🞂​

https://www.sebi.gov.in/stock- exchan
ges.html
🞂​Any body of individuals, whether incorporated or not,
constituted for the purpose of assisting, regulating or
controlling the business of buying, selling or dealing in
securities.
🞂​ Corporate shares started being traded in the 1830s in
Bombay (now Mumbai) with the stock of Bank and Cotton
presses.
🞂​ The simple and informal beginnings of stock exchanges
in India take one back to the 1850s when 22 stockbrokers
began trading opposite the Town Hall of Bombay under a
banyan tree. The tree still stands in the area which is now
known as Horniman Circle.
🞂​ 1874-Dalal street
🞂​ 1875-BSE
🞂​ 1956-SCRA(Securities Contract Regulation Act)
🞂​ 1988-SEBI-non statutory-statutory in 1992
🞂​ 1992-NSE
🞂​ Economic Barometer:
🞂​ Pricing of Securities
🞂​ Safety of Transactions
🞂​ Dealings only in registered securities
🞂​ Spreading of Equity Cult
🞂​ Providing Scope for Speculation
🞂​ Liquidity
🞂​ Better Allocation of Capital
🞂​ Promotes the Habits of Savings and Investment
🞂​ Facilitates liquidity
🞂​ Regulate trade in securities
🞂​ Attracts Foreign Capital
🞂​ Influences Monetary and Fiscal policies
 MARKET INFRASTRUCTURE INSTITUTIONS
1) STOCK EXCHANGES: computerized screen based trading platform to facilitate
buying and selling of securities

2) CLEARING CORPORATIONS: guarantee the settlement of trades executed on the

Stock Exchanges

3) DEPOSITORIES: hold securities of investors in dematerialized / electronic form

4) MARKET INTERMEDIARIES: dealing in securities and providing information relevant

to the trading of securities
4A) DEPOSITORY PARTICIPANTS

Link between depositories and investor

Holds the Demat account of the investor
Sanctioned banks, financial institutions, stock brokers etc

4B) STOCK BROKERS

Link between the investor and the stock exchange

Holds the Trading account of the investor
Sanctioned specialized financial institutions
 TRADING PROCESS

Primary Secondary Market

Market(ONLY IPO) (Stock Exchange)

Bank Account Bank Account

Demat A/c with a Trading Account

Bank with Stock Broker

ASBA
(Application Demat Account
Supported by with DP
Blocked Amount)
 STOCK EXCHANGES IN INDIA
Sr. No. Name of the Recognized Stock Exchange Recognition Valid Upto Segments Permitted

1 BSE Ltd. PERMANENT a. Equity

b. Equity Derivatives
c. Currency Derivatives (including Interest Rate
Derivatives)
d. Commodity Derivatives
e. Debt
f. Electronic Gold Receipt (EGR)

2 Calcutta Stock Exchange Ltd. PERMANENT -

3 Metropolitan Stock Exchange of India Ltd. Sep 15, 2024 a. Equity

b. Equity Derivatives
c. Currency Derivatives (including Interest Rate
Futures)
d. Debt

4 Multi Commodity Exchange of India Ltd. PERMANENT a. Commodity Derivatives

5 National Commodity & Derivatives Exchange Ltd. PERMANENT a. Commodity Derivatives

6 Indian Commodity Exchange Limited PERMANENT -

7 National Stock Exchange of India Ltd. PERMANENT a. Equity

b. Equity Derivatives
c. Currency Derivatives (including Interest Rate
Derivatives)
d. Commodity Derivatives
e. Debt
 WHY REGIONAL STOCK EXCHANGES EXITED TRADING???

