7/18/2019 Stock Exchange

http://slidepdf.com/reader/full/stock-exchange-5696b5089d3e6 1/11

scd govt 

college, ldh

assignment on

Business

Environment 

SUBMITTED TO: SUBMITTED BY:

Prof.B.K.Khurana Bhawna

{M.COM 1(2ndSEM)}

 

7/18/2019 Stock Exchange

http://slidepdf.com/reader/full/stock-exchange-5696b5089d3e6 2/11

  STOCK

EC!"#$E

7/18/2019 Stock Exchange

http://slidepdf.com/reader/full/stock-exchange-5696b5089d3e6 3/11

  STOCK EXCHANGE

Meaning of Stock Exchange:

 A stock exchange is a form of exchange which provides servicesfor stock rokers and traders to !" or se## stocks$ onds$ andother sec!rities% Stock exchanges a#so provide faci#ities for iss!eand redemption of sec!rities and other &nancia # instr!ments$ andcapita# events inc#!ding the pa"ment of income and dividends%Sec!rities traded on a stock exchange inc#!de stock  iss!ed "#isted companies$ !nit tr!sts$ derivatives$ poo#ed investment

 prod!cts and onds% Stock exchanges often f!nction as'contin!o!s a!ction' markets$ with !"ers and se##erscons!mmating transactions at a centra# #ocation$ s!ch as the (oor of the exchange%

To e a#e to trade a sec!rit" on a certain stock exchange$ it m!st e #isted there% )s!a##"$ there is a centra##ocation at #east for record keeping$ !t trade is increasing#" #ess#inked to s!ch a ph"sica# p#ace$ as modern markets are e#ectronicnetworks$ which gives them advantages of increased speed and

red!ced cost of transactions% Trade on an exchange is "memers on#"%

  The initia# p!#ic o*ering of stocks and onds toinvestors is " de&nition done in the primar" market  ands!se+!ent trading is done in the secondar" market % A stockexchange is often the most important component of a stockmarket % S!pp#" and demand in stock markets are driven "vario!s factors that$ as in a## free markets$ a*ect the price of

stocks

There is !s!a##" no comp!#sion to iss!e stock viathe stock exchange itse#f$ nor m!st stock e s!se+!ent#" tradedon the exchange% S!ch trading is said to e o* exchange or over,the,co!nter % This is the !s!a# wa" that derivatives and onds aretraded% -ncreasing#"$ stock exchanges are part of a g#oa# market 

7/18/2019 Stock Exchange

http://slidepdf.com/reader/full/stock-exchange-5696b5089d3e6 4/11

for sec!re -n recent "ears$ vario!s other trading ven!es$ s!chas e#ectronic comm!,nication networks$ a#ternative tradings"stems and 'dark poo#s' have taken m!ch of the trading activit"awa" from traditiona# stock exchanges%

Defnitions o Stock Exchange

 According to Husband and Dockerary ,

"Stock exchanges are privately organized markets which are used to facilitate

trading in securities."

The Indian Securities Contracts (Regulation) Act of 1956, defines Stock Echange

as,

"An association, organization or body of individuals, whether incorporated or not,

established for the purpose of assisting, regulating and controlling business in

 buying, selling and dealing in securities."

Features o Stock Exchange

Characteristics or features of stock echange are!"

1. Mar%&' for &ur*'*&  Stock exchange is a market, where securities of

corporate bodies, government and semi!government bodies are bought and

sold.

7/18/2019 Stock Exchange

http://slidepdf.com/reader/full/stock-exchange-5696b5089d3e6 5/11

. D&a+ *n &ond hand &ur*'*&  #t deals with shares, debentures

 bonds and such securities already issued by the companies. #n short it deals

with existing or second hand securities and hence it is called secondary

market.

$. ,&-u+a'& 'rad& *n &ur*'*&  Stock exchange does not buy or sell any

securities on its own account. #t merely provides the necessary infrastructure

and facilities for trade in securities to its members and brokers who trade in

securities. #t regulates the trade activities so as to ensure free and fair trade

%. "++ow d&a+*n- on+ *n +*'&d &ur*'*&  #n fact, stock exchanges

maintain an official list of securities that could be purchased and sold on its

floor. Securities which do not figure in the official list of stock exchange are

called unlisted securities. Such unlisted securities cannot be traded in the

stock exchange.

&. Trana'*on &ff&'&d on+ 'hrou-h /&/0&r  All the transactions

in securities at the stock exchange are effected only through its authorised

 brokers and members. 'utsiders or direct investors are not allowed to enter

in the trading circles of the stock exchange. #nvestors have to buy or sell the

securities at the stock exchange through the authorised brokers only.

