Ncfm Training - Cm Chapter 5

An Overview of the Indian Securities market

Capital Market The market for securities, where companies  and the government can raise large  d h i l amounts of money (capital) for long term  use and the subsequent trade of the  instruments

Market Segments which are  interdependent p Primary Market    – y New issues are  distributed to investors Secondary Market  – Existing securities  are traded

Primary Market Issuance is either through public issue or private p p placement Two issuers are: ‰Corporate entity 

‐ Equity & Debt instruments

‰Governments

‐ Debt securities

Secondary Market ‰Enables participants to hold securities in  their assessment of risk & returns their assessment of risk & returns  ‰Trading and Settlements 

Dependence on Security Markets Corporate C t & Governments G t – Raise R i resources to meet obligations Households – Invest their savings

Derivatives Market Trading T di iin d derivatives i ti market k t commenced d in June 2000. • • • •

Index future – June 2000 I d option Index ti – June J 2001 Stock futures –November 2001 Stock options – July 2001

Secondary Market • Membership Membership ‐ registration cert. from SEBI registration cert from SEBI • Listing ‐ at least 10% & min 20 lk • Price bands ‐ i b d to curb volatility circuit levels are  b l ili i i l l prescribed at 10%,15%, 20% • Trading cycle ‐ T+ 2 • Risk management ‐ g pre empt mkt failures &  p p protect investors.

Legal Framework • Capital Issues (Control) Act, 1947 C it l I (C t l) A t 1947 • Securities Contract (Regulation) Act, 1956 • SEBI Act, 1992 • Depositories Act, 1996 Depositories Act, 1996 • Companies Act, 1956 • SEBI (Insider Trading) Regulation, 1992 SEBI (I id T di ) R l ti 1992 (Everything Covered in detail in Chapter 4)

Regulations ‰ All Brokers to be registered with SEBI ‰ Sauda Book (Register of Transactions) to be preserved for min. 5  years ‰ 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 All new IPO new IPO’ss will be traded compulsorily in Demat form only. A  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 The amount in unpaid dividend account of companies is transferred  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  prior approval i l

Broker Client relation ‰KYC (Know Your Client) ‰ i ‰Unique Client Code (PAN Compulsory) li d ( l ) ‰Contract Note (issued within 24 hours) to be signed  b A th i d Si t by Authorized Signatory ‰CN to have Reg. Office address and Dealing office  address ‰ECN ‰B k ‰Brokerage (max. 2.5% of traded value) ( 2 5% f t d d l ) ‰Sub‐broker (max. 1.5% of traded value)