• LACK OF REGULATIONS
• ABOLITION OF BADLA TRADING: UNORGANISED FUTURE CONTRACTS WHICH
ALLOWS SHORT SELLING
• STOCK BROKERS OBTAINING MEMBERSHIPS FROM NSE,BSE
• FAILURE TO MEET SEBI CRITERIA

STOCK MARKET SCENARIO IN INDIA

• HARSHAD MEHTA SCAM – 1992 – MARKET MANIPULATION

• 1994 – ON SCREEN TRADING - NSE
• SATYAM SCAM – 2009 – FALSIFIED ACCOUNTING INFORMATION
LEADING TO MISTRUST OF STAKEHOLDERS
• ENCOURAGEMENT OF MUTUAL FUNDS

NOTE: https://
www.cnbctv18.com/market/scam-1992-harshad-mehta-scam-explained-7417101.htm
https://www.5paisa.com/blog/satyam-scam
• BSE OnLine Trading
• Started March 19,1995
• Fully computerised mode of trading
• Trade : Monday – Friday; 9.15am – 3.30pm
• Muhurat Trading (auspicious trade window)
• Pre Trading Session: 9.00 am to 9.15 am
• After Market Trade: 3:45 p.m. to 8:59 a.m
• The minimum post-issue paid-up capital of the
applicant company shall be Rs. 10 crore for IPOs &
Rs.3 crore for FPOs
• The minimum issue size shall be Rs. 10 crore
• The minimum market capitalization of the
Company shall be Rs. 25 crore

Note: market capitalization shall be calculated by

multiplying the post-issue paid-up number of equity
shares with the issue price).
🞂​ Permission for using BSE’s Name: Permission from
the Listing Commitee for using the name in the
company Prospectus.
🞂​ Letter of application: Submission of application
before filing prospectus with ROC
🞂​Allotment of securities: Allotment to be done within 30
days of closure of subscription and the basis of
allotment to be approved by BSE

🞂​Trading Permission: The company should complete

all formalities for trading permission within 7 days
of approval of basis of allotment
🞂​ Security Deposit: 1% of issue amount. Will be forfeited in
case of negligence of investor complaints
🞂​ Annual Listing Fees

🞂​ Listing agreement: Prescribed Disclosures

https
://www.bseindia.com/Static/about/Ipo_Fpo.aspx#:~:text=As%
20per%20Section%2073%20of,with%20the%20Registrar%2
0of%20Companies
.

https://www.bseindia.com/Static/about/listing_fees.aspx
🞂​Incorporated in November 1992
🞂​ Two tier:
🞄 Company Board
🞄 Governing Body
🞂​Trades shares, bonds, debentures, gilt edged securities
🞂​ Objectives
🞄 Establishes nationwide trading facility for all securities
🞄 Ensures equal access to all investors
🞂​Settlement period: T+1
🞂​Demutualized Stock Exchange
🞂​Listing Requirements:
🞄 Minimum Paid up capital Rs.10 Crores
🞄 Minimum Market Capitalization Rs.20 Crores
🞂​StockWatch System – Computer system designed and
programmed to monitor share market activity of NSE
Company Board:
🞄 Senior Executives from Financial
institutions
🞄 Experts in Law, Economics, Finance, Tax
🞄 3 Nominees of SEBI
🞄 Full time Executive
🞂​Executive Committee:
🞄 Representatives from Trading members, Public &
Management
🞄 4 Broker Members
🞂​ SEBI was formed as an independent identity under the SEBI Act
of 1992 and has the power to conduct inspections of the stock
exchanges. The inspections review the operations of the market
and the organizational structure along with aspects of
administrative control.
The main role of SEBI includes:
🞂​ Ensuring a fair and equitable market for investors to grow
in
🞂​ Compliance of the exchange organization, the system its
practices in accordance with the rules framed under the
Securities Contracts (Regulation) Act (SC(R) Act), 1956
🞂​ Ensure implementation of the guidelines and directions
issued by the SEBI
🞂​ Check if the exchange has complied with all the conditions and
has renewed the grants, if needed, under Section 4 of the
SC(R) Act of 1956.
🞂​Compulsory Rolling Settlement
🞂​ The rolling settlement prevailing in India is T+1,
implying that the outstanding positions at the end
of the day 'T' are compulsorily settled within 1 day
after the trade date. Rolling settlement (T+2
earlier) was first introduced in India by OTCEI
(exited in 2014).
 Types of Stock markets Settlement
S.No Basis Rolling/Spot Auction Futures
Settlement Settlement Settlement

