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1 Vadodara Stock Exchange Ltd. PREFACE It is quite true that the world outside your home is many times different from what you have perceived. Similarly, the theoretical knowledge in the classroom may differ from the practical knowledge. Firstly I would like to express my deepest and sincere gratitude towards the respected professors of MSU BBA who gave this opportunity to know that what is actually happening in the company. I had prepared the project report on VADODARA STOCK EXCHANGE LTD. At Vadodara, this is a great privilege for me as a student of T.Y. B.B.A. In the following pages, I have tried to the best of my ability to include the maximum information that i have obtained during my project at VADODARA STOCK EXCHANGE LTD. A sincere attempt has been made to explain the working of the VADODARA STOCK EXCHANGE LTD.

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1 Vadodara Stock Exchange Ltd.PREFACE It is quite true that the world outside your home is many times different from what you have perceived. Similarly, the theoretical knowledge in the classroom may differ from the practical knowledge.

Firstly I would like to express my deepest and sincere gratitude towards the respected professors of MSU BBA who gave this opportunity to know that what is actually happening in the company.

I had prepared the project report on VADODARA STOCK EXCHANGE LTD. At Vadodara, this is a great privilege for me as a student of T.Y. B.B.A.

In the following pages, I have tried to the best of my ability to include the maximum information that i have obtained during my project at VADODARA STOCK EXCHANGE LTD. A sincere attempt has been made to explain the working of the VADODARA STOCK EXCHANGE LTD.

ACKNOWLEDGEMENT I hereby admit the truth that during the project at VADODARA STOCK EXCHANGE LTD. Many known and unknown persons had helped us directly or indirectly by giving us maximum information. They had tried their level best in explaining the procedures of company. I feel highly obliged to Prof. JAGDISH THAKAR who gave me the opportunity to be prepared project report on VADODARA STOCK EXCHANGE LTD.

Finally I must thank MSU BBA to give me a chance to pursue the BBA program and I also feel highly obliged to our Director and to the professors of our collage.

With warm regards,

Ansari Mo Mustak Jannathusen TY BBA Roll no:-04

Place: - VADODARA Date:-

DECLARATION

This is to declare that the project report on the VADODARA STOCK EXCHANGE LTD. Is and original one and has not been submitted earlier to this university or any other institution for the fulfillment of the requirement of the curriculum of Bachelor of Business Administration.

With warm regards,

Ansari Mo Mustak Jannathusen TY BBA Roll no:-04 Place: - VADODARA Date:-

GUIDE CERTIFICATE

THE MAHARAJA SAYAJIRAO UNIVERSITY OF BARODA B.B.A. COLLAGE ACKNOWLEDGEMENT

DATE:-

This is to certify that the project report on VADODARA STOCK EXCHANGE LTD. Has been conducted and completed by Mr. ANSRI MO MUSTAK JANNATHUSEN it is being submitted for the partial fulfillment of the requirements of the Degree of Bachelor of Business Administration as per syllabus prescribed by THE MAHARAJA SAYAJIRAO UNIVERSITY OF BARODA. He has prepared this report during the academic year 2009-10 is appreciated.

GUIDE

(Prof. JAGDISH THAKAR)

EXECUTIVE SUMMERY

Indian stock markets are one of the oldest in Asia. Its history dates back to nearly 200 years ago. There are 23 Stock Exchanges across the country. Here I undertook this study to have a look on functioning of Stock Exchanges. And to persuade this purpose I selected Vadodara Stock Exchange as an model. With this study I have interacted with the officials of VSE and tried to understand the functioning of Vadodara Stock Exchange and its subsidiary VSE Stock Services Ltd. I have visited various departments of VSE and studied its functions. I have also analyzed financial condition of VSE and with ratio analysis I have compared its current financial condition with previous year. On the basis of above, I gave some suggestions that is to promote their strong points like low charges of DP services, to set up a marketing team for promotion, various steps should be taken to continue to exist as a RSE and other suggestions like to update their website regularly, upgrading systems and better utilization of asset.

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2 Vadodara Stock Exchange Ltd.

STOCK EXCHANGE: AN INTRODUCTIONAn individual desires to invest whatever he has saved. The best financial derivates, which give a mammoth yield, are the stocks of corporate companies. In order to bring liquidity these instruments are traded systematically in a Stock Exchange. In a Stock Exchange a person who wishes to sell his security is called a seller, and a person who is willing to buy the particular stock is called the buyer. The rate of stock depends on the simple Law of Demand and Supply. Stock Exchange is an organized secondary market where securities like shares, debentures of public companies. Government securities and bonds issued by municipalities, public corporations, utility undertakings, port trusts and such other local authorities are purchased and sold. Since buying and selling of different exchanges, demand and the prices types of securities takes place in stock the of particular securities reflect their relative security indicate

supply. The prices of individual

financial health of individual company. The share prices over a period are indicated as index of the financial status of an organization. Thus investor can take decision about the suitability of particular securities for investment in terms of safety, profitability and risk. Besides, he can change his decision when necessary as liquidity of investment is provided by easy transferability of securities through the stock exchanges. The stock exchange not only offers the best bids but also the following advantages: One of the key advantages of stock exchanges is that they are an efficient medium for rising of resources and channeling savings from the general public by the way of issue of equity/debt capital by joint stock companies which are listed on the stock exchanges. The second main benefit is the wide-spread dissemination of

information and the need to disclose adequate information not only the quarterly or yearend financial results but also major events which have an impact on the working of the company.

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3 Vadodara Stock Exchange Ltd.

History of stock exchange in IndiaIndian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years ago. The earliest records of security dealings in India are scanty and obscure. The East India Company was the dominant institution in those days and business in its loan securities used to be transacted towards the close of the eighteenth century. By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers recognized by banks and merchants during 1840 and 1850. The 1850's witnessed a rapid development brokers increased to 60. In 1860-61 the American Civil War broke out and cotton supply from United States was stopped; thus, the 'Share Mania' in India begun. The number of brokers increased to about 200 to 250. However, at the end of the American Civil War, in 1865, a disastrous slump began (for example, Bank of Bombay Share which had touched Rs. 2850 could only be sold at Rs. 87). At the end of the American Civil War, the brokers who thrived out of Civil War in 1874 found a place in a street (now appropriately called as Dalal Street) where they would conveniently assemble and transact business. In 1887, they formally and established Stock in Bombay, the "Native Share Brokers' Association". In 1895, the Stock of commercial enterprise and brokerage

business attracted many men into the field and by 1860 the number of

Exchange acquired a premise in the same street and it was inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated.

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4 Vadodara Stock Exchange Ltd.

