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Primary Market

A market that issuesnew securities on an

exchange. Companies,government and othergroups obtain financingthrough debt or equitybased securities.Primary Markets are

facilitated byunderwriting groupswhich consists ofinvestment bank thatwill set a beginningprice range for a given

security and thenoversee its sale directlyto investors

Secondary Market

A market in whichan investorpurchase a securityfrom anotherinvestor rather thanthe issuer

subsequent to theoriginal issuance inthe primary market,also called

aftermarket.

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Methods of issuing securities in the

primary market Public issue- An offer to public by an issuer

through a prospectus for subscription .Public issue involves sale of securities to thepublic at large.

Private placement- an offer to the specificknown persons selected by the sponsors forprocuring subscription.

Right Issue An offer in which existingshareholders are offered new securities inproportion to their existing holdings.

Offer for sale - An invitation to the generalpublic to purchase the stock of a companythrough an intermediary.

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Products dealt in the secondary

marketo Equity shares-

Right issueBonus shares

o Preferred stocko Cumulative preference shareso Convertible preference shareso Govt. securities

o Debentureso Bondso Commercial Papers

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Structure of Stock Exchange

16 stockexchanges

(set up as companies,

either ltd. By guarantee, orby shares)

3 stock exchanges

(set up in association ofpersons and laterconverted into companies)

BSE (Bombay)

ASE (Ahmedabad)

MPSE (Madhya Pradesh)

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NATIONAL STOCK EXCHANGE

Established in the year 1992, GOIauthorized IDBI for establishing thisexchange for cities and towns across the

country. NSE was set up by leading institutions to

provide a modern fully automated screenbased trading system with national reach.

NSE has brought about unparalleltransparency speed and efficiency safetyand market integrity

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BOMBAY STOCK EXCHANGE

BSE is the oldest stock exchange in Asiaand has the greatest no. of listedcompanies in the world. 4700 companiesare listed as of August 2007.

It is located at Dalal Street Mumbai, IndiaHistoryIt traces its history to the 1850s. In 1956

the BSE became the first stock exchange

to be recognised by Indian Govt. underSecurities Contracts Regulation Act. In1986 SCRA gave BSE a means to measureoverall performances of the exchange.

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Services of BSE Investor Services-

BSE was the first exchange in the countryto provide an amount of Rs. 1 milliontowards the investor protection fund.

BSE online trading (BOLT)

Surveillance-BSEs online surveillance system monitorson a real time basis the price movements,volume position and members position.

BSEWEBX.comIn Feb 2001 BSE introduced the worlds

first centralised exchange based internettrading system

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SEBI

Foremost authority presiding over thecapital markets is SEBI.SEBI is theregulatory authority established under

section 3 of SEBI Act 1992 to protect theinterest of the investors in securities andto promote the development of and toregulate (promote, maintain fair efficient

secure and transparent market) thesecurities market and for mattersconnected therewith and incidentalthereto.

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Functions

Ready market

Evaluation of securities

Protection of investorMobilization of saving

Capital formation

Economic barometerRegulation of company management

Clearing house of information

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Role and Functions of Stock

Exchange

Established for the purpose of assisting,regulating and controlling business ofbuying, selling, and dealing in securities.

Provides a market for the trading ofsecurities to individuals and organisationsseeking to invest their saving or excessfunds through the purchase of securities.

Provides a physical location for buying andselling securities that have been listed fortrading on that exchanges.

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Role and Functions of Stock

Exchange Establishes rules for fair trading practices and regulates the

trading activities of its members according to those rules.

The exchange itself does not buy or sell the securities nor does itset prices for them.

The exchange assures that no investor will have an undueadvantage over other market participants. This means that ordersexecuted and transaction are settled in the fastest possible way.

Investor make informed and intelligent decision about theparticular stock based on information

Listed companies must disclose information in timely completeand accurate manner to the exchange and public on a regularbasis.

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Role and Functions of Stock

Exchange

Required information include stock price,corporate conditions and developmentsdividends, mergers and joint ventures andmanagement changes.

People who buy or sell stock on anexchange do so through a broker.

The broker takes your order to the floor of

the exchange looks for a brokerrepresenting someone wanting to buy/sell.If mutually agreeable price is found thetrade is made.