isn’t investing at all, by taking on very little risk, keeping the bulk of wealth in a savings account practically guarantees purchasing power over the long term.

Indian stock market started way back in eighteen century but it was unorganized till end of

nineteen century. During that time the market was under a banyan tree in front of the Town hall

in Bombay. In May 1927 the Bombay Stock Exchange was recognized under the Bombay

Security contracts Control act, 1925 but during that still the exchange was not well organized as

British Government didn’t want India to be the rising Nation. After independence, slowly companies like Century Textile, Tata Steel, Kohinoor mills had become the participants of the

market. Indian market has been gone through adverse effects and managed to adapt to changes to

suit the environment for exchange and now it is organized, more globalized and fairly valued.

Computer and telecom sectors play a vital role in breaking the boundaries approaching the

different investors by providing better level of information.

It is essential that before an investment is made the elements that surround the value or worth of

the securities must also be verified however this is only possible for an experienced or an

educated person of financial background a common lay person would be able to understand the

reasons for security price fluctuations and their dependence only when explained which cannot

be portrayed by all company’s, as these are work ethics because at the end of the day a company

only wants to increase net worth and a lay person only wants profits, the basic understanding is

absent and it is this sense that has trigerred the journal.

These are the risks that are identifiable in the stock market

Market Risk-Market risk is considered as a broader picture as it holds the more significance over

the other risks. Before investing in a stock it is assumed that based on an average expected return

the decision is made and this decision is much more influecial in the market risk category

particularly if you choose the less expensive route of investing in a broad stock-based index

fund, as the study of the overall economic condition of the country or even the world will cause

investment’s to fluctuate because of the fluctuations in the market price. As this market

constitutes all types of securities it is a proprity analysis, the analysis maybe on the business

cycle of the economy, tax exemptions, whether the share values are effected because of the

ruling party, etc…

Default Risk-Default risk is related to the quality of the underlying investment, and it is more

apparent when investing in a single company, through stocks or bonds. When the investment is

made in a company’s bond or a municipality’s, generally there is an expectation of a guaranteed return. The promised return is usually higher than what a savings account would provide, but the

risks faced maybe by default. If the company files for bankruptcy of if the municipality is

mismanaged, it’s possible returns won’t be received.

Inflation Risk-Financial planners like to assume that inflation runs about 3 or 4 percent a year

over long periods of time. This allows planners and investors to calculate expected “real” returns for an investment. If you assume inflation is 3 percent and your savings account earns 1 percent

the real return is a loss of 2 percent is occurred in that year. This real return takes the effect of

inflation into account, as the prices of all goods increase which maybe the required raw materials

this inturn increases the cost of production which any company in any economy would try to

reclaim the lost amount through the stock market.

Company Risk-All the companies today are facing risks and it varies depending upon the

company and the strength of the organization and the products/services in the market as well as

the locality the company is related in. There are two types of companies like low risk companies

and high risk companies, company with less risk factor will be a stable one and they will have

more shares and if a company is facing the risk it is advanttageous to invest maximum shares in

a low risk company and remaining which would be a minmul amount in a high risk company.

Sector Risk-Diversification of the portfolio is one of the important steps in hedging and this

doesn’t mean that taking shares for different companies but stock can be taken from different economic sectors, this will minimize the risks that would be exposed and the counter balancing

of off setting risks can be managed.

Mortality Risk-Considering mortality risk is when the investments in pensions, insurance

contracts, annuities, or any investment with a long-term horizon are in existence in the market. If

your investment strategy focuses solely on the long-term, there is a chance that you will never

live to enjoy the benefits.

The risk of stock market can be reduced by diversification, investing in long term funds, invest

less and monitor the economy in the market, to get advice from the expert and analyze the

company before you make investment. Spend some time to think about the risks of your

investments. You may discover that your tolerance for risk is lower than you have originally

expected or that you’ll need to adjust to accepting considering more risks in order to meet

your financial goals regardless of being an individual or a company. Investors jump head on to

buy investment with great potential for returns without assessing their risk tolerance capacity and

the real risk. It’s easy for such investors to get burnt in the process. The rule is simple, and you

have heard it many times before- The higher the returns, the greater the risk. The lower the risk,

the lower the returns.

