An Overview of the IndianAn Overview of the Indian Securities market

Capital Market

The market for securities, where companies d h i land the government can raise large 

amounts of money (capital) for long term use and the subsequent trade of the instruments

Market Segments which are Market Segments which are interdependent

Primary Market    – New issues are 

p

ydistributed to investors

Secondary Market  – Existing securities are traded

Primary MarketPrimary Market

Issuance is either through public issue or private placement p p

Two issuers are:

Corporate entity  ‐ Equity & Debt instruments

Governments ‐ Debt securities

Secondary MarketSecondary Market

Enables participants to hold securities in their assessment of risk & returnstheir assessment of risk & returns 

Trading and Settlements 

Dependence on SecurityDependence on Security Markets

C t & G t R iCorporate & Governments – Raise resources to meet obligations

Households – Invest their savings

Derivatives MarketDerivatives Market

T di i d i ti k t dTrading in derivatives market commenced in June 2000.

• Index future – June 2000I d ti J 2001• Index option – June 2001

• Stock futures –November 2001• Stock options – July 2001

Secondary MarketSecondary Market

• Membership ‐ registration cert from SEBI• Membership  registration cert. from SEBI

• Listing ‐ at least 10% & min 20 lk

i b d b l ili i i l l• Price bands ‐ to curb volatility circuit levels are prescribed at 10%,15%, 20%

• Trading cycle ‐ T+ 2

• Risk management ‐ pre empt mkt failures & g p pprotect investors.

Legal FrameworkLegal Framework

C it l I (C t l) A t 1947• Capital Issues (Control) Act, 1947

• Securities Contract (Regulation) Act, 1956

• SEBI Act, 1992

• Depositories Act, 1996Depositories Act, 1996

• Companies Act, 1956

SEBI (I id T di ) R l ti 1992• SEBI (Insider Trading) Regulation, 1992

(Everything Covered in detail in Chapter 4)

RegulationsAll Brokers to be registered with SEBI

Sauda Book (Register of Transactions) to be preserved for min. 5 yearsyears

Any person holding > 5 % shares in a company will make the disclosure to the Company

Any Co. making an IPO > Rs. 10 Cr. Will issue shares in Demat Form only

All new IPO’s will be traded compulsorily in Demat form only AAll new IPO s will be traded compulsorily in Demat form only. A maximum penalty of Rs. 5 lacs can be imposed for insider trading, as prescribed under SEBI Act, 1992.

The amount in unpaid dividend account of companies is transferredThe amount in unpaid dividend account of companies is transferred to Investor Education and Protection Fund

All advertisement / brochures by TM to be submitted to NSE for i lprior approval

Broker Client relation

KYC (Know Your Client)

i li d ( l )Unique Client Code (PAN Compulsory)

Contract Note (issued within 24 hours) to be signed b A th i d Si tby Authorized Signatory

CN to have Reg. Office address and Dealing office addressaddress

ECN

B k ( 2 5% f t d d l )Brokerage (max. 2.5% of traded value)

Sub‐broker (max. 1.5% of traded value)