Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
What is a share?
The stock exchanges are the exclusive centers for the trading of
securities. The regulatory framework encourages this by
virtually banning trading of securities outside exchanges. Until
recently, the area of operation/ jurisdiction of exchange was
specified at the time of its recognition, which in effect precluded
competition among the exchanges. These are called regional
exchanges. In order to provide an opportunity to investors to
invest/ trade in the securities of local companies, it is mandatory
foe the companies, wishing to list their securities, to list on the
regional stock exchange nearest to their registered office.
Exchange management
Made some attempts in this direction, but this did not materially
alter the situation. In view of the less than satisfactory quality,
of administration of broker-managed exchanges, the finance
minister in march 2001 proposed demutualisation of exchanges
by which ownership, management and trading membership
would be segregated from each other. The regulators are
working towards implementing this. Of the 23 stock exchanges
in India, two stock exchanges viz., OTCEI and NSE are already
demutualised. Board of directors, which do not include trading
members, manages these. Theses are purest form of
demutualised exchanges, where ownership, management and
trading are in the hands of three sets of people. The concept of
demutualisation completely eliminates any conflict of interest
and helps the exchange to pursue market efficiency and
investors interest aggressively.
Role of SEBI
The SEBI, that is, the Securities and the Exchange Board of
India, is the national regulatory body for the securities market,
set up under the securities and Exchange Board of India act,
1992, to “protect the interest of investors in securities and to
promote the development of, and to regulate the securities
market and for matters connected therewith and incidental too.”
SEBI has its head office in Mumbai and it has now set up
regional offices in the metropolitan cities of Kolkata, Delhi, and
Chennai. The Board of SEBI comprises a Chairman, two
members from the central government representing the
ministries of finance and law, one member from the Reserve
Bank of India and two other members appointed by the central
government.
As per the SEBI act, 1992, the power and functions of the Board
encompass the regulation of Stock Exchanges and other
securities markets; registration and regulation of the working
stock brokers, sub-brokers, bankers to an issue (a public offer of
capital), trustees of trust deeds, registrars to an issues, merchant
bankers, under writers, portfolio managers, investment advisors
and such other intermediaries who may be associated with the
stock market in any way; registration and regulations of mutual
funds; promotion and regulation of self- regulatory
organizations; prohibiting Fraudulent and unfair trade practices
and insider trading in securities markets; regulating substantial
acquisition of shares and takeover of companies; calling for
information from,undertking inspection, conducting inquiries
and audits of stock exchanges, intermediaries and self-
regulatory organizations of the securities market; performing
such functions and exercising such powers as contained in the
provisions of the Capital Issues (Control) Act,1947 and the
Securities Contracts (Regulation) Act, 1956, levying various
fees and other charges, conducting necessary research for above
purposes and performing such other functions as may be
prescribes from time to time.
SEBI as the watchdog of the industry has an important and
crucial role in the market in ensuring that the market participants
perform their duties in accordance with the regulatory norms.
The Stock Exchange as a responsible Self Regulatory
Organization (SRO) function to regulate the market and its
prices as per the prevalent regulations. SEBI and the Exchange
play complimentary roles to enhance the investor protection and
the overall quality of the market.
Membership
Listing
Index services
Trading Mechanism
On the BSE, the Steel Authority of India had the largest market
capitalization of Rs.19, 908 crores as on the 31st March, 1994
followed by the State Bank of India with the market
capitalization of Rs.16, 702 crores and Mahanagar Telephone
Nigam Limited with the market capitalization of Rs.11, 700
crores.
BSE SENSEX
Objectives of SENSEX
Trading System
TRADING
TRADING
The Exchange has also the facility to trade in "C" group which
covers the odd lot securities in 'A', 'B1', 'B2' and 'Z' groups and
Rights renunciations in all the groups of scrips in the equity
segment. The Exchange, thus, provides a facility to market
participants of on-line trading in odd lots of securities and
Rights renunciations. The facility of trading in odd lots of
securities not only offers an exit route to investors to dispose of
their odd lots of securities but also provides them an opportunity
to consolidate their securities into market lots.