BY:

JANITHA

KIRTHI

LOBSANG

LAKSHMI

2nd

MFA

DIFFERENCE BETWEEN INDIAN STOCK MARKET &

INTERNATIONAL STOCK MARKET

The stock market is witnessing heightened activities and is increasingly gaining importance. In

the current context of globalization and the subsequent integration of the global markets this

paper captures the trends, similarities and patterns in the activities and movements of the Indian

Stock Market in comparison to its international counterparts.

ORIGIN OF VARIOUS STOCK EXCHANGES

The National Stock Exchange of India Ltd. (NSE) is a exchange located in the financial capital

of India, Mumbai. National Stock Exchange (NSE) was established in the mid 1990s as a

demutualised electronic exchange.

Established in 1875, BSE Ltd. (formerly known as Bombay Stock Exchange Ltd. and established

as "The Native Share and Stock Brokers' Association") is one of Asia’s fastest stock exchanges, with a speed of 200 microseconds and one of India’s leading exchange groups.

The origin of the New York Stock Exchange (NYSE) is dated back to May 17, 1792, when the

Buttonwood Agreement was signed by twenty-four stock brokers outside of 68 Wall Street in

New York under a buttonwood tree.

The Tokyo stock exchange was established on May 15, 1878 and trading began on June 1, 1878.

In 1943, the exchange was combined with ten other stock exchanges in major Japanese cities to

form a single Japanese Stock Exchange.

The Hong Kong stock exchange is the 8th largest stock exchange in the world in terms of Market

capitalization.

Presently, the fluctuations in the Indian market are attributed heavily to cross border capital

flows in the form of FDI, FII and to reaction of Indian market to global market cues. In this

context, understanding the relationship and influence of various exchanges on each other is very

important. This study that compares global exchanges which are from different geopolitics-

socio-economic areas. With the cross border movements of capital like never before in the form

of FDI and FII, coupled with the easing of restrictions bringing various stock exchanges at par in

terms of system and regulations, it can be assumed reasonably that a particular stock exchange

will have some impact on other exchanges.

Since stock prices are time series data, a check needs to be done to find the stationary of the

given time series. A time series is said to be stationary if its mean value and its variance do not

vary systematically over time, hence time series data should be first tested for stationary. In

econometrics, a time series that has a unit root is known as a random walk.

The study brings forth some distinct conclusions many of which validate popular beliefs.The

objective of the whole research was to try and compare the various stock exchanges based on

certain parameters in order to understand the impact of integration of the financial world on the

various entities within it especially in the context of globalization and increased interesting the

capital markets fuelled by surging growth.

In short, the financial sector as a whole, with the stock markets as its indicator, has indeed come

a long way and are ready for the next level with regards to efficient trading and variety in the

instruments traded.

BY,

MONICA

KEERTHANA

MARY LINDA

NEETHU C.M

1st MFA

HOW DOES THE STOCK MARKET BENEFITED IN INDIA

A stock exchange is an institution, organization or association that serves as a market for trading

financial instruments such as stocks, bonds, and their related derivatives. Mark Twain once

divided the world into two kinds of investors: those who know about the investment

opportunities in India and those who don't. Most trading in the Indian stock market takes place in

National Stock Exchange and Bombay Stock Exchange. Both exchanges follow the same trading

mechanism, trading hours, settlement process.

Indian stock market started its operation since 19th century. In May 1927 the Bombay stock

exchange was recognized and the National stock exchange was recognized in the year 1992.if

you would like to buy share of stock in any publicly traded company you will most likely need

the services of brokerage firm. The brokers buy and sell the shares on behalf of the investor.

There are some practical and legal approaches. The securities industry is highly regulated.

Besides two national exchanges there are many smaller regional stock exchanges.

