stock exhange module 1
TRANSCRIPT
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Stock Exchange
The stock exchange is the market for old
securities I.e those which are already been
issued.
A market in which securities are bought and
sold: "the company was floated on the Stock
Exchange (WIKI)
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Characteristic Stock Exchange
Risk/Return
Liquidity
Global Regulated
Volatility
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Listing on stock exchange adds to the prestige
of the firm, that helps the number of
subscriptions in first issue market
Listing in stick exchange gets the stock
exchanges involved in issue which helps them
making a fair issue
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Both the market are integrated into each
other, if the stock the stock prices go up so will
the new issue.
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Functions of stock market
Liquidity and marketability
Safety of funds.
Supply of long term funds Flow of capital to profitable venture
Motive for improved performance
Promotion of investment Reflection of business cycle
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Contd
Marketing of new issues
Miscellaneous Services
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Recognition of stock exchanges
The stock exchanges in India have to be
recognized by the central government under
SCRA (securities and contract regulation act
1956) and SEBI, any Stock exchange which
needs Recognition under SEBI act has to
submit an --
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Contd
-- application in prescribed manner to the
government, the application must comply the
following
1. A copy of bylaws of the stock exchange for
its operations
2. A copy of rules its constitution, governing
body, powers and duties of office bearers etc.
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Grant of recognition:- this will be granted by
government provided the following has been
fulfilled
1. The rules and by-laws of the stock exchange
applying for registration must ensure fair
dealing and protect the interest of the the
investors
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2. The stock exchange concern must be willing
to comply with any other conditions that may
be imposed by the government from time to
time.
3. The grant of recognition will be in the
interest of trade as well as in the public
interest.
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Renewal of recognition
If any stock exchange intends to renew its
recognition, it must once again make an
application to central government in the
aforesaid manner 3 months prior to expiry ofcurrent recognition.
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Withdrawal of recognition
The central government may withdraw the
recognition granted to any of the Stock
exchanges in the country at any time if it
opines that the recognition granted is againstthe interest of trade or public interest, While
doing so there should be ample opportunity
given to SE to explain the position. How eversuch withdrawal will have no effect on the
contracts entered before the withdrawal
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Organization of SE in India
The following stock exchanges perform as
AOP( Association of persons)
The Following are the list of stock exchanges
in India
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List of the stock exchange
Bombay Stock Exchange (BSE)
National Stock Exchange of India (NSE)
Indian Commodity Exchange (ICEX)
United Stock Exchange of India (USE)
Multi Commodity Exchange (MCX)
Over the Counter Exchange of India (OTCEI) Inter-connected Stock Exchange of India (ISE)
Madras Stock Exchange (MSE)
Coimbatore Stock Exchange (CSX)
Ahmedabad Stock Exchange (ASE)
Bhubaneshwar Stock Exchange (BhSE)
Cochin Stock Exchange (CSE)
Hyderabad Stock Exchange (HSE)
Calcutta Stock Exchange (CSE)
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Delhi Stock Exchange (DSE)
Bangalore Stock Exchange (BgSE)
Madhya Pradesh Stock Exchange, Indore
Jaipur Stock Exchange (JSE)
Magadh Stock Exchange, Patna
UP Stock Exchange (UPSE)
Vadodara Stock Exchange,Vadodara (VSE)
Guwahati Stock Exchange Ltd
Ludhiana Stock Exchange Association Ltd
Kanara Stock Exchange Ltd
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Mangalore Stock Exchange Ltd
Pune Stock Exchange Ltd
Saurashtra Kutch Stock Exchange Ltd Meerut Stock Exchange Ltd
Intrex Trade Exchange Ltd
United Stock Exchange of India Mahurat trading
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Management
The recognized stock exchanges are managed
by Governing Boards. The governing boards
consists of elected member directors from
stock brokers members, publicrepresentatives, government nominee, and
nominees nominated by SEBI.
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The Powers of Management
Selection of office bearers and setting up of
committees like listing committee, arbitration
committee, Defaulters committee etc.
Admission and expulsion of members.
Managing of properties and finances of the
exchange
Framing and interpreting of rules bylaws etc
for the regulation of stock exchange
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Adjudication of disputes among members or
outsiders.
Managing the best interest of affairs of the
stock exchange in the best interest of the
investors and public interest
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Members
To become a member of stock exchanges a
person must possess the following
qualification.