1 Meaning Immediate Securities are Securities

settlement of acquired through bought/sold
Regular sale of auction by stock through
Securities on a exchanges and futures
Stock transferred to contracts
exchange/bourse sellers, who have
not received
shares from
buyers due to
short selling
(buyer default)
2 Settlement Period T+1 T+2 T+3
 MECHANICS OF SETTLEMENT/SETTLEMENT
SYSTEM/PROCESS OF NSE/BSE

1) Delivery Orders:
• Delivery orders contain information on quantity
of shares, name of the receiver
• Money statement contains itemwise details of
payments/receipts
• Members’ (Broker) accounts are auto debited
• Members/Brokers selling shares should deposit shares
with clearing banks on T+1 basis i.e on the 2nd day
2) Auto DO Facility:
• Delivery Out instruction are generated online by the
Clearing banks on behalf of the members
• This facility is available for Compulsory
Rolling Settlement Segment (CRS)

⮚3) Demat Pay in:

• Members should give instructions to their Depository
Participants regarding transfer of securities from
Demat A/C to Pool A/C

https://
www.bseindia.com/static/markets/equity/EQReports/tra
_Settlement.aspx
🞂​ Securities Buy in:
• The Clearing bank compares securities received
and the member (broker) wise report generated.
This is called Securities Pay in
• After pay in, the bank account of the buyer is auto
debited
• After debiting, the clearing bank arranges for the pay
out(distribution) of securities. Securities are channeled
to Pool accounts from which securities are transferred
to their Demat accounts
• The clearing house will credit the accounts of the
seller of securities
 TRADE SETTLEMENT MECHANISM
Stock Exchange

1) Buyer places order 5) Buyer’s 9) Buyer’s

with broker bank account Demat A/c is
is auto debited credited with
securities

2) Broker instructs DPs 6) Securities

to debit the Demat A/c are debited
from Seller’s
Trading A/c
10) Seller’s
bank account
3) Shares are 7) Securities is credited
Routed through are moved to
Depositories Pool A/C
(NSDL, CDSL)

8) Clearing
4) Clearing Bank
Corporation
verifies order (Pay-
settles the
in)
trade
 STOCK INDICES
• A stock market index is an indicator that shows all the major changes in the
stock market.
• Similar stocks are selected from amongst the securities listed on the stock
exchange and are grouped based upon the type of industry, the company's size,
and its market capitalization to develop an index.
• Changes in the price of underlying assets impact the overall value of the index.
If the price goes upwards, the stock index will rise, and if they go downwards,
the stock will fall.

TYPES OF STOCK INDICES

1) Benchmark Indices: best point of reference. Eg: NIFTY 50, SENSEX

2) Sectoral Indices: measure companies falling under one specific sector. Eg:
NIFTY PHARMA
3) Market-Cap Based Indices: slightly larger performance based indices. Eg:
S&P 500

Notes: https://www.nirmalbang.com/knowledge-center/stock-market-indices.html
 NATIONAL STOCK INDICES
NIFTY 50:
• Weighted Average of Well diversified 50
stocks
• Considers Free Float Market Capitalisation
• Base capital 2.06 trillion
• i) Market Capitalisation = Current market
price x Outstanding shares
ii) Free Float Market Capitalisation =
Shares outstanding x Price x Investable
Weight Factors (IWF)
iii) Index Value = (Current Market Value /
Base Market Capital) x Nifty Base Index Value
(1000)
SENSEX:
• Weighted Average of Well diversified 30
stocks
• Considers Free Float Market
Capitalisation
• Base capital 2500 crores
• The formula for Sensex = (Free float
market capitalisation of 30 companies /
Base market capitalisation) x Base value
of the index.