The 'C' group can also be used by investors for selling upto 500
shares in physical form in respect of scrips of companies where
trades are to be compulsorily settled by all investors in demat
mode. This scheme of selling physical shares in compulsory
demat scrips is called as Exit Route Scheme.
Permitted Securities
The Exchange has since decided to permit trading in the
securities of the companies listed on other Stock Exchanges
under " Permitted Securities" category which meet the relevant
norms specified by the Exchange. Accordingly, to begin with
the Exchange has permitted trading in scrips of five companies
listed on other Stock Exchanges w.e.f. April 22, 2002/
DAY ACTIVITY
T+1
Confirmation of 6A/7A data by the Custodians. Downloading
of securities and funds obligation statement by members.
T+3
Pay-in of funds and securities by 11:00 a.m. and pay-out of
funds and securities by 2:00 p.m
T+4
Auction on BOLT.
T+5
Auction pay-in and pay-out.
Thus, the pay-in and pay-out of funds and securities takes places
on the 3rd working day of the execution of the trade.
Pay-in and Pay-out for 'A', 'B1', 'B2', 'C', "F" & 'Z' group of
securities
Demat pay-in:
The members can effect demat pay-in either through Central
Depository Services (I) Ltd. (CDSL) or National Securities
Depository Ltd. (NSDL). In case of NSDL, the members are
required to give instructions to their Depository Participant (DP)
specifying settlement no., settlement type, effective pay-in date,
quantity, etc. The securities are transferred to the Pool Account.
The members are required to give delivery-out instructions so
that the securities are considered for pay-in.
OR
Self Auction
As has been discussed in the earlier paragraphs, the Delivery
and Receive Orders are issued to the members after netting off
their purchase and sale transactions in scrips where netting of
purchase and sale positions is permitted. It is likely in some
circumstances that a selling client of a member has failed to
deliver the shares to him. However, this did not result in a
member's failure to deliver the shares to the Clearing House as
there was a purchase transaction of some other buying client of
the member in the same scrip and the same was netted off for
the purpose of settlement. However, in such a case, the member
would require shares so that he can deliver the same to his
buying client, which otherwise would have taken place from the
delivery of shares by the seller. To provide shares to the
members, so that they are in a position to deliver them to their
buying clients in case of internal shortages, the members have
been given an option to submit floppies for conducting self-
auction (i.e., as if they have defaulted in delivery of shares to the
Clearing House). Such floppies are to be given to the Clearing
House on the pay-in day. The internal shortages reported by the
members are clubbed with the normal shortages in a settlement
and the Clearing House for the combined shortages conducts the
auction. A member after getting delivery of shares from the
Clearing House in self-auction credits the shares to the
Beneficiary account of his client or hand over the same to him in
case securities received are in physical form and debits his seller
client with the amount of difference, if any, between the auction
price and original sale price
B) Objections
When receiving members collect the physical securities from
the Clearing House on the Payout day, the same are required to
be checked by them for good delivery as per the norms
prescribed by the SEBI in this regard. If the receiving member
does not consider the securities good delivery, he has to obtain
an arbitration award from the arbitrators and submit the
securities in the Clearing House on the following day of the
Pay-Out (T+4). The Clearing House returns these securities to
the delivering members on the same day, i.e., (T+4). If a
delivering members feels that arbitration awards obtained
against him is incorrect, he is required to obtain arbitration
award for invalid objection from the members of the Arbitration
Review Committee. The delivering members are required to
rectify/replace the objections and return the shares to the
Clearing House on next day (T+5) to have the entry against
them removed. The rectified securities are delivered by the
Clearing House to the buyer members on the same day (T+5).
The buyer members, if they are not satisfied with the
rectification, are required to obtain arbitration awards for invalid
rectification from the Bad Delivery Cell on T+6 day and submit
the shares to the Clearing House on the same day.
If a member fails to rectify/replace the objections then the same
are closed-out. This is known as "Objection Cycle" and the
entire process takes 3 days.
DAY ACTIVITY
T + 3 Pay-out of securities of Rolling Settlement
T + 4 Patawat Arbitration session :
Arbitration awards to be obtained from officials of the Bad
Delivery Cell.