Stock exchanges have a vital function in modern economies as places where investors and

companies can meet and exchange capitals. They offer standardized instruments which

are traded with transparency contrary to what happens in OTC transactions. They display prices

and volumes for every product they trade.

However, there's a lot of action that takes place between your order and the confirmation. Here's

what has to happen:

You place the order with your broker to buy 100 shares of the “X” Company.

The broker sends the order to the firm's order department.

The order department sends the order to the firm's clerk who works on the floor of the exchange

where shares of “X” company are traded.

The clerk gives the order to the firm's floor trader who also works on the exchange floor.

The floor trader goes to the specialist's post for “X” company and finds another floor trader who is willing to sell shares of “X” company.

The traders agree on a price.

The order is executed.

The floor trader reports the trade to the clerk and the order department.

The order department confirms the order with the broker.

The broker confirms the trade with you.

Trading Mechanism: Trading at both the exchanges takes place through an open electronic limit

order book, in which order matching is done by the trading computer. There are no market

makers or specialists and the entire process is order-driven, which means that market orders

placed by investors are automatically matched with the best limit orders. As a result, buyers and

sellers remain anonymous. The advantage of an order driven market is that it brings more

transparency, by displaying all buy and sell orders in the trading system. However, in the

absence of market makers, there is no guarantee that orders will be executed.There are various

benefits from stock markets:

Helps the economy to grow whereby the developing nations needs more capital to fund the new

projects, set up plans and to grow and expand the operations.

Banker who lends loans does not provide to all the business, however investors are known to be

more patient and show overwhelming support to good enterprises which are in distress.

The market and analysts often demand higher standards of efficiency and management than what

the Government can ask via laws and these days the stock holders even force the companies to

take CSR, and morals more seriously.

Stock market wants records, audits and paper trail of every transaction which leads to the curbing

of corruption.

Mobilizing the savings gives a common man to relax and let his investments work for him.It also

helps in redistribution of wealth.

It also leads to an easy liquidity which benefits in investing in shares and securities are traded in

very high volume which makes it a volatile market.

Flexibility is also added to the benefits of stock market which have ups and downs in prices at

every trade session.

Stock market works under some regulatory framework to protect and safeguard all its investors.

Stock market gives maximum returns.

It also suits the tastes of the business and its investors.

Once when we start investing in stock market then we are starting our own business.

BY:

REKHA C

2nd

MFA

SEBI Guidelines

Listing means admission of securities to dealings on a recognized stock exchange. The securities

may be of any public limited company, Central or state government, quasi governmental and

other financial institutions or corporations, municipalities, etc.The objectives of listing are

mainly to provide liquidity to securities, mobilize savings for economic development and protect

the interest of investors by ensuring full disclosures.BSE has set various guidelines and forms

that need to be followed and submitted by the companies. These guidelines will help companies

to expedite the fulfillment of formalities and disclosure requirements that are required at various

stages of public issue. A company intending to have its securities listed on BSE has to comply

with the listing requirements prescribed by it. Some of the requirements are as under:

1. Minimum listing requirements for new companies.The minimum post-issue paid-up capital of

the applicant company should be Rs. 10 crore for IPOs & Rs.3 crore for FPOs.The minimum

issue size shall be Rs. 10 crore. The minimum market capitalization of the Company shall be Rs.

25 crore . The applicant, promoters or group companies shall not be in default of compliance of

the listing agreement..The above eligibility criteria would be in addition to the conditions

prescribed under SEBI (Issue of Capital & Disclosure Requirements) Regulations, 2009.

2. Minimum requirements for companies delisted by BSE seeking relisting on BSE.

Companies delisted by BSE and seeking relisting at BSE are required to make a fresh public

offer and comply with the existing guidelines of SEBI and BSE regarding initial public offerings.