(. "o*a'*on of &ron  A stock exchange is an association of persons

or body of individuals which may be registered or unregistered.

). ,&o-n*'*on fro/ C&n'ra+ $o&rn/&n'  Stock exchange is an

organised market. #t re*uires recognition from the +entral overnment.

-. 3or%*n- a &r ru+& uying and selling transactions in securities at

the stock exchange are governed by the rules and regulations of stock

exchange as well as SEBI $u*d&+*n&. /o deviation from the rules and

guidelines is allowed in any case.

0. S&*f* +oa'*on  Stock exchange is a particular market place whereauthorised brokers come together daily i.e. on working days2 on the floor of 

market called trading circles and conduct trading activities. 3he prices of

different securities traded are shown on electronic boards. After the working

hours market is closed. All the working of stock exchanges is conducted and

controlled through computers and electronic system.

7/18/2019 Stock Exchange

http://slidepdf.com/reader/full/stock-exchange-5696b5089d3e6 6/11

14.4*nan*a+ Baro/&'&r  Stock exchanges are the financial barometers

and development indicators of national economy of the country. #ndustrial

growth and stability is reflected in the index of stock exchange.

5*' of ar*ou 'o% &6han-& *n Ind*a

5ombay Stock 6xchange

5 /ational Stock 6xchange

 5 7egional Stock 6xchanges

5 Ahmedabad

5 angalore

5 hubaneshwar 

 5 +alcutta

 5 +ochin

 5 +oimbatore

5 8elhi

5 uwahati

 5 9yderabad

 5 :aipur

5 ;udhiana

7/18/2019 Stock Exchange

http://slidepdf.com/reader/full/stock-exchange-5696b5089d3e6 7/11

5 <adhya =radesh

5 <adras

5 <agadh

 5 <angalore

 5 <eerut

5 '3+ 6xchange 'f #ndia

 5 =une

5 Saurashtra >utch

5 ?ttar=radesh

 5 @adodara

,o+& of S'o% E6han-& *n &ono/* -row'h:

1. Continuous and ready market or securities

Stock echange #ro$ides a read% and continuous &arket for #urchase and sale of

 securities' It #ro$ides read% outlet for u%ing and selling of securities' Stock

echange also acts as an outletcounter for the sale of listed securities

. Facilitates evaluation o securities

Stock exchange provide easy and *uick evaluation of securities.

!. Encourages ca"ital ormation

Stock echange accelerates the #rocess of ca#ital for&ation' It creates the hait of

 sa$ing, in$esting and risk taking a&ong the in$esting class and con$erts their

7/18/2019 Stock Exchange

http://slidepdf.com/reader/full/stock-exchange-5696b5089d3e6 8/11

 sa$ings into #rofitale in$est&ent' It acts as an instru&ent of ca#ital for&ation' In

addition, it also acts as a channel for right (safe and #rofitale) in$est&ent'

 #. $rovides saety and security in dealings

Stock echange #ro$ides safet%, securit% and e*uit% (+ustice) in dealings astransactions are conducted as #er ell defined rules and regulations' The

&anaging od% of the echange kee#s control on the &e&ers' -raudulent

 #ractices are also checked effecti$el%' .ue to $arious rules and regulations, stock

echange functions as the custodian of funds of genuine in$estors'

%. &egulates com"any management 

 /isted co&#anies ha$e to co&#l% ith rules and regulations of concerned stock

echange and ork under the $igilance (i'e su#er$ision) of stock echange

authorities'

'. Facilitates "u(lic (orro)ing

Stock echange ser$es as a #latfor& for &arketing 0o$ern&ent securities' It

enales go$ern&ent to raise #ulic det easil% and *uickl%'

*. $rovides clearing house acility 

Stock echange #ro$ides a clearing house facilit% to &e&ers' It settles the

transactions a&ong the &e&ers *uickl% and ith ease' The &e&ers ha$e to #a%

or recei$e onl% the net dues (alance a&ounts) ecause of the clearing house facilit%'

+. Facilitates healthy s"eculation

 ealth% s#eculation, kee#s the echange acti$e' 2or&al s#eculation is not

dangerous ut #ro$ides &ore usiness to the echange' oe$er, ecessi$e

 s#eculation is undesirale as it is dangerous to in$estors 3 the groth of

cor#orate sector'

. Serves as Economic Barometer Stock echange indicates the state of health of co&#anies and the national

econo&%' It acts as a aro&eter of the econo&ic situation conditions'