T+5
Members and institutions to submit rectified securities,
confirmation forms and invalid objections in the clearing house
Rectified securities delivered to the receiving members
T+6
Arbitration Awards for invalid rectification to be obtained from
officials of the Bad Delivery Cell
For 'A' + 'B1' + 'B2' + 'Z', 'Rolling demat' and 'F' group
The highest rate of the scrip from the first day (trading day in
case of Rolling demat segment) to the day prior to the day on
which the auction is conducted for the respective settlement.
20% above the closing rate as on the day prior to the day of
auction of the respective settlement.
For 'C' group segment
For 'A' + 'B1' + 'B2' + 'Z', 'Rolling demat' and 'F' group
The highest rate of the scrip from the first day (trading day in
case of Rolling demat segment) to the day prior to the day on
which the auction is conducted for the respective settlement.
20% above the closing rate as on the day prior to the day of
auction of the respective settlement.
Clearing System
The Clearing House of the Exchange handles the share and the
money parts of the settlement process in the case of 'A' and 'B1'
groups. The Clearing House handles only the money part of 'B2'
group while securities are physically exchanged between the
brokers.
1. Direct investment:
4. Broking Business:
TRANSFER OF OWNERSHIP
SAFEGUARDS
1. Margins are collected from the brokers on buying and
selling positions at the end of the day. The total
outstanding position is further subject to capital adequacy
norms laid down from time to time.
2. A comprehensive insurance cover for the Exchange and
the members is about to be put in place.
3. Guaranteeing trades is the cornerstone of a mature clearing
and settlement process. BSE is in the process of
establishing a Clearing Corporation that will guarantee
trades.
4. Companies are required to publish half-yearly unaudited
results and other price sensitive information. This imparts
greater transparency to the stock market operations.
5. Insider Trading Regulations have been laid down and a
'Take-Over' code has been created.
ARBITRATION MACHINERY
GRIEVANCE REDRESSAL
DISCIPLINARY ACTION
Phase I: The primary objective of this phase was the real time
dissemination of price data through the Display Information
Driver System (DIDS). DIDS was commissioned in November
1992 to disseminate bids, offers, actual rates of transactions and
indices on a real time basis.
Future Developments
Listing
Constitution
The NSE has two segments for trading in securities: Wholesale
Debt Market (WDM) and Capital Market (CM). Separate
membership is required for each segment.
Trading members
Trading mechanism
Rolling Settlement
Institutional Segment
Trading System
The NEAT system in NSE has four types of market. They are:
Normal Market
All orders which are of regular lot size or multiples thereof are
traded in the Normal Market. For shares, which are traded in the
compulsory dematerialised mode the market lot of these shares,
is one. Normal market consists of various book types wherein
orders are segregated as Regular lot orders, Special Term orders,
Negotiated Trade Orders and Stop Loss orders depending on
their order attributes.
Spot Market
Spot orders are similar to the normal market orders except that
spot orders have different settlement period’s vis-à-vis normal
market. These orders do not have any special terms attributes
attached to them. Currently the Spot Market is being used for
the Automated Lending & Borrowing Mechanism (ALBM)
session.
Auction Market
Competitor
The party who enters orders on the same side as of the
initiator is called a
Competitor.
Solicitor
The party who enters orders on the opposite side as of
the initiator is called a
Solicitor.
Order Books
Best Price- Price priority means that if two orders are entered
into the system, the order having the best price gets the higher
priority.
4. Stop-Loss Book
Stop Loss orders are stored in this book till the trigger price
specified in the order is reached or surpassed. When the
trigger price is reached or surpassed, the order is released in
the Regular lot book.
Buy order - A buy order in the Stop Loss book gets triggered
when the last traded price in the normal market reaches or
exceeds the trigger price of the order.
5. Odd Lot Book
The Odd lot book contains all odd lot orders (orders with
quantity less than
marketable lot) in the system. The system attempts to match
an active odd lot
order against passive orders in the book. Currently, pursuant
to a SEBI directive
the Odd Lot Market is being used for orders which has a
quantity less than or
equal to 500 (Qty more than the market lot) for trading. This
is referred as the
Limited Physical Market (LPM).