VADODARA STOCK EXCHANGE LIMITED (VSEL)Introductio nVadodara Stock Exchange Limited (hereinafter, referred as the Company, the Exchange, or VSEL), was established as a company limited by guarantee in 1990, but was subsequently converted into a company limited by shares in 2005. The main object of VSEL is to facilitate, assist, regulate and control the trade of business in securities and effectively serve the interest of the general public and the investors. Under the Provisions of Securities & Contracts (Regulation) Act, 1956, VSEL was accorded recognition by the Government of India on 5th January 1990 as Stock Exchange. VSEL is also regulated and controlled by the Securities & Exchange Board of India (SEBI), which is a statutory body established under the Securities & Exchange Board of India Act, 1992 . The operations of VSEL were shifted to its own, larger premises at, Fortune Tower, 1995. in the year

Currently, VSEL has a network of 290 members and about 484 companies are currently listed on the Exchange. Over the years, though there has been a decline in the listing of securities & subsequent trading operations on the Exchange, VSEL has diversified into Depository Participant (DP) operations, which presently has over 47,000 client accounts. It has also incorporated a subsidiary, VSE Stock Services Ltd., which acquired membership rights of BSE cash segment & NSE cash segment. VSSL currently has a network of 94 sub- brokers (who are members of VSEL), dealing with over 33,000 clients, having a average daily turnover of Rs. 70

crores.

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5 Vadodara Stock Exchange Ltd.

Brief History & BackgroundVSEL is one of the several Regional Stock Exchanges in India. Earlier, all the Stock Exchanges f u n c t i o n e d u n d e r t h e f r a m e w o r k o f B o m b a y S e c u r i t i e s Contracts Act, 1925. The Securities Contracts (Regulations) Act, 1956 was enacted thereafter and all the stock exchanges within India were required to get recognition from the Ministry of Finance. Accordingly, VSEL received the recognition as Stock Exchange from the Government of India on 5th January 1990. Originally incorporated in 1990 as a company limited by guarantee, VSEL was later converted into a company limited by shares and a fresh certificate of incorporation was issued on 2nd September, 2005. VSEL went live on 17th July, 1996, marking a memorable event in its history and joining the stream of Indian Stock Exchanges having gone LIVE for electronic trading. CMC Ltd. had facilitated implementation of fully automated stock trading, settlement and clearing system. The Exchange installed VECTOR (Versatile Engine f or C e n t r a l i z e d T r a d i n g a n d On -line R e p or t i n g ), b u i lt a ro un d t he Central Trading System (CTS). All the brokers interacted with CTS through Brokers Work Station (BWS). The Market operations and surveillance were connected to the CTS through their work stations Operations Work Station (OWS) and Surveillance Work Station (SWS) respectively. In November 1999, SEBI issued a circular permitting the regional stock exchanges to acquire membership of NSE and BSE for facilitating stock broking activities and incorporation of a subsidiary company for this purpose. This lead to the birth of VSE Stock Services Ltd. (VSSL) (formerly VSE Securities Limited) as a subsidiary of VSEL.

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6 Vadodara Stock Exchange Ltd. In July 2000, VSEL also commenced providing online, real-time Depository Participant (DP) services, of Central Depository Services Ltd. (CDSL), under the name VSE Clearing House.

Capital StructureThe Issued, Subscribed and Paid-Up Share Capital of VSEL as on 31st March 2007 amounted to Rs. 29 lacs comprising of 290,000 equity shares of Rs. 10/- each. The Company had recently offered 11,60,000 equity shares of Rs 10/- each on Rights basis to its shareholders in the ratio of 4 equity shares for every 1 equity share held by each shareholder, aggregating to Rs.1,16,00,000/-. The said Rights issue was subscribed to the extent of 2.37 times. Consequent to the allotment of shares to the members pursuant to the Rights issue, the paid-up equity share capital of the Company increased to Rs. 140.27 lacs comprising of 14,02,754 equity shares of Rs 10/- each; the allotment of 47,246 equity shares of Rs. 10/- each is kept in abeyance by the Company pending the compliance with the Demutualisation Scheme & SEBI approval, post which, the paid-up equity share capital will enhance to Rs. 145 lacs.

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7 Vadodara Stock Exchange Ltd.

Member sVSEL has a vast network of 290 Members, of which there are 54 corporate members and the balance 236 are individual members. Presently there is no trading on the Exchange; the Trading Members are routing their business through the subsidiary of the Exchange VSSL. Presently, 90 members of VSEL also function as registered sub-brokers of VSSL. Further, the geographical dispersion of Members of VSEL is evident from the fact that nearly 100 members are located at Mumbai.

Cr o opr a te M em bers 1 9 %

Individua Members l 8 1 %

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8 Vadodara Stock Exchange Ltd.

Governance Administration

&

VSEL has a strong governance and administration mechanism, which encompasses a right balance of experts with highest level of educational background, practicing professionals and independent experts in various fields of Financial Sector. The management and administration of VSELs operations are headed by the Managing Director and a team of Senior Management Professionals who are experts in the fields of Finance, Administration, Personnel, Technology, Legal, and Education & Training. The Board of Directors of the Exchange comprises of Nine members, of which, one is a SEBI Nominee and Five (including the Chairman) are Public Representatives, who are all eminent persons in the fields of Finance & Accounts, Education, Law, Capital Markets, Banking and other is an experienced member of related fields. The Managing Director

Institute of Company Secretaries of India and Indian Institute of Bankers, and has over 20 years of experience in the field of Company Law, Secretarial matters, Corporate Laws and the experience of functioning Securities Laws; he also has as CEO of VSSL. There are two Member

Directors, who bring with them rich experience in Capital Market operations. The aforesaid composition of Board of Directors is in compliance with the Demutualisation Scheme, which restricts members representation in the Board to 25%. The E x c h a n g e has constituted four Statutory Committees -

D i s c i p l i n a r y Committee, Arbitration Committee, Defaults Committee and Investors Services Cell Committee. Apart from these Statutory Committees, it has also formed other Sub Committees to assist in the administration Ethics Committee, Delisting Investment Committee, Audit and Committee, Membership Services Committee

Committee. Besides, the Exchange has also formed three

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9 Vadodara Stock Exchange Ltd. special purpose committees SEBI Inspection & Compliance

Committee, Management Committee and Demutualisation Committee.

Existing ProfileAs

Businessis currently engaged in providing

mentioned earlier, VSEL

Depository Participant services to its clientele. In this regards, VSEL is registered under SEBI (Depositories & Participants) Regulations 1996 vide registration number IN-DP-CDSL-77-2000. A chart depicting the process flow for DP operations of VSEL is given in Annexure E. The Clearing House of VSEL, which carries out the DP operations, has witnessed sustained growth during the last few years, primarily on account of the buoyancy in the upon the compliances and the indicators. service capital markets as well as competitive services & rates offered by it. VSEL has continuously strived to improve

Active & Dormant50,000 40,000 30,000 20,000 10,000 0 2003-04 2004-05 2005-06 2007 2006-07 June

Total50,000 40,000 30,000 20,000 10,000 0

Active Accounts Dormant Accounts Total Accounts

As on June 2007, VSEL had over 46,000 client accounts, increasing by almost four times in four years, from 11,126 in 2003-04.