1-. Facilitates Bank ending

7/18/2019 Stock Exchange

http://slidepdf.com/reader/full/stock-exchange-5696b5089d3e6 9/11

 4anks easil% kno the #rices of *uoted securities' The% offer loans to custo&ers

against cor#orate securities' This gi$es con$enience to the oners of securities'

Stock market intermediaries

 Stockbroker ! A stockbroker  is a regulated #rofessional indi$idual, usuall%

associated ith a rokerage fir& or roker"dealer  , ho u%s and sells

 stocks and other securities for oth retail  and institutional  clients, through a stock echange or o$er the counter  , in return for a fee or co&&ission'

Stockrokers are knon % nu&erous #rofessional designations, de#ending

on the license the% hold, the t%#e of securities the% sell, or the ser$ices the%

 #ro$ide'

 Sub broker  ! An inter&ediar% roker  , fro& ho& another roker ac*uires

the reinsurance that needs to e #laced'

 jobbers! A +oer is a &arket dealer, u%ing and selling in *uick succession for a #rofit of fe ticks ( fe #aise )' These are also called as

scal#ers at fe #laces'

Financiers! -inanciers are adlacarr% forard &e&ers ho #ro$ide

 finance for carr% forard deals onl% in s#ecified grou# of shares'

 Arbitraguers: The% &ake deals through differences in #rices sa% u% in

 /udhiana and sell in delhi and $ice $ersa'

   Rules and Regulations:

7/18/2019 Stock Exchange

http://slidepdf.com/reader/full/stock-exchange-5696b5089d3e6 10/11

 Indian Ca#ital arkets are regulated and &onitored % the inistr% of -inance,

The Securities and Echange 4oard of India and The Reser$e 4ank of India'

The inistr% of -inance regulates through the .e#art&ent of Econo&ic Affairs "

Ca#ital arkets .i$ision' The di$ision is res#onsile for for&ulating the #olicies

related to the orderl% groth and de$elo#&ent of the securities &arkets (i'e' share,

det and deri$ati$es) as ell as #rotecting the interest of the in$estors' In

 #articular, it is res#onsile for

1. institutional reforms in the securities markets,

. building regulatory and market institutions,

$. strengthening investor protection mechanism, and

%. providing efficient legislative framework for securities markets.

 

The .i$ision ad&inisters legislations and rules &ade under the

1. 8epositories Act, 100(,

. Securities +ontracts 7egulation2 Act, 10&( and

$. Securities and 6xchange oard of #ndia Act, 100.

The Regulators

 Securities & Exchange Board o !ndia "SEB!#

The Securities and Echange 4oard of India (SE4I) is the regulator% authorit%

estalished under the SE4I Act 1997 and is the #rinci#al regulator for Stock

 Echanges in India' SE4I8s #ri&ar% functions include #rotecting in$estor interests,

 #ro&oting and regulating the Indian securities &arkets' All financial

inter&ediaries #er&itted % their res#ecti$e regulators to #artici#ate in the Indian

 securities &arkets are go$erned % SE4I regulations, hether do&estic or foreign'

7/18/2019 Stock Exchange

http://slidepdf.com/reader/full/stock-exchange-5696b5089d3e6 11/11

 -oreign Institutional In$estors are re*uired to register ith SE4I in order to

 #artici#ate in the Indian securities &arkets

 ,&&r& Ban% of Ind*a (,BI)

The Reser$e 4ank of India (R4I) is go$erned % the Reser$e 4ank of India Act,19:' The R4I is res#onsile for i&#le&enting &onetar% and credit #olicies,

issuing currenc% notes, eing anker to the go$ern&ent, regulator of the anking

 s%ste&, &anager of foreign echange, and regulator of #a%&ent 3 settle&ent

 s%ste&s hile continuousl% orking toards the de$elo#&ent of Indian financial

&arkets' The R4I regulates financial &arkets and s%ste&s through different

legislations' It regulates the foreign echange &arkets through the -oreign

 Echange anage&ent Act, 1999'

#a'*ona+ S'o% E6han-& (#SE) 7 ,u+& and ,&-u+a'*on In the role of a securities &arket #artici#ant, 2SE is re*uired to set out and

i&#le&ent rules and regulations to go$ern the securities &arket' These rules and

regulations etend to &e&er registration, securities listing, transaction

&onitoring, co&#liance % &e&ers to SE4I R4I regulations, in$estor #rotection

etc' 2SE has a set of Rules and Regulations s#ecificall% a##licale to each of its

trading seg&ents' 2SE as an entit% regulated % SE4I undergoes regular

ins#ections % the& to ensure co&#liance'