Difference between Nifty and Sensex

Basis Nifty Sensex
No. of Sectors 24 13
Base Number 1000 100
Liquidity, float adjustment,
Criteria for Inclusion Price Fluctuations
and domicile
Number of Companies 50 30
Base Year 1995 1997-98
Investible Weight Factor
ILLUSTRATING STOCK INDICE CALCULATION
 INTERNATIONAL STOCK INDICES
• Global indices are a benchmark to evaluate the strength or weakness in the overall
market.
• A sample of highly liquid and valuable stocks from the universe of listed stocks is
selected and made into an index. The weighted movement of these sets of stocks
or portfolios of stocks constitutes the movement of global indices.
• Global indices are moving up, that means the markets are strong, and if global
indices are moving lower, that means global markets are weak.
NASDAQ

• Nasdaq became the first electronic stock market in the world

when it began operations in 1971. It now contains three
indices.
• The Nasdaq Composite is the main one and is well known
alongside the Dow Jones Industrial Average and the S&P 500.
• The Nasdaq 100 consists of the 100 largest non-financial
companies listed on the index. The 100 companies in the
Nasdaq 100 make up more than 90% of the weight of the
Nasdaq Composite Index.
• The Nasdaq Financial-100 consists of the financial companies
that are listed on the Nasdaq.
 NYSE (NEW YORK STOCK EXCHANGE)

NYSE is the oldest exchange in the US

It is the largest equities-based exchange in the
world.
NYSE still retains a physical trading floor on
Wall Street.
NYSE is an auction-based market.

LSE (LONDON STOCK EXCHANGE)

Started in 1698
Played a crucial role in financing World War I
Stock Watch System – 1970
FTSE 100 – 1984
Sustainable Finance initiatives
 DEPOSITORIES IN INDIA
• A depository means an entity that holds financial securities in a dematerialized form.
National Securities Depository Limited (NSDL) is promoted by the National Stock Exchange,
Industrial Development Bank of India, and Unit Trust of India.
Central Depository Services Limited (CDSL) is promoted by the Bombay Stock Exchange,
State Bank of India, and the Bank of India.
Depository Participant (‘DP’) is the agent or the registered stockbroker of a
depository. hrough the DP, a person can open and maintain a Demat account. They are
the link between the depository and the investors. An agreement between the DP and
the depository regulates their relationship. Depositories Act, 1996 defines a DP as a
person registered under Section 12 of the Securities Exchange Board of India (‘SEBI’)
Act, 1992. Section 12 of the SEBI Act states that no DP shall buy, sell or deal in
securities unless registered with SEBI.
Functions of a Depository Participant
• To open accounts of investors.
• Dematerialisation/Demat of securities. The Demat process is converting the
physical certificates of investors into an equivalent number of securities in
electronic form.
• Rematerialisation/Remat of securities. The Remat process is converting
securities held in electronic form in the Demat account back to the form of the
physical certificates.
• Transfer of securities,i.e. changing the beneficial ownership of securities.
• Settlement of trades which are done on the exchange connected to the depository.
• Pledging and Unpledging of securities for a loan against shares.
• Corporate action benefits such as directly transferring securities to the Demat and
bank account of customers.
 Differential Factors Dematerialisation Rematerialisation

Physical shares are converted into the Electronic shares are converted to the
Definition
electronic format physical form

Annual maintenance costs and other

Physical certificates do not require
Cost of maintenance transaction fees are applicable as
maintenance charges
specified by the broker

No threats to shares held in the electronic High chance of theft, misplacement, fraud
Disadvantages
form and forgery

Identification Shares held in the dematerialised form do Physical shares hold distinct numbers
attributes not have a distinct number issued by the RTA

Post rematerialisation, transactions take

Transaction approach All transactions take place electronically
place physically

NSDL or CDSL — depository participants

Maintained by The company maintains the account
— maintain the account

Rematerialisation a complex procedure and

Dematerialisation is a simple and easy
takes an extended period of time. The
Challenges process; mandatory when trading in
process is typically a long drawn and
shares.
requires expert assistance.

Investor needs to fill out the Investor needs to fill out the
Application form used
Dematerialisation Request Form [DRF] Rematerialisation Request Form [RRF]

It is the principal and primary function of It is a secondary and supporting function of

Sequence
the depository, and is an initial process. the depository and a reversal procedure.
🞂​ A derivative is a futures contract between two
or more parties whose value is based on an
underlying financial asset. Common underlying
instruments include bonds, commodities and stocks.
🞂​Risk Management
🞂​Price Discovery

🞂​Lower Transaction costs

🞂​Greater Liquidity

🞂​Short Selling

Classification of Derivatives:
🞂​OTC: Over the Counter
🞂​ETD: Exchange Traded Derivatives
🞂​ A futureis a derivative contract between two parties to
buy or to sell an asset at a specified future time at a
price already agreed upon.