Year

Total Accounts

Active Accounts

Dormant Accounts

200304 200405 2005-

11,126 18,240 29,575 39,569 46,220

8,84 3 14,73 2 24,31

2,28 3 3,50 8 5,26

10 Vadodara Stock Exchange Ltd.

The primary source of revenue for the DP operations is the transaction charges; besides, the Company also earns revenues in form of annual maintenance charges, documentation charges, dematerialization / rematerialisation charges, etc. VSEL also provides a lot of other benefits & facilities to its clients such as display of ISIN numbers of listed companies, informing the clients about ISIN numbers of companies coming out with IPO (at the time of their initial listing), investor education, investor awareness, assistance to the customers in filling the instruction slips, executing bulk instructions with minimum hassles to the clients, etc. As a result of its constant endeavor to provide qualitative DP services at competitive rates, VSEL has, within a short span of time, built a sound reputation & image for itself and is able to easily survive in an intensely competitive environment, rubbing shoulders with several private DPs. The DP operations of VSEL have also been rated as largest no-branch DP operations of CDSL in the State of Gujarat.

Investor ServicesOver the decades, the exchange has actively focused on the empowerment of investors in the market by providing information on the market through the investors services centers established by the Exchange. In addition to this, Investment Education/Training Center maintained by the Exchange plays a vital role in enhancing the knowledge base of the participants through seminars. The said Center is proposed to be made available to the corporate sector for conducting external seminars & conference as well in Future .

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11 Vadodara Stock Exchange Ltd. With a view to support the investors in resolving their grievances, Exchange has established an Investor Services Center at Vadodara. The center co- ordinates with the investors, companies and the members in resolving their problems and also offers them counseling services. The Investors Services Cell Committee comprising of Public Representatives, SEBI Nominees and Members oversee the functioning of the Cell and they are authorised to take appropriate steps for amicable settlement of the Grievances. The Exchange has established to cater to well the equipped varied Library and Investor of

Information Center

information

needs

investors, corporates, members and others. The center has a collection of wide range of books, periodicals, journals, annual reports, prospectus and research publications relating to Capital markets, Circulars & Notifications issued by authorities are also available. Draft prospectus, offer documents and other related information are displayed regularly. The Exchange has set up an Investor Protection Fund for providing

compensation to individual investors in case of default by a member of the Exchange. In case the member broker defaults in his obligation towards investors in respect of deals that took place through the trading system of the Exchange, then the concerned investors are compensated from this fund. VSELs websiteWWW.VSE-INDIA.COM

also provides

valuable

information

about the latest market commentary, research reports about companies, daily status of international markets, the Exchange and its subsidiary. a separate module for internet trading, information about listed companies and brokers and sub brokers of

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12 Vadodara Stock Exchange Ltd.

Corporate Governance ReportCorporate Governance is a process or set of systems and processes to ensure that a company is managed to suit the best interest of all its stakeholders. The Company does not matter of creating checks and increasing view corporate governance as a rather, good and Company company has firmly corporate organization, client the The balances, employee,

governance is about creating an out- performing encompassing spirit of the believes corporate principles that, it is

stakeholders satisfaction and creating shareholder value. In line with the governance standards, character. of transparency, accountability, trusteeship and the right of its stakeholders to have information

integrity at the very core of its basic

regarding companys financial performance. The Companys corporate governance philosophy is based on the principles of integrity, fairness, equity, transparency, accountability and commitment to values. The Exchange, consequent upon notification of VSE (Corporatisation & Demutualization) Scheme, 2005 is required to attain 51% shareholding by the members of public other than trading members. Exchange is proactively making its best efforts to practice Corporate Governance in spirit. For the purpose of effective administration and to inculcate best practices various committees have been functional and majority representation is by Public & Shareholders Representatives. The details of the said committees are as follows:

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Infrastructure Assets

&

VSEL owns a nine-storeyed (excluding basement as well as ground floor) building Fortune Tower having an aggregate area of 156,238 sq. ft. The said building establishments, is three located star at Sayajigunj in Vadodara, by commercial a & well-developed area surrounded complexes

hotels, shopping complexes, & business

establishments, etc., complete with all basic infrastructure amenities & facilities. The said building is in vicinity of the Vadodara railway station & central bus stand and has good connectivity with the other parts of the city. The said building is used by VSEL for carrying out its operations and also houses the offices of several Members.

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VSEL

also

owns

premises

admeasuring

4,183

sq.

ft.

at

Paradise

Complex, adjacent to Fortune Tower, at Sayajigunj. VSEL has invested substantially in developing & maintaining advanced technological systems for its operations. It has deployed CROSS, a DP back office software, which is developed and maintained by Acer E-solutions.

Personn elVSEL & VSSL have combined staff strength of 50 personnel, comprising of managerial & support staff. Over the years, the staff of the Exchange and VSSL has acquired valuable skills, expertise and experience in securities market. The staff is led by highly qualified and skilled professionals who have rich experience of a mix in financial markets. The staff at VSEL comprises of professionals, post-graduates, graduates, and

under-graduates. The average experience of the staff with VSEL / VSSL is 13-14 years, which highlights staff retention. INVESTOR AWARENESS PROGRAMMES Exchange is regularly their inviting Experts in the field on to with the Securities Market, Financial share Services Sector andTaxation and

knowledge

experience

brokers, sub brokers and the public at large. Programme on Post Budget Analysis has been regular feature at the Exchange.

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15 Vadodara Stock Exchange Ltd. INVESTOR TRUST PROTECTION FUND

SEBI, in order to compensate the legitimate investment claims against the defaulter member, issued comprehensive guidelines. In terms of the guidelines the Exchanges are required to create a separate trust and the administration of which to be vested with independent trustees distinct from Exchange. As you are aware, the Exchange has already setup Vadodara Stock Exchange Limited Investor Protection Fund Trust. The independent trustees are looking after management and administration of the trust since April, 2006 and also that a separate Balance been prepared for the current Sheet year has

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16 Vadodara Stock Exchange Ltd.

VSE STOCK SERVICES LTD. (VSSL) Brief History & BackgroundVSSL, a subsidiary of VSEL, was incorporated in May 2000. It has acquired the Membership rights of Cash Market (CM) segment of The Bombay Stock Exchange Ltd. and the CM Segment of The National Stock Exchange Ltd. It provides Trading platforms of these larger Stock Exchanges to the investors of the region, through a vast network of sub-brokers servicing such investors. VSSL commenced its operations on BSE in May 2000 and on the NSE in February 2005. VSSL was initially incorporated as a wholly owned subsidiary of VSEL. However, currently, VSEL is in the process of transferring 49% stake in VSSL to the Members of VSEL, after the completion of which, VSELs holding in VSSL will be 51%. The Issued, Subscribed and Paid-Up Share Capital of VSSL as on 31st March 2007 amounted to Rs. 400 lacs comprising of 40,000 equity shares of Rs. 1,000/- each. However, currently, VSSL is in the process of sub-dividing the equity share capital of VSSL into equity shares of face value of Rs. 10/each, consequent to which its share capital will comprise of 40,00,000 equity shares of Rs. 10/- each

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Business ProfileVSSL does not have any proprietary interest in trading and also does not deal in its own account. As a regulatory & business policy, it only provides a trading platform to SEBI registered sub-brokers, who are also SEBIregistered brokers / members of VSEL. VSSL operates through a network of 94 registered sub-brokers, of which 88 were active during the year 2006-07. The company operates a total of 429 terminals trading of BSE and 35 terminals of NSE, which facilitates / investments by over 33,000 clients. It currently has an average

daily turnover of Rs. 70 crores. During the past few years, VSSL has witnessed tremendous increase in the business volumes and turnover: Trading Volume (Rs.)30000 25000 20000 15000 10000 5000 0 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

25127

8250 3999

9085

12183

13784

The peak daily turnover of VSSL during the year 2006-07 was Rs 83 crores & recently crossed Rs. 100 crores. Around 10% of turnover is in delivery segment and balance 90% is in trading segment.

