unit 3 secondary market

8/2/2019 Unit 3 Secondary Market

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SECONDARY MARKET


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Outstanding securities are traded in thesecondary market

Stock markets primarily deal with equity

shares Promotes capital formation

Growth of primary market depends on the

stock market Economy is also dependent on stock

market


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FUNCTIONS

Maintain active trading

Fixation of prices

Ensures safe and fair dealing Financing for industry

Dissemination of information

Performance inducer Guidance on cost of capital


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Brokers

-Limit orders : Orders limited by fixed price

-Best rate order: Freedom given to thebroker

-Discretionary order: Range of price given-Stop loss order: If price falls below limit, sell

to limit losses

Jobbers

-Buys/sells on his own behalf

-Profit from price diffrences


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Bulls

-Expects the price to rise

-Buys securities to sell in future

Bears

-Expects price to fall

-Sells securities for future delivery


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SETTLEMENT CYCLE

Fixed and Rolling

Fixed starts on a particular day and endsafter 5 days. This pay-in-day and pay-outday follows the settlement cycle

Rolling settlement from 2000

T+5 period trades are settled five daysfrom the date of transaction

Net position


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PRICE FILTERS

Price volatility can create artificial demandand supply conditions

Intra day price bands

Proper reaction in prices for giveninformation is not got

Intra day volatility cannot be checked

Graded price filters


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Margins

Gross exposure margin: Upper limit to thetransaction

Net exposure margin: If purchase is greater than

sale a margin needs to be submitted. Mark to market margin: A fixed percentage

deposit has to be made based on the differencebetween the opening and closing price. This isrefunded back to the broker

Concentration ratio margin


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SEBI

In 1988 the Securities and ExchangeBoard of India (SEBI) was established bythe Government of India through an

executive resolution, and wassubsequently upgraded as a fullyautonomous body (a statutory Board) in

the year 1992 with the passing of theSecurities and Exchange Board of IndiaAct (SEBI Act) on 30th January 1992


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Objectives It tries to develop the securities market.

Promotes Investors Interest. Makes rules and regulations for the securities

marketFunctions

Regulates Capital Market Checks Trading of securities. Checks the malpractices in securities market. It enhances investor's knowledge on market by

providing education. It regulates the stockbrokers and sub-brokers. To promote Research and Investigation


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Primary market

Entry norms

-Track record of dividend payment

-Post issue net worth more than 5 times Promoters contribution

-Not less than 20 percent

Disclosure Book building


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Allocation of shares

-Minimum application

-Reservation for small investors Intermediaries

-Licensing

-Net worth


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SECONDARY MARKET

Governing body

Infrastructure

Settlement

-Auction within 80 days

-Clearing house

Debt market

Price stabilization

Delisting


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NSE

InApril 1993,,it was recognized as a stockexchange under the Securities Contracts(Regulation)Act,956.NSE commenced

operations in the Wholesale Debt Marketsegment in June1994.

The Capital Market (Equities) segment of theNSE commenced operations in

November 1994, while operations in theDerivatives segments commenced in June 2000.


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PURPOSE

Establishing a nationwide trading facility for alltypes of securitiesall types of securities

Ensuring equal access to investors all over the

country through an appropriatethe countrythrough an appropriate communication network

Providing for a fair, efficient and securitiesmarket using electronic trading system

Enabling shorter settlement cycles Meeting up with international benchmarks

standards


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Equity

Futures and Options

Retail Debt Market

Wholesale Debt Market

Currency future


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The S&P CNX Nifty is a composite of the top 50stocks listed on the NSE representing differentsectors of the economy.

The CNX Nifty Junior is an index for companieson the National Stock Exchange of India . Itrepresents the next rung of liquid securities afterS&P CNX Nifty . It consists of 50 companies

representing approximately 10% of the tradedvalue of all stocks on the NSE. The S&P CNX 500 is Indias first broad-

basedstock market index of the Indian stockmarket.The S&P CNX 500 represents about96% of total market capitalization and about93% of the total market the total turnover on theNSE.


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LISTING

Every NSE listed company is required to satisfystringent financial, public distribution andmanagement requirements.

High listing standards foster investor confidenceand also bring credibility into the markets.

NSE plays an important role in helpingcompanies access equity capital by providing aliquid and well regulated market.

It includes companies from different industries


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ADVANTAGES OF TRADING ATNSE

An integrated network for trading instockmarket of India

Fully automated screen based system that

provides higher degree of transparency Investors can transact from any part of

thecountry at uniform prices

Greater functional efficiency supported byby totally computerized network


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BSE

The origin of the Bombay Stock Exchangedates back to1875.

It was organized under the name of The NativeStock and share brokersAssociation asa non-profit makingAssociation.

It was recognised on a permanent basisin1957.


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In March 1995, The Bombay StockExchange hasintroduced screen based trading called BOLT(Bombay On-Linetrading)

The securities traded in the BSE are classifiedinto three groups namely, A Group and non-specified securities. The latter is sub-divided intoB1 and B groups.

A group contains with large outstanding shares,

good track record and large volume of business.

Relatively liquid securities come under the B1group and the remaining shares are placedunder the B group.

unit 3 secondary market

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