6. Spot Book
The Spot lot book contains all spot orders (orders having only
the settlement period different) in the system. The system
attempts to match an active spot lot order against the passive
orders in the book. Currently the Spot Market book type is
being used for conducting the Automated Lending &
Borrowing Mechanism (ALBM) session.
7. Auction Book
This book contains orders that are entered for all auctions.
The matching process
for auction orders in this book is initiated only at the end of
the solicitor period.
Order Conditions
A Trading Member can enter various types of orders depending
upon his/her requirements. These conditions are broadly
classified into three categories: time related conditions, price-
related conditions and quantity related conditions. For example
Time Conditions
DAY - A Day order, as the name suggests, is an order
which is valid for the day on which it is entered. If the
order is not matched during the day, the order gets
cancelled automatically at the end of the trading day.
Price Conditions
Limit Price/Order
An order, which allows the price to be specified while entering
the order into the system.
Market Price/Order
An order to buy or sell securities at the best price obtainable at
the time of entering the order.
Sell order
A sell order in the Stop Loss book gets triggered when the last
traded price in the normal market reaches or falls below the
trigger price of the order.
Buy order
A buy order in the Stop Loss book gets triggered when the last
traded price in the normal market reaches or exceeds the trigger
price of the order.
e.g. If for stop loss buy order, the trigger is 93.00, the limit price
is 95.00 and the market (last traded) price is 90.00, then this
order is released into the system once the market price reaches
or exceeds 93.00. This order is added to the regular lot book
with time of triggering as the time stamp, as a limit order of
95.00
Quantity Conditions
Trading Workstation
The trader workstation is the terminal from which the member
accesses the trading system. Each trader has a unique
identification by way of Trading Member ID and User ID
through which he is able to log on to the system for trading or
inquiry purposes. A member can have several user IDs allotted
to him by which he can have more than one employee using the
system concurrently.
Title Bar
The title bar displays the current time, Trading system name and
date.
Tool Bar
A window with different icons which provides quick access to
various functions such as Market By Order, Market By Price,
Market Movement, Market Inquiry, Auction Inquiry, Snap
Quote, Market Watch, Buy order entry, Sell order entry, Order
Modification, Order Cancellation, Outstanding Orders, Order
Status, Activity Log, Previous Trades, Net Position, Online
Backup, Supplementary Menu, Security List and Help. All these
functions are also available on the keyboard.
Ticker Window
Inquiry Window
Market Inquiry enables the user to view the market statistics like
Open, High, Low, Previous close, Last traded price change
indicator, Last traded quantity, date and time etc. A user may
find inquiry screens like Market Movement, Most Active
Securities and Net Position useful. These are available in the
supplementary menu.
Net Position
Snap Quote
Order/Trade Window
Supplementary Menu
On line back up
BADLA TRADING
Vyaj Badla
In the vyaj badla system, there was a very high chance that an
investor may end up with an average annual return of 14-18 per
cent or sometimes even higher. But having said that,
unfortunately, the returns were not guaranteed. This rosy picture
could well be a reality during a bull run, but when the market
was under a bear hug, returns could diminish to just around 6-8
per cent a year. Comparing it with a steady 12 per cent annual
return offered by a bank fixed deposit or any AAA rated
corporate bandit seemed that The high-risk and uncertain return
of vyaj badla would start looking like a bad investment option.
Most brokers don't accept anything less than Rs 1 lakh per client
for badla financing. And the stock selection too is at their
discretion. But it would be prudent for you to know the basis of
allocation of stocks to you, as you would be one among a lot of
clients whose money has been collectively invested in vyaj
badla. Badla rates vary between stocks, depending upon their
demand and supply. These rates fluctuate considerably
throughout the session.
Substitutes to Badla
Financial derivatives
Trading options are riskier than futures. This is purely from the
options-writer's perspective. Market making in options depends
to a great extent on institutions willing to write the contracts.
Since the buyer of an option contract is not under any obligation
to exercise his right, his risk is limited to the premium paid for
purchasing the right.
The third part is the Case, attached with the report, which is also
taken from Franklin Templeton India Ltd. The case speaks about
3 facts of investing; first being that growth and value do not
move in tandem; second being, value investing has rewarded
long term investors; and the third one as, value stocks have
provided low relative volatility over time.