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18 Vadodara Stock Exchange Ltd. The services provided by VSSL are as under: Trading at BSE & NSE Cash Segment Electronic Contract Notes Efficient Pay Out of Securities and Funds All Demat related Services Strong Risk Management Features Direct Billing of Clients Auto Pay In for VSSL clients having Demat Accounts in VSE CDSL DP

IT InfrastructureVSSL has placed a great deal of emphasis on Information Technology to strengthen its functioning and performance of Online Trading Platform for BSE and upgrade NSE trading operations. software and It has strived to continuously to enhance its hardware, networking systems

the quality and standard of services provided to its counterparts. VSSL uses ODINTM Integrated: Multi-Exchange, Multi-Segment Front Office Trading System. ODIN is developed and maintained by Financial Technologies (India) Limited, Mumbai. The major modules in ODIN are ODINTM Integrated Manager ODINTM Market Information Server ODINTM EICON Server ODINTM Integrated Administrator ODINTM Integrated Trader Workstation ODINTM Database ODINTM IML Server ODINTM Secondary Broadcast Server (SBS) ODINTM Integrated Mini Administrator VSSL uses TRADE PLUS, a Back office software, which is developed and maintained by Acer E-Solutions, which is connected to the subbrokers through browser based software, TRADE NET.

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19 Vadodara Stock Exchange Ltd. It has installed multiple Intel servers supplied and installed by multinational suppliers like HP / IBM. All softwares are running on WINDOWS Platform. Connection to BSE is through 128 Kbps Leased line, with VSAT serving as a back-up. It is connected to NSE through VSAT. VSSL has network of around 450 terminals, out of which, 275 are on LAN and balance 175 are on WAN connected through leased Line / ISDN / PSTN and VPN connected through Internet.

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STRUCTURE OF VSEL BSE/NSEMember Broker Of BSE

VSEL VSSL DPVSE Stock Services Ltd Subsidiary Of VSEL & DP having 46,000 clients account

VSEL Have 94 Sub-Broker is also Member Of VSEL

BROKERS

CLIENTS

34,000 Clients Dealing Under 94 Sub-Brokers

Over the years, though there has been a decline in the listing of securities and trading operations on the Exchange, VSEL has diversified into Depository Participant (DP) operations, which presently has over 46,000 client accounts. It has also incorporated a subsidiary, VSE Stock Services Ltd. (VSSL), which acquired membership rights of BSE cash segment and NSE cash segment. In July 2000, VSEL also commenced providing online, real-time Depository Participant (DP) services, of Central Depository Services Ltd. (CDSL), under the name VSEL Clearing House.

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REGISTERED AND CORPORATE OFFICE:3RD

21

FLOOR, FORTUNE TOWER, SAYAJIGUNJ, VADODARA 390 005

BOARD OF DIRECTORS BANKERSUTI BANK LTD. RACE COURSE BRANCH VADODARA 390 007 DR. EDWIN G. MACWAN, CHAIRMAN SHRI VISHNUBHAI I. PATEL, TRADING MEMBER DIRECTOR SHRI KAMAL KISHORE NARIA, TRADING MEMBER DIRECTOR SHRI V.K.KHUBCHANDANI, SEBI NOMINEE DIRECTOR SHRI DEVESH A. PATHAK, PUBLIC INTEREST DIRECTOR DR. MAHESH K. THAKAR, PUBLIC INTEREST DIRECTOR SHRI SANJEEV S. SHAH, PUBLIC INTEREST DIRECTOR SHRI JAIDEEP VERMA, PUBLIC INTEREST DIRECTOR SHRI DIPAK RAVAL, MANAGING DIRECTOR

AUDITORSM/S. D. C. PARIKH AND CO. CHARTERED ACCOUNTANTS VADODARA 390 005

Vadodara Stock Exchange Ltd.

ADVISORS: HARIBHAKTI MRI CORPORATE SERVICES PVT. LTD., MUMBAI

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22 Vadodara Stock Exchange Ltd.

KEY MILESTONES OF Vadodara Stock Exchange Limited

Incorporation of VSEL Formation of Brokerage Subsidiary-VSE Stock Services Ltd Commencement of Trading on BSE cash segment Commencement of Online real time depository services Trading and settlement in Demate scripts Commencement of Trading on NSE cash segment Approval of Demutualization Scheme

22/01/1990 29/05/2000 29/05/2000 01/07/2000 2002 16/02/2005 15/09/2005

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23 Vadodara Stock Exchange Ltd.

BrainFunction Automation Department B

Veins & VesselsBanks

Account Department

Heart Function

H

K Right Hand BSE

Kidney Function Margin Left Hand NSE

Right Leg CDSL

Left Leg NSDL

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24 Vadodara Stock Exchange Ltd.

Brain function

Automation department

The human brain is the sources of the conscious, cognitive mind. The mind is the set of cognitive process related to perception, interpretation, imagination, memories, and crucially language of which a person may or may not be aware. The brain regulates autonomic through the autonomic nervous system. Likewise automation department regulates the automatic process from brokers to exchange / exchange to brokers. Without automation stock exchange cannot exist, because all transaction take place through subcomputerize network system. Automation work as intermediary of brokers to member-brokers(VSE) / member-brokers to the BSE/NSE. processes related to essential body functions such as respiration and heart beat, especially

Heart function DepartmentThe heart is a

Accountspecialized muscle that contracts regularly and

continuously, pumping blood to the various parts of the body and the lungs. The pumping action is caused by a flow of electricity through the heart that repeats itself in a cycle. Like wise account department works as a heart and pumps fund from brokers to BSE/NSE and BSE/NSE to brokers. Money is working like blood in human body. Account department works as a collection of cheques for payin and get issue the cheques for pay-out to the client or sub-brokers.

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25 Vadodara Stock Exchange Ltd.

