INTRODUCTION

The India Capital market consists of many financial institutes, Banks, Stock Markets etc. The capital Market is being divided between two parts: Primary Market Secondary market. The stock exchange comes in the secondary market & these exchanges are performing various functions. Stock exchange performs these functions with the help of middleman called the intermediaries. These intermediates act as a link in between buyer & seller on the stock exchange. Without the presence of these intermediaries it is impossible to trade on the stock exchange. Stock exchange is trading in share, securities, gilt-edge securities, bonds, mutual fund & commodities. There are 23 stock exchanges in India like BSE, NSE, Bangalore stock exchange, Cochin stock exchange, Delhi stock exchange, kolkatta stock exchange & many others. The intermediaries in the capital market are: Merchant Banker Their function & working are very crucial to the operating in the primary market. They are the issue manager, lead manager, co-manager & are responsible to the company & SEBI.

Registrar:

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Their function are next to merchant banker in importance. They collect the application for the new issue, their cheques, stock invests, classify & computerize them. They also make allotment in consultation with the regional stock exchange regarding norms in the event of over subscription & before a public representative.
Collecting Banker:

Collecting banker collects the subscription in cash, cheques, stock invest, ect. Underwriter: Underwriter mar be financial institution, banks, mutual fund, ect., & undertake to mobilise the subscription up to some limit. Falling to secure subscription as agreed to, they have to make good the shortfalls by their own subscription. Stock Market Intermediaries:
Client Broker:

They are doing simple broking between buyer & seller & earning only brokerage for their service from the client. Floor Broker: These are authorized clerks & sub-brokers who enter the trading floor & execute the orders for the client or other member.

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 Jobber & Market Maker: Those members who are ready to buy & sell simultaneously in selected scrips, offering on the trade floor & earning profit through the margin between buying & selling rate. Market Maker undertakes this work compulsorily for some companies & bank finance in available to them.
Arbitrager:

Those who do inter market deals for a profit through difference in price as between markets say buy in Kolkatta & sell in Mumbai & vice versa. Badla Financiers: Those members who finance carry forward deals in specified group (A group) for a return in the form of interest, called Badla Rate. They lend money or shares for the brokers who are over bought or over sold respectively at the time of settlement. Badla in carry forward facility from one settlement to another without taking a delivery up to a maximum period of 90 days at a time.

Introduction To Bombay Stock Exchange The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as "The Native Share and Stock Brokers Association". It is the oldest one in Asia, even older than the Tokyo Stock Exchange, which was established in 1878. It is a voluntary non-profit making Association of Persons (AOP) and is currently engaged in the process of converting itself into demutualised and corporate entity. It has evolved over the years into its

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present status as the premier Stock Exchange in the country. It is the first Stock Exchange in the Country to have obtained permanent recognition in 1956 from the Govt. of India under the Securities Contracts (Regulation) Act, 1956.

The Exchange, while providing an efficient and transparent market for trading in securities, debt and derivatives upholds the interests of the investors and ensures redressal of their grievances whether against the companies or its own member-brokers. It also strives to educate and enlighten the investors by conducting investor education programmes and making available to them necessary informative inputs.

A Governing Board having 20 directors is the apex body, which decides the policies and regulates the affairs of the Exchange. The Governing Board consists of 9 elected directors, who are from the broking community (one third of them retire ever year by rotation), three SEBI nominees, six public representatives and an Executive

Director & Chief Executive Officer and a Chief Operating Officer. The Executive Director as the Chief Executive Officer is responsible for the day-to-day administration of the Exchange and the Chief Operating Officer and other Heads of Departments assist him.

The Exchange has inserted new Rule No.126 A in its Rules, Bye-laws & Regulations pertaining to constitution of the Executive Committee of the Exchange. Accordingly, an Executive Committee, consisting of three elected
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directors, three SEBI nominees or public representatives, Executive Director & CEO and Chief Operating Officer has been constituted. The Committee considers judicial & quasi matters in which the Governing Board has powers as an Appellate Authority, matters regarding annulment of transactions, admission, continuance and suspension of member-brokers, declaration of a member-broker as defaulter, norms, procedures and other matters relating to arbitration, fees, deposits, margins and other monies payable by the memberbrokers to the Exchange, etc.

Turnover on the Exchange

The average daily turnover of the Exchange during the financial year 2000-2001 (April-March), was Rs.3984.19 crores and the average number of daily trades was 5.69 lakhs. The average daily turnover of the Exchange in the subsequent two financial years, i.e., 2001-02 & 2002-03, has declined Considerably to Rs. 1248.15 crores and Rs. 1251.29 crores respectively. The average number of daily trades recorded during 2001-02 and 2002-03 numbered 5.17 lakhs and 5.63 lakhs respectively.