3. Permission to use the name of BSE in an issuer company's prospectus.

Companies desirous of listing their securities offered through a public issue are required to

obtain prior permission of BSE to use the name of BSE in their prospectus or offer for sale

documents before filing it with the concerned office of the Registrar of Companies. BSE has a

Listing Committee, comprising of market experts, which decides upon the matter of granting

permission to companies to use the name of BSE in their prospectus or offer documents.

4. Submission of letter of application: As per Section 73 of the Companies Act, 1956, a company

seeking listing of its securities on BSE is required to submit a Letter of Application to all the

stock exchanges where it proposes to have its securities listed before filing the prospectus with

the registrar of companies.

5. Allotment of securities .As per the listing agreement, a company is required to complete the

allotment of securities offered to the public within 30 days of the date of closure of the

subscription list and approach the designated stock exchange for approval on the basis of

allotment. In case of book building issues, allotment shall be made not later than 15 days from

the closure of the issue, failing which interest at the rate of 15% shall be paid to the investors.

6. Trading permission . As per SEBI Guidelines, an issuer company should complete the

formalities for trading at the stock exchanges where the securities are to be listed within 7

working days of finalization of the basis of allotment. A company should scrupulously adhere to

the time limit specified in SEBI (Disclosure and Investor Protection) Guidelines 2000 for

allotment of all securities and dispatch of allotment letters or share certificates/credit in

depository accounts and refund orders .

7.Requirement of 1% security.Companies making public or rights issues are required to deposit

1% of the issue amount with the designated stock exchange before the issue opens. This amount

is liable to be forfeited in the event of the company not resolving the complaints of investors

regarding delay in sending refund orders/share certificates, non-payment of commission to

underwriters, brokers etc.

8. Payment of listing fees.All companies listed on BSE are required to pay to BSE the annual

listing fees by 30th April of every financial year as per the schedule of listing fees prescribed

from time to time.

SEBI guidelines for equity shares

The eligibility norms for public issue is that an unlisted company can make initial public offering

(IPO) of equity shares or any convertible securities into equity if it has net tangible assets of

atleast Rs. 3 crores in each of the preceding 3 years , of which not more than 50% should be held

as monetary assets. If more than 50% of net tangible assets are held as monetary assets, the

company should have made firm commitments to deploy such excess monetary assets to its

projects . The company should have distributable profits for atleast three out of five immediately

preceding years. The company should have net worth of atleast Rs. 1 crore in each of the

preceding 3 years . The aggregate of the proposed issue and all previous issues made in the same

financial year (in terms of size) should not exceed five times its pre-issue net worth as per the

audited balance sheet of the last financial year.

An unlisted company which does not satisfy the requirements specified above can make offer to

the public of equity or any other convertible security at a later date into equity only through book

building process. The company must allot 50% of the issue size to qualified institutional buyers

(QIBs) else full subscription money is to be refunded. The project should have at least 15%

participation by financial institutions or scheduled commercial banks, of which at least 10%

comes from the appraisers. At least 10% of the issue size shall be allotted to QIBs else full

subscription money should be refunded.

Either the minimum post-issue face value of the capital of the company should be Rs. 10 crore or

there should be a compulsory market-making for at least 2 years from the date of listing of the

shares subject to the following:

- Market makers undertake to offer to buy and sell quotes for a minimum depth of 300 shares

- Market makers undertake to ensure about the bid-ask spread.

Hence, we can conclude by saying that if the companies want to list their securities, they have to

follow the above given guidelines by SEBI. Only on compliance with the SEBI guidelines for

listing of securities, they can be listed in the stock exchange for the purpose of trading.

BY:

SHUBHA VADYA

CHAITHANYA

JAGRUTHI

HEMALATHA

NEETU MENON

1st MFA

RECENT CHANGES IN REGULATION OF STOCK MARKET IN INDIA.

Regulation is a part and parcel of every business sector, where sector is opening newly

regulation need to ensure that the business is conducted in a systematic manner to achieve long

term clients’ satisfaction. The capital market is grown, but it is still less when compared to other

countries.