Kidney function department

Margin

Two kidneys are vital organs that perform many functions to keep blood clean and chemically. They are located near the middle of our back. Kidneys are sophisticated reprocessing machine. Every day our kidney process about 200 quarts of blood to sift out about 2 quarts of west product and extra water. Likewise margin departments function is like kidney. The main function of margin department is to collect a margin for NSE/BSE pay-ins. Without margin no account physibility is possible. Margin department collects margin from various brokers for pay-ins to BSE/NSE. Few out of all brokers do fail to pay margin so their limit is decrease and in long-run of defaultment, there terminals also kept close for some time up to the settlement of margin.

Veins Banks

and

Vessels

Veins are flexible and acted its activities in extreme condition. The vein valves are necessary to keep blood flowing towards the heart, but they are also necessary to allow blood to flow against the force of gravity. The vein valves provide footholds for the blood as it climbs its way up. Blood vessels are hollow tubes that circulate our blood. Likewise banks also a perform the job of transferring funds from one place to another 24*7 for the easy settlement of the funds on both the ends ( viz BSE/NSE & brokers).

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26 Vadodara Stock Exchange Ltd.

Two hands NSE

BSE

and

Our two hands are same but some task being assigned to them is different, still they work like competitor. Same as in the stock market BSE and NSE is same but competitor company work as two hands in mechanism of stock market. Each and every broker has terminals of NSE & BSE and they works on both.

Two legs NSDL

CDSL

and

A man can not stand or walk without their legs. Likewise stock market can not stand or walk without CDSL / NSDL. Two autonomous bodies inter dependent for transferring securities,

and holding securities of each other. This depositories are able to provide various services to the investors and clearing member.

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27 Vadodara Stock Exchange Ltd.

FUNCTIONS AND VARIOUS DEPARTMENT OF VSEVadodara Stock Exchange and its subsidiary consist of various department enumerated below: 1. Settlement Department 2. Margin Department 3. Surveillance Department 4. Listing Department 5. Account Department 6. Automation Department 7. Personal Department 8. Membership Departed 9. Central Depository (VSE Clearing House)

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28 Vadodara Stock Exchange Ltd.

1. Settlement DepartmentSettlement department mainly deals with those transactions, which have taken place during the course of the day and by member brokers. The transaction of securities of companies which have made arrangements for dematerialization of their securities are settled only in Dematerialized mode on T+2 on net basis, i.e. buy and sell position of a member broker in the same scrip are netted and the net quantity and value is required to be settled DAY ACTIVITY T= trading on BOLT and daily downloading of statements showing details of transaction and margins at the end of each day. =Downloading of provisional securities and fund obligation statements by member-broker =6A/7A entry custodians. by the member broker/confirmation by the

T+1= confirmation of 6A/7A brokers.

data by the custodian up to 11:00 am.

Downloading of final securities and funds obligations statement by member

T+2= pay-in of funds and securities by 11:00 am and pay-out of funds and securities by 1:30 pm The member brokers are required to submit the pay-in instructions for funds and securities to banks and depositories respectively at 11:00am T+3= auction 11:00am on BOLT at

T+4= auction pay-in and pay-out of funds and securities by 12:00 noon and 1:30 respectively pm

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29 Vadodara Stock Exchange Ltd. The delivery order/receive order provides information like the script and quantity of securities to be delivered/received by the member broker through clearing house. The money statement provides script wise/item wise details of payment/receipts of monies by the member brokers in the settlement. The securities, as per the delivery orders issued by the exchange, are required to be delivered by the member broker to the Clearing House on the day designated for securites pay-in i.e. T+2 day. DEMAT PAY-IN As regard to CDSL, the member broker gives pay-in instruction to their respective DPs. the securities are transferred by the DPs to Clearing Member (CM) Principal Account. The member brokers are required to give confirmation to their DPs, so that securities are processed towards pay-in obligation. FUNDS PAY-IN After the reconciliation of securities completed, the bank account of member broker directly maintained with 9 clearing banks are debited through computerized posting for their fund

settlement obligation. Once the pay-in of securites and funds is completed, the Clearing Member arranges for the pay- out of securities and funds. SECURITIES PAYOUT Securites are credited by Clearing house in the pool account of member broker. The exchange also provides facility to directly to the clients BO account. Inter depository settlement takes place if transfer is there from one depository to another. In case of physicals securities, the receiving members are required to collect the same from clearing house on Pay-out day.

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30 Vadodara Stock Exchange Ltd.

FUNDS PAYOUT The bank account of member brokers having pay out of funds are credited by the Clearing House with the clearing bank on the same day. This member fails to deliver the process is called as funds pay-out. if a standing/closing price of script on trading day. AUCTION An auction tender is issued by the exchange to the member broker informing them about the names of the script short or not delivered, quantity slated for auction and date and time of the auction session on the BOLT/the auction for the undelivered quantity is conducted on T+3 day between 11:00am and 12:00 noon for all the scripts under CRS except those in Z group and on trade to trade basis which are directly closed. In auction, the highest offer price is allowed up to close out rate of scrip and the lowest offer price be 20% below the closing price of the scrip on a day prior to day of auction i.e. pay-in day.

securities, then the value of shares delivered short is recovered from him at

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31 Vadodara Stock Exchange Ltd.

2. Margin DepartmentVSE act as Exchange. broker to Mumbai Stock

Margin trading is trading with borrowed funds/securities. It is essentially a leveraging mechanism which enables investors to take exposure in the market over and above what is possible with their own resources. Corporate brokers with net worth of at least Rs 3 crores are eligible for providing margin-trading facility to their clients subject to their entering into an agreement to that effect. Before providing margin-trading facility to a client, the member and the client have been mandated to sign an agreement for this purpose in the format specified by SEBI. The facility of margin trading is available for Group 1 and those securities, which are offered in the initial public offers and meet the conditions for inclusion in the derivatives segment of the stock exchanges. For providing the margin trading facility, a broker may use his own funds or borrow from scheduled commercial banks or NBFCs regulated by the RBI. The total exposure of the broker towards the margin trading facility should not exceed the borrowed funds and 50% of his net worth. While providing the margin trading facility, the broker has to ensure that the exposure to a single client does not exceed 10% of the total exposure of the broker. Initial margin has been prescribed as 50% and the maintenance margin has been prescribed as 40%. In addition, a broker as to disclose to the stock exchange details on gross exposure including name of the client, unique number under the SEBI (central database of market participants) regulations, 2003, and name of the scrip. If the broker has borrowed funds for the purpose

of providing amount

margin-trading

facility,

the

name

of

the

lender

and

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3 32 Vadodara Stock Exchange Ltd. borrowed should be disclosed latest by the next day. The stock exchange, in turn, has to disclose the scrip-wise gross outstanding in margin accounts with all brokers to the market. Such disclosure regarding margin trading done on any day shall be made available after the trading hours on the following day. There are following margin practice at VSE: Volume margin Loss/mark to market Volatility margin Scrip margin Intra day gross trading limit margin Net exposure margin