He should be citizen of India
He should not be less than 21 years of age
He should not have been adjudged bankrupt
or insolvent.
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Listings Of securities
The securities in BSE are listed in 3 different
groups
1. Group A
2. Group B
3. Group c
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Group A criteria
The company has equity base of Rs 10 crore
The Market capitalization of Rs 254-30Crore
The public holing's of 35-40% Have a share holders 15000 to 20000
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He should not have been convicted for an
offence involving fraud or dishonesty.
He should not be engaged in any other
business except dealing in securities.
He should not have been expelled by any
other stock exchanges in the country
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Group B
All companies not included in group A, care
clubbed under this category. B1 is ranked
higher than B2.
B1 and B2 groups will be merged as a single
Group B effective from March 2008.
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Group c
In group c only odd lots and permitted
securities are included.
A number of securities that are less than the
market lot are known as odd lots.
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Advantages of listings
Facilitates buying and selling of securities
Ensures Liquidity
Offers wide publicity Assures finance
Enables borrowing
Protects investors
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limitations
Leads to speculations
Degrades companies reputations
Discloses vital information to competitors
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Listing procedure
Certified copies of memorandum and articles
of association, prospectus or statement in lieu
of prospectus, underwriting agreements,
agreements with vendors and promoters etc
Specimen copies of shares and debentures,
letter of call and allotment
Copies of Balance sheet
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Copies of offers for sale and circulars or
advertisements offering any securities for
subscription or sale during last 5 years
Certified copies of arrangements with
managerial personnel
Certificates of dividends and bonus paid
during last 10 years
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A statement showing dividend or interest in
arrears ( if any).
A brief history of company
Particulars regarding its capital structure.
Particulars of shares and debentures for which
permission to deal is applied for their issue
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A statement showing the distribution of
shares along with list of highest 10 share
holders of each class or kind of securities of
the company stating the numbers of sharesheld by them.
Particulars of shares forfeited
Certified copies of agreements if any with the
industrial finance corporation, icici etc
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Listing agreement with necessary initial and
annual listings fee
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Criteria for listings
At least 60% of each class of securities issued
must be offered to the public for subscription
and minimum issued capital should be Rs 3
Crore
The minimum public offer for subscription
should atleast 25% of each issue
The issue must be advertised for 2 days at
least in News Papers
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The company should be of fair size 9 having
broad based capital)
There must be at least 10 public shareholders
for every rs 1 lakh share for fresh issue capital
and 20 in case of subsequent issue
A company having more than rs 5 crore paid
up capital must be listed on more than one SE,
listing on regional SE is compulsory
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The company must pay interest on interest on
the excess application money received at the
rates ranging between 4% 15% depending
upon delay beyond 10 weeks
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The certificate to the effect the shares form
promoters quota are not sold or transferred
for a period for 3 years must be submitted
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Listing obligations
The company has to notify the stock exchange
The date of board meeting at which the
declaration or recommendation of dividend or
the issue of right or bonus share will be
considered
Any change in company Mananagment by
death, resignation removal or otherwise
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Any issue of new shares ( before intimating to
share holders)
Any change in company's capital structure
Any material change in general character or
nature of companies business
Any reissue of fortified securities or issuing
reserve securities.
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Any action that will result in redemption,
cancellation or retirement of in securities
Any intention of drawing of listed securities
Any information necessary to enable the share
holders to apprise the companies position in
SE
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Additional Obligation
The company must recommend or declare all
dividend/ cash at bonus at least 5 days before
the commencement of the closer of the
transfer books
The company must advice the SE in writing of
all such dividend/ cash bonus recommended
or declared immediately after board meetinghas been held
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The company must close the transfer books
only for the purpose of declaration of dividend
or for the issue of rights/ bonus shares
The company must grant to shareholders the
right of renunciation in all cases of the rights
issue
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The company must undertake to maintain allthe letters of allotment regret, acceptance andrights serially and to issue letters allotment
and regret simultaneously at the same time The company must issue receipt for all
securities deposited for registration/exchange/ subdivision or for any other
purpose and it should not change any fee forit
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Listing Agreement
The stock exchange authorities will scrutinize
the application carefully and if they are
satisfied with all the particulars/ documents
submitted, they will call upon the company toexecute a listing agreement. The agreement
contains rules and regulations which the
company should strictly follow or the SE willhave the right to suspend or withdraw the
listing facility