Due diligence: SEBI sent lengthy compulsory to amc’s for distributor’s due deligence verification to verify investor’s physical presence.

SEBI has asked to AMC’s performance to be disclosed in detail in order to help the investor s

fund quality and potential of fund manager.

Retail broking

Lower retail participation, high transaction costs, falling cash volumes and revenues, and risk

management are recent concerns which shaped the intent of regulators. Related to KYC, SEBI

asked brokers to identify the ultimate beneficial owner during the time of account opening itself.

Key aspects of recent regulations (both enacted and proposed)

STT:(Securities transaction tax) Following the STT cut in cash delivery in the previous Budget,

this Budget announced STT cut in equity futures to address issues like shift of Nifty futures

trading to SGX (SGX volumes now ~50% of NSE volumes).

CTT: Commodities transaction tax of 0.01% on non-farm commodity futures (excludes agric

commodities like food etc).

Risk Management: NSE asked brokers to pre-define order limits (based on criteria) of each

terminal they operate in both cash and F&O. NSE/BSE also imposed surveillance obligation

wherein they will send transaction alerts to brokers, who will then review those and report back

if found adverse.

RGESS: RGESS for first-time investors with gross income <= Rs 1.2mn, with max Rs 50,000

investment for tax benefit, Tax benefit extended to 3 years.

Registration: Common registration certificate proposed for brokers across all segments. Single

KYC norms will reduce switching costs between brokers.

Exchanges can give liquidity incentive schemes to brokers in cash segment needs to be

continued till scrip reaches impact cost of 2%.

Investors don’t need to pay service tax on the late payment charges paid.

The Finance Ministry is also considering a change in STT accounting, from deducting from

business income to setting off against actual taxes

Institutional Broking/Foreign Investors

The GAAR proposals caused a lot of problems to FIIs in 2012. Its subsequent deferment to 2016

gave a positive boost to FII flows, and gives more time to investors to review their investment

structures. Changes in the disclosure norms of FIIs’ beneficial ownership and similar details

were on the immediate agenda of regulators to control flows of Indian money via the FII route.

Key aspects of recent regulations (both enacted and proposed)

Disclosure norms: Finance Ministry announces new disclosures related to source of funds and

beneficial .ownership while investing in sensitive sectors. Foreign investors need to furnish these

upfront to FIPB.

SEBI announced a cap on execution charges earned from mutual funds.

FIIs can participate in currency derivatives, to the extent of its INR exposure.

FIIs allowed approaching any bank to hedge currency risk on investments.

SEBI has set up a committee to study a single route for all foreign investments like QFIs, foreign

financial investors, VCFs, NRIs. It should simplify the investment process for overseas entities.

Wealth Management – Investment Advisor regulations

Wealth management as a segment is still largely unregulated in India, in terms of both

distribution and advisory. The Investment Advisor norms were an attempt on this front. SEBI

recently announced these guidelines and it is expected to be applicable by mid-2013.

Key aspects of recent regulations (both enacted and proposed)

Investment Advisor norms: Will make it mandatory for investment advisers to register with

SEBI and disclose:

(a) Issues that could lead to conflict of interests,.

(b) Risks associated with product.

(c) Fee received for their advice,

(d) Records like KYC, risk profiling, record of advice and time of advice etc, as well as

complying with net worth and qualification requirements

Investment Banking

The industry has been hit due to a slowdown in fundraising activities. The regulator’s focus was to further the bankers’ accountability in the IPO process to bring back the confidence of the investors, and also ease the access to the primary markets.

Key aspects of recent regulations (both enacted and proposed)

OFS/IPP: In order to comply with the 25% minimum public shareholding rule for listed cos.,

SEBI created two new ways by which firms can sell shares without public issue- Offer for Sale

and Institutional Placement Programme. SEBI also amended the OFS rules to allow sale of up to

10% stake to AIFs.

IPOs: IB firms need to disclose track record of price performance of their previous IPOs. SEBI

may also ask companies to compensate retail investors if prices crash within months of the IPO,

after factoring market movements.