3. Surveillance DepartmentOne of the objectives of the Exchange is to promote and inculcate honorable and just practices of trade in securities transactions and to discourage malpractices. The Securites and Exchange Board of India (SEBI) had directed the separate stock exchange in with August staff 1995 to set up a to Surveillance Department exclusively market assigned

surveillance functions. The exchange has set up a separate SB to keep a close watch on price movement of scrips, like price rigging, etc., monitor detect manipulations position to the member-brokers

ensure that defaults do not occur. The SB monitors exposure of the members on a daily basis. It also scrutinizes the prices and volumes of the scrips on a daily basis. As per the guidelines issued by SEBI, the exchanges are required to apply a daily Circuit Filter of 20% on all the scripts except on the scripts on which derivative products are available or are included in the indices on which derivative products are available. On these scripts exchange

has imposed

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33 Vadodara Stock Exchange Ltd. dummy circuit filters to avoid punching error by members, if any. The imposition of circuit filters on scripts ensures that the price of the scrip cannot move upward or downward beyond the limit set for a day. The large variation in the prices as well as the volumes of the scripts are scrutinized and appropriate actions are taken. The scripts, which reach new high or new low and companies, which have high turnover, are watched. The prices and volumes in the newly listed scripts are monitored. In case certain abnormalities are notices, then circuit filters are reduced to make it difficult for the price manipulators to increase or push down the prices of a script within a short period of time. The exchange imposes special margin in the scripts where it is suspected that there is an attempt to ramp up the prices by creating artificial volumes. The exchange imposes special margin in the scripts where it is suspected that there is an attempt to ramp up the prices by creating artificial volumes. The exchange also transfers the scripts for trading and settlement if a trade-to-trade basis would result into giving/taking delivery of shares on a gross level and no intra-day/settlement netting off/squaring off facility would be permitted. In cases where the abnormal movements continue despite the aforesaid measures, trading in the scrip is suspended. The exchange has developed an Online Real Time (OLRT) Surveillance System, which has been commissioned from July15, 1999. Under this volume variation in system, alerts are generated by the system online, in real time, based on certain preset parameters like the price and scripts, members taking unduly large positions not commensurate with their financial positions or having concentrated positions in one or a few scripts etc. This system includes databases such as company profile, members profile and historical database members of turnover and price movement in scripts,

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34 Vadodara Stock Exchange Ltd. turnover, their pay-ion obligations, etc. the system generates alerts on the basis of pre-set parameters during the trading hours and corrective action based on further investigations is taken in such cases.

4. LISTING DEPARTMENTListing department of VSE lists the securities of corporate bodies at the Exchange by making an agreement with the companies, which fulfills the terms and conditions as required by VSE. This agreement is prepared in order to secure the rights of investors and to control/guide the risk of investor to some extent. There are around 51 clauses in listing agreement that a company has to fulfill. Some of the mail clauses of listing agreement are clause 35, 41, 47 and 49. Clause pattern 31: defines shareholding

Clause 41: defines declaration and publication of unaudited result Clause 47: appointment of company secretary as a compliance officer Clause 49: corporate governance According to this agreement it is the duty of each company to inform VSE about any major decision which can affect the functioning of the company so that VSE can inform its member broker and in turn they can inform their respective clients who are investors in the company. Thus, the investors can decide upon whether to invest in the company or not and in this manner VSE controls/guides the risks of investors by informing them about the decision of the company in which they are investing.

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5. Accounts DepartmentAccounts department at VSE does not have a wide scope. But in general, its main activity is of handling monetary effects in cash and cheque for all companies i.e. Vadodara Stock Services Exchange Limited-Listing fee VSE Stock Services Limited-BOLT (Membership card of Mumbai Stock Exchange purchased by VSSL is known as BOLT. VSE clearing/CDSL Activities of accounts department Collection of cheque for pay-in and pay-out bills from members and depositing the same. Pay-in and pay-out summary of rolling/regular and auction and settlement is inserted in PC and

cheques of members are entered in pay- in slip. Thereafter it is deposited in bank and debit/credit take place in account of member as per the transaction. Depositing cheque of listing fee, which is collected for membership card of VSE Ltd. Calculating staffs salary after considering leave, loan, advance salary, half day etc. of each employee. All govt formalities in monetary terms are programmed and calculated example income tax, municipal tax etc. Billing of any material purchased for these 3 companies. Calculating of monthly rent of BOLT terminals allotted to members. Collection of maintenance charges from members.

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36 Vadodara Stock Exchange Ltd.

6. Automation DepartmentActivities: VSE Ltd. has around 80 sub-brokers; their connectivity of terminals with Mumbai Stock Exchange is checked by Automation Department. Mumbai Stock Exchange has given equipment VSAT to VSE, which is connected to IDU. Through IDU automation department can check connection of those members who are sub-brokers of VSE securities Ltd. This dept solves problems occurring between VSAT and IDU. In each office of member there are 3 network connections and on each floor room. It has to check the file of transactions sent to them by Mumbai Stock Exchange everyday. They have to prepare Data Cumulative of shares, which are transacted by sub-brokers by taking file from surveillance and entering the same in software. They have to provide various information to other departments like data cumulative, pay-in, pay-out billing and contracts to members; pay- in/pay-out billing to accounts department Data regarding delivery of shares as per transaction to clearing house. Although VSE has its trading days from Tuesday to Monday but here only those members are active who are sub-broker to it and who deal with Mumbai market, all other remaining members are inactive. there is 1 HUB room is connected with another. Automation dept has to check and solve all problems related to HUB

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7. Personnel DepartmentThey keep all the information of the employees. Functions: Man-power planning Recruitment Probation Promotion and transfer Training Performance appraisal system Exchange continues to focus on training needs of the employees. Efforts are directed toward upgrading the knowledge, skills and attitude of employee by deputing them to various workshops, seminars. Most of the staff members have been trained for depository operations and are holding DP System Certification.

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8. MEMBERSHIP DEPARTMENT:As we have seen that the Listing Department lists the securities of Corporate bodies at Department VSE. Whereas of VSE the Membership registers individual persons as

members of VSE and issues them a membership card. The main activity of this dept. is of record and registration of the members, Collecting turnover fee, Collecting audit reports and working as a middleman between SEBI and members of VSE. At present there are 290 members at VSE Individual Members Corporate Members TOTAL 236 54 290

Initially when VSE was established all the members were selected after conducting an interview for them. 6 Directors, 1 Executive director and 1 Government nominee were in the interview panel. The criteria decided for a person to be a member of VSE are AGE: 21 years QUALIFICATION : 10+2 (old SSC will also do) NET WORTH : minimum 5 Lac EXPERIENCE : 3 years in capital market CERTIFICATES : No Objection Certificate of other stock exchange if he is a member of other stock exchange. Minimum 3 years working as a member in a stock exchange is compulsory for multiple membership. A person can become member of all recognized stock exchanges in India but only after providing the NOC of other stock exchange. If any of these members sell their membership card to other person then

this dept. registers the name of other person at SEBI and transfer their name on

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39 Vadodara Stock Exchange Ltd. the card after checking that whether he falls in the criteria for a member of VSE and no interview is conducted for him. In case if that person does not fall in the criteria to become a member of VSE than his membership card gets automatically canceled. SEBI has the right to cancel the membership card of any member due to any reason which SEBI feels satisfying. VSE has stopped issuing more membership cards and making more members because at present these 307 members are also not functioning properly as market has slow down. To fasten the business of the members of VSE, VSE Securities Ltd. has become a member of The Mumbai Stock Exchange and so the members of VSE are becoming sub-brokers of The Mumbai Stock Exchange so that they can have a wide scope for their business. Until now 80 such members of VSE has become the sub-broker of The Mumbai Stock Exchange to get some business even from Mumbai market.