Forward
⮚A forward is a derivative contract between two
parties to buy or to sell an asset at a specified future
time at a price that prevails on the date of
purchase/sales
🞂​Swap is a future derivative contract in which two parties
agree to exchange their cash flows/payments. They
agree to mutually exchange the Interest rates of
payments based upon a notional/imaginary principal
amount.
🞂​ Note:
• Two parties before the agreement may be making
payments to their respective financial institutions
• The interest rates may cost too much. So they decide
to exchange each others’ payments to reduce cost.
• Cash flows are received by the parties and not the
financial institutions.
• Only interest payments are swapped. Principals are not
swapped. That is why payments in swaps are based upon an
imaginary principal amount.
🞂​ ÏoíwaídRatc Agíccmc⭲ts (ÏRA's) aíc similaí to
foíwaíd co⭲tíacts wkcíc o⭲c paítQ agíccs to
boííow oí lc⭲d a ccítai⭲ amo"⭲t or mo⭲cQ at a
rixcd íatc o⭲ a píc-spcciricd r"t"íc datc
🞂​Options are derivatives that give the right, (not
obligation/compulsion), to the holder of the instrument to
buy or sell the underlying asset at a future date at a pre
determined price specified called as strike price.
🞂​Thevalue of the Option is calculated as: Strike price (-)
Current Market price of asset
🞂​CallOption: The Option which gives the right to buy the
asset
🞂​Put Option: The Option which gives the right to sell the
asset
🞂​ Strike price: it is the minimum price at which the
underlying asset of an Option contract should be
bought/sold. It is pre determined
🞂​ Examples:

1) Strike price=100. Market price=50

Option price=50. Buying the option contract would
be a loss

2) Strike Price=100.Market price=125.Option

price=25. Buying the option contract would be
profitable
🞂​ Commodity derivatives are investment tools that
allow investors to profit from
certain commodities without possessing
them.
🞂​ The buyer of a derivatives contract buys the right to
exchange a commodity for a certain price at a future
date. The buyer may be buying or selling the
commodity.
🞂​Eg: Bullions, Base metals, Cereals etc.,
🞂​ Currencyderivatives are contracts to buy or sell
currencies at a future date.
🞂​ The major types of currency derivatives are forward
contracts, futures contracts, options and swaps.
🞂​ The currency derivatives trading segment in India is
dominated by importers, exporters, central banks,
banks and corporations.
🞂​ A depositary receipt (DR) is a negotiable certificate
issued by a bank representing shares in a foreign
company traded on a local stock exchange.
🞂​ The depositary receipt gives investors the
opportunity to hold shares in the equity of foreign
countries and gives them an alternative to trading
on an international market.
🞂​IDR, GDR,ADR etc.,
🞂​ Singapore Diamond Investment Exchange (SDiX),
headquartered in Singapore, is the world’s first commodity
exchange in physically settled diamond
🞂​ It utilizes proven exchange technology to create a new
marketplace for the global diamond trade. By bringing
commodity exchange technology to the
🞂​ Diamond market, SDiX is creating a true price discovery
mechanism with increased liquidity, allowing diamonds to
be traded as a commodity.
🞂​ Repository in India
🞂​ Dematerialisation
🞂​ Badla
🞂​ Increase in Mutual Funds
🞂​ Growth in Credit Rating
🞂​ Masala Bonds: denominated in Indian rupee
(2014)
🞂​
https://tradebrains.in/10-largest-stock- exchanges-in-the- w
orld/#:~:text=National%20Stock%20Exchange% 20of%20I
ndia,%2C%20located%20in%20Mumbai% 2C%20Mahara
shtra.&text=NSE's%20flagship%20i ndex%2C%20the%20
NIFTY,of%20the%20Indian%2 0capital%20market
.
🞂​
https://street-finance.com/top-10-commodity- exchanges-of
-the-world/