Usage of proceeds: SEBI plans to make the issue manager responsible for the end-use of IPO

funds. Cos. cannot deploy more than 25% of proceeds for general corporate purposes, and may

not be able to access the markets if the utilization plan is vague or does not create a tangible

asset.

SEBI allowed issuance & listing of preference shares on exchanges, and waived 6 month lock-in

for DIIs during preferential allotment of shares. SEBI relaxed IPO norms for SMEs of achieving

profits in 3 out of 5 years.

Wealth Management – Investment Advisor regulations

Wealth management as a segment is still largely unregulated in India, in terms of both

distribution and advisory. The Investment Advisor norms were an attempt on this front. SEBI

recently announced these guidelines and it is expected to be applicable by mid-2013.

Key aspects of recent regulations (both enacted and proposed)

Investment Advisor norms: Will make it mandatory for investment advisers to register with

SEBI and disclose:

(a) Issues that could lead to conflict of interests,.

(b) Risks associated with product.

(c) Fee received for their advice,

(d) Records like KYC, risk profiling, record of advice and time of advice etc, as well as

complying with net worth and qualification requirements

Investment Banking

The industry has been hit due to a slowdown in fundraising activities. The regulator’s focus was to further the bankers’ accountability in the IPO process to bring back the confidence of the

investors, and also ease the access to the primary markets.

Key aspects of recent regulations (both enacted and proposed)

OFS/IPP: In order to comply with the 25% minimum public shareholding rule for listed cos.,

SEBI created two new ways by which firms can sell shares without public issue- Offer for Sale

and Institutional Placement Programmers. SEBI also amended the OFS rules to allow sale of up

to 10% stake to AIFs.

IPOs: IB firms need to disclose track record of price performance of their previous IPOs. SEBI

may also ask companies to compensate retail investors if prices crash within months of the IPO,

after factoring market movements.

Usage of proceeds: SEBI plans to make the issue manager responsible for the end-use of IPO

funds. Cos. cannot deploy more than 25% of proceeds for general corporate purposes, and may

not be able to access the markets if the utilization plan is vague or does not create a tangible

asset.

SEBI allowed issuance & listing of preference shares on exchanges, and waived 6 month lock-in

for DIIs during preferential allotment of shares. SEBI relaxed IPO norms for SMEs of achieving

profits in 3 out of 5 years.

OTHER AREAS:

It allows the broker to use open-ended mutual funds as a collateral securities for margin

requirements except from cash bank guarantee.

SEBI restricts dynamic price bands of the previous year close for stock securities are available.

A new rule on structured product valuation requires rating agencies as a third party to valuation.

Challenges are to the large or great extent to experiment or work on the risk and returns of

assets to capture that savings flow. These regulations will educate the investors about the stock

guidelines, capital market etc, and also increase the opportunity for selling and ensure the

structure of intermediaries in order increase the inflows.

BY

DEEKKSHITHHA

LAVANYA

MARIA NITHYA

RADHIKA B S

1st MFA

CONCLUSION

It is known to all that the stock markets are very unpredictable. The reason behind this

unpredictable nature of the stock markets is no more a secret. In fact it is an open secret that the

stock market is unpredictable because the stocks and shares are extremely volatile instruments.

The fluctuations are very severe and they follow no definite sequence. In addition, the stock

markets are subjected to the trade cycle. The economy, as we all know, is never static, and it

keeps fluctuating. As such, there arises different stage in the economy. These stages are the said

to be the periods of boom and depression. The economy can be very suitably being compared to

a sea wave. Just like a wave, rises up at first and then descends at regular intervals, the economy

too rises (that is the period of boom) and then descends down (that is the period of depression) at

regular intervals. In other words, neither the period of boom nor the period of depression lasts

forever. Generally, the period of depression brings in losses and the period of boom brings in

profit. Thus, this was only brush up. Now that we are done with this it is time to learn about the

traditional stock market of today.

EDITOR

ANU.V

2nd

MFA