9. CLEARING HOUSEVSE has its own Clearing House known as VSE Clearing House. As the depositories are important intermediaries in the securities market that is scrip- less or moving towards such a state. The principle function of depository is to dematerialize securities and enable their transactions in book-entry securities with the form. Dematerialization of securities occurs when securities destroyed and an equivalent number of are credited technology into for the beneficiary owners account. All the The intermediaries in this system issued in physical form is

players have to be conversant with the rules and regulations as well as processing. have to play strictly by the rules. A depository established under the Depositories Act can provide any services connected securities with in the recording record of a l l o t m e n t of of a depository. A

depository cannot directly open accounts and provide services to

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40 Vadodara Stock Exchange Ltd. clients. Any person willing to avail of the services of the depository can do so by entering into an agreement with the depository through any of its Depository Participants. Depository (DP) Participant

A Depository Participant is describing as an agent of the depository. They are the intermediaries between the depository and the investors. The relationship between the DPs and the depository is governed by an agreement under the Depository Act, 1996. In a strictly legal sense, a DP is an entity who is registered as such with SEBI under the provisions of SEBI Act. As per this Act, a DP can offer depository related services only after getting certificate of registration from SEBI.

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VSE CLEARING HOUSE - VSEL

41

Counter 1

(1) Billing

(3) Billing

(3) DIS Accept System

(4) DRF Accept

(5) AOF Accept

Counter ll (All types Form & DIS)

(6) Modification Misc forms

(7) DIS Request Form verification

(8) DIS Stamping issue

Holding / Txn / Demat / General / IPO Inquiry

(10) (11) Holding txn Demat IPO (14) Off Market

(11) Holding txn. Demat IPO

(12) AOF Entry

(13) DRF Entry

DIS ENTRY

(15) Inter Depository

(16) On MarketVadodara Stock Exchange Ltd.

DIS Maker / chekerInteraction with DIS BO

(17) DIS Authorized All segment & Upload

(18) DIS Authorized All Segment & Upload Interaction With DIS BO

MISC

(19)

AOF Scan / System Bill Printing

(20)

MAY I HELP YOU

42 Vadodara Stock Exchange Ltd.

CDSL Performs the following functions through DP Enable the surrender and withdrawal of securities to and form the depository Dematerialization and Rematerialisation. Maintains investor holdings in the electronic form. Effect settlement of securities traded on the exchanges. Carries out settlement of trades not done on the stock exchange.(Offmarket trade) Transfer of securities. Pledging/unpledging of dematerialized securities. Electronic credit in public offering of companies or corporation actions. Receipt of non-cash corporate benefits like Bonus rights, etc. in electronic form. Stock lending and Borrowing. Freezing/locking of investors account.

DEMATERIALISATION Introduction: Dematerialization is the process by which a BO can get his physical securities converted into electronic form. Pre-requisites for dematerialization are: Investor should have a Demat account with any DP of CDSL. Securities to be dematerialized must have been admitted in CDSL I.e. ISIN for the securities should be available in CDSL. Investor should be the registered holder for the securities in the books of the company. The BO submits a request to the DP in the Dematerialization Request Form (DRF) along with the certificates. The DP verifies the information on the DRF 42

43 Vadodara Stock Exchange Ltd. and physical certificates and enters the details in the system to set up a request electronically. The DP sends the physical documents to the concerned Issuer / RTA .if the issuer/RTA finds the DRF and certificates in order, it registers CDSL as the registered holder of the securities and conform the DRN electronically to CDSL. On receiving such conformation, CDSL credits the BO account. If the issuer / RTA reject all or some of the certificates in a Demat request then the same are sent back to the DP mentioning the rejection(s). DP will then ask the BO Demat request. to rectify the for rejection and send under a fresh the certificates again dematerialization

Dematerialization Process 1 BO 7 3 5Issuer/RTA DP

6

2

4

CDSL

1) DRF with certificate 2) Setup electronic request 3) DRF with Certificate 4) Statement of holding

5) Conforms electronic request 6) Credit in the BOs account 7) Access electronic request

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44 Vadodara Stock Exchange Ltd. REMATERIALIZATIO N Rematerialisation is the process of convert the securities into physical converting securities, held in a

Demat account (i.e. electronic form) to physical form. A BO intending to form submits a remat request to the DP in a Rematerialisation Request Form (RRF). DP verifies the information on the RRF and enters the details in the system to setup a request electronically. The system generates a unique serial number called as Rematerialisation Request Number (RRN), which can be used for future reference. The DP sends the RRF to the Concerned Issuer/ RTA. If the remat request is in order, the issuer/RTA approves the same and confirms the RRN electronically to CDSL. On receiving such confirmation, CDSL debits the BO account. Physical certificates are sent by the Issuer / RTA directly to the investor. The process flow of a remat request is given below:

1

BO7

DP

8

3

6

2

Issuer/RTA41) 2) 3) 4) RRF with Certificate Setup electronic request RRF Accesses electronic request

5

CDSL

5) confirms electronic request 6) Credit in the BOs account 7) Statement of holdings 8) Physical Certificate

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45 Vadodara Stock Exchange Ltd. Off-Market Transaction Off-Market transaction can be used for transfer securities from one BO accounts to another BO account. Both accounts are in CDSL. Both accounts may with same DP or different DPs. In off-market transactions the buyer account or the receiving account is not with a CH/CC. Following possible: combination of off-market transactions are

BO account to BO account BO account to CM account for pay-in CM account to BO account for pay-out CM account to CM account

On-Market Transaction In on-market transaction receiving account / buyer account is always with CH/CC. Investor buy / sell securities on the trading mechanism provided by the stock exchange through SEBI registered CMs. The day on which the trade is executed is called as the trading day or the T day. On receiving confirmation from the CM, of execution of the trade, the buyer BO has to deliver the funds to the CM and the seller BO has to deliver the securities to the CM. the CM delivers the funds and securities receive from BO to the CH/CC of the stock exchange before the stipulated time specified by the stock exchange. The CH/CC of the stock exchange then delivers the securities to the buying CMs and funds to the selling CMs, who have executed trades on behalf of their clients.

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46 Vadodara Stock Exchange Ltd. This activity of the CH / CC of the stock exchange of delivering funds and securities to the respective sellers / buyers is known as settlement of market trades. The date on which settlement has taken place is known as settlement date. The process of delivery of securities by the seller CM to the CH/CC for settlement is known as pay-in of securities and the process of delivery of securities by the CH / CC to the buyer CM is known as pay-out of securities. Pay-in and pay-out of securities takes place at pre-determined timings decided by the stock exchanges. Settlement of on-market trades is currently done on a T+2 basis i.e. settlement take place on 2nd working day after the trade has been executed by the CM. settlement of funds effected by clearing banks and depository plays no role in this whereas settlement of securities in dematerialized form is effected through depository system.

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47 Vadodara Stock Exchange Ltd. PLEDGE UNPLEDGE AND

The depository act, 1996 permits the creation of pledge and Unpledge against securities, securities held in a depository account can be pledged or Unpledge against a loan, credit, or such other facility availed by the beneficial ownEr of such securities. For this purpose, both the parties have to the agreement, i.e., the pledgor and pledgee must have a beneficiary account with CDSL. However, both parties need not have their account with the same DP. The nature of control securities on the offered as collateral determines whether the

transaction is a pledge or Unpledge. If the lender (pledgee) has unilateral right (without reference to borrower) to appropriate the securities to his account if the borrower (pledgor) defaults or otherwise, the transaction is called a pledge. If the lender needs concurrence of the borrower (pledgor) for appropriating securities to his account, the transaction is called Unpledge.

CDSLConfirmation Request Confirmation Request

Pledgees DP

Pledgors DPRequest Agreement

Confirmation

Request

PledgeeLOAN

Pledgor

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48 Vadodara Stock Exchange Ltd.

Agreement is signed between the pledgor and pledgee outside the CDSL system. Pledgor gives a pledge creation request to his DP who enters it in the system. Securities are transferred from free balances head to pledged balances head in the pledgors account. The request reaches the Pledgees DP through the CDSL system. Pledgee is intimated by his DP. Pledgee gives a pledge confirmation to his DP who enters it in the system. Status of pledge instruction is changed to pledged. Loan is given by pledgee to pledgor outside the CDSL.

FREEZE AND UNFREEZE OF ACCOUNT Freezing is an action performed on a BO account as a whole or individual ISIN balances held with in a BO account to safeguard the balances present in the BO account. Freezing represents temporary blocking of entire balance or part of balance in a BO account as such. If the freeze is initiated by the BO then the BO will continue to get all the corporate action, cash / non cash benefits. If the freeze is initiated by DP / CDSL, The Issuer / RTA may choose to keep the benefits in abeyance. Multiple freezes can exist for the same account since freeze can be initiated by BO/DP/CDSL. If freeze initiated by DP is released then the other freeze will still be active.

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FINANCIAL CONDITION OF VSE COMPARED TO LAST YEAR.BALANCE SHEET AS AT 31ST MARCH 2008

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50 Vadodara Stock Exchange Ltd.

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED ON 31ST MARCH 2008.

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51 Vadodara Stock Exchange Ltd.

RATIO ANALYSIS OF VSE LTD.SR.NO. RATIO 1. CURRENT RATIO: CURRENT ASSETS CURRENT LIABILITIES 2. DEBT EQUITY RATIO: DEBT EQUIT Y 3. RETURN ON TOTAL ASSETS: PAT *100 TOTAL ASSETS 4. RETURN ON CAPITAL EMPLOYED: PBDT *100 5. RETURNEQUITY+DEBT ON EQUITY: PAT *100 EQUITY+RESERVES & SURPLUS 2008 3.07 0.28 1.77% 69.35% 4.37% 2007 1.81 0.39 3.39% 42.88% 2.04%

ANALYSIS: Current ratio of VSE Ltd. clearly shows high amount of unutilized current asset. Debt equity ratio of VSE Ltd. shows better position in debt compared to equity of VSE Ltd. compared to last year. Return on total asset ratio shows major decline compared to last year. ROCE & ROE shows better position of VSE compared to last year.

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SUGGESTION S PROMOTION OF STR ONG POINTS:Vadodara Stock Exchange should promote their strong points to compete with other broking firms. VSE has its own clearing house. They provide services through other brokers in three places apart from VSE like Anand, Bharuch, Surat. It has huge 63000 plus DP accounts but brokers for all of these is not VSE brokers. So VSE should target those accounts who have their accounts with other brokers. VSE has very low charges of DP services of VSE Clearing house compared to other DP service providers. So they should undertake marketing activities to promote such low charges. Many VSE brokers have DP accounts with other firms. So VSE should promote its DP services among VSE brokers. VSE should try to provide DP services to broking firms. Thus this can be a major source or revenue if efforts are made in this direction. As the charges are already less the distribution network of broking firms can be used to increase the account base.

SET UP A MARK ETIN G TEAM:VSE should set up a marketing team for promotion of their strong points which we discussed above. Calcutta Stock Exchange already have a marketing team, so VSE should take cue from it and set up a marketing team.

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STEPS TO BE TAKEN TO CONTINUE TO EXIST AS A RSE: Demutualised stock exchanges have usually listed on the stock exchange itself and regulatory conflicts have been addressed through specific provisions in the listing agreement. This will lead to better corporate governance. Due to the access to the national trading platform through the subsidiary route has reduced the incentive of VSE to trade in its own cash segment. So VSE should make the platform. After recommencing trading in its cash segment VSE should also diversify in the derivatives & commodities. Only being in equity isnt going to work in the long run. In order to survive in the competitive market VSE should provide an electronic equities exchange for the shares listed on the exchange. It can also create a platform for book building for initial public offerings (IPOs). The exchange can try to create its own distinct identity once trading starts in its cash segment. For instance, Nasdaq in US is renowned for AIM at London attracts SMEs from all technology companies. Similarly, to create their own niche. efforts to are re-commence exclusively listed trading in on the shares which

exchange by joining with some other RSE and forming an alternative trading

over the world. Thus they can study the pattern of transactions happening

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54 Vadodara Stock Exchange Ltd. OTHER SUGGESTIONS VSE should update their systems for more effective and speedy work. VSE should update its website more often. VSE has a hall on the ground floor of its building, which was used extensively for trading it for during the open-outcry system but today, the screen based trading has rendered it redundant. VSE currently rents commercial purposes like Employment Fairs and Art of Living Seminars etc. But the fees charges are very nominal. Moreover the hall it rented hardly for round about 30-40 times a year. Thus VSE needs to use this asset more efficiently by raising the charges for use and by marketing it further to increase the frequency use. of

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55 Vadodara Stock Exchange Ltd.

REFERENCES Websiteshttp://www.sebi.gov.in/corpo/vadodaraorder.html http://www.munothfinancial.com/stock_faq.php http://www.bseindia.com/about.asp http://www.bseindia.com/hist.pdf www.mayin.o rg/ajayshah/A/SEBI_RSEreport.pdf

Other References Information memorandum of VSE Annual Report of VSE Hooper, Vincent J., A World of Regional Stock Exchanges, May 2002.

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