The average daily turnover and average number of daily trades during the quarter April-June 2003 were Rs. 1101.05 crores and 5.70 lakhs respectively. The ban on all deferral products like Borrowing & Lending of Securities Scheme (BLESS) and Automated Lending & Borrowing Mechanism (ALBM) in the Indian capital markets by SEBI w.e.f. July 2, 2001, abolition
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of account period settlements, introduction of Compulsory Rolling Settlements in all scrips traded on the Exchanges w.e.f. December 31, 2001, etc. has adversely impacted the liquidity in the market and consequently there is a considerable decline in the average daily turnover at the Exchange as reflected in above statistics. The Stock Exchange, Mumbai Governing Board For The Year 2005 Mr. S. Jambunathan IAS (Retd.) Executive Director & CEO Mr. Rajnikant Patel Mr. Bhanubhai G. Fozdar Mr. Siddharth J. Shah Mr. Prakash R. Kacholia Mr. Alok C. Churiwala Mr. Deven R. Choksey Mr. Balkishan Mohta Mr. Uttam Bagri Mr. Radheyshyam B. Khandelwal Mr. Nagji Keshavji Rita Mr. Jitesh Khosla Joint Secretary, Dept. of Company Affairs, Govt. of India Mr. P.P. Vora Mr. P. K. Banerji Retired IAS Officer Mr. Jagdish Capoor
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Chairman, HDFC Bank Mr. Vijay Mukhi Managing Director, Vijay Mukhi's Computer Institute Mr. Pradip P. Shah Chairman, IndAsia Fund Advisors Private Limited Prof. N. Ravichandran Professor, IIM Ahmedabad

NATIONAL STOCK EXCHANGE LTD. The Organisation: The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country. On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000. Our Mission:
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NSE's mission is setting the agenda for change in the securities markets in India. The NSE was set-up with the main objectives of:

Establishing a nation-wide trading facility for equities, debt instruments and hybrids,

Ensuring equal access to investors all over the country through an appropriate communication network,

Providing a fair, efficient and transparent securities market to investors using electronic trading systems,

Enabling shorter settlement cycles and book entry settlements systems, and

Meeting the current international standards of securities markets.

The standards set by NSE in terms of market practices and technology has become industry benchmarks and is being emulated by other market participants. NSE is more than a mere market facilitator. It's that force which is guiding the industry towards new horizons and greater opportunities. Our Logo: Say NSEs LOGO

The logo of the NSE symbolises a single nationwide securities trading facility ensuring equal and fair access to investors, trading members and issuers all over the country. The initials of the Exchange viz., N, S and E have been etched on the logo and are distinctly visible. The logo symbolises

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use of state of the art information technology and satellite connectivity to bring about the change within the securities industry. The logo symbolises vibrancy and unleashing of creative energy to constantly bring about change through innovation. Promoters: NSE has been promoted by leading financial institutions, banks, insurance companies and other financial intermediaries: Industrial Development Bank of India Limited Industrial Finance Corporation of India Limited Life Insurance Corporation of India State Bank of India ICICI Bank Limited IL & FS Trust Company Limited Stock Holding Corporation of India Limited SBI Capital Markets Limited The Administrator of the Specified Undertaking of Unit Trust of India Bank of Baroda Canara Bank

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 General Insurance Corporation of India National Insurance Company Limited The New India Assurance Company Limited The Oriental Insurance Company Limited United India Insurance Company Limited Punjab National Bank Oriental Bank of Commerce Corporation Bank Indian Bank Union Bank of India

Corporate Structure NSE is one of the first de-mutualised stock exchanges in the country, where the ownership and management of the Exchange is completely divorced from the right to trade on it. Though the impetus for its establishment came from policy makers in the country, it has been set up as a public limited company, owned by the leading institutional investors in the country. From day one, NSE has adopted the form of a demutualised exchange - the ownership, management and trading is in the hands of three different sets of

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people. NSE is owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries and is managed by professionals, who do not directly or indirectly trade on the Exchange. This has completely eliminated any conflict of interest and helped NSE in aggressively pursuing policies and practices within a public interest framework. The NSE model however, does not preclude, but in fact accommodates involvement, support and contribution of trading members in a variety of ways. Its Board comprises of senior executives from promoter institutions, eminent professionals in the fields of law, economics, accountancy, finance, taxation, etc, public representatives, nominees of SEBI and one full time executive of the Exchange. While the Board deals with broad policy issues, decisions relating to market operations are delegated by the Board to various committees constituted by it. Such committee includes representatives from trading members, professionals, the public and the management. The day-to-day management of the Exchange is delegated to the Managing Director who is supported by a team of professional staff. Our Technology: Across the globe, developments in information, communication and network technologies have created paradigm shifts in the securities market operations. Technology has enabled organizations to build new sources of competitive advantage, bring about innovations in products and services, and to provide for new business opportunities. Stock exchanges all over the

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world have realised the potential of IT and have moved over to electronic trading systems, which are cheaper, have wider reach and provide a better mechanism for trade and post trade execution. NSE believes that technology will continue to provide the necessary impetus for the organisation to retain its competitive edge and ensure timeliness and satisfaction in customer service. In recognition of the fact that technology will continue to redefine the shape of the securities industry, NSE stresses on innovation and sustained investment in technology to remain ahead of competition. NSE's IT set-up is the largest by any company in India. It uses satellite communication technology to energies participation from around 400 cities spread all over the country. In the recent past, capacity enhancement measures were taken up in regard to the trading systems so as to effectively meet the requirements of increased users and associated trading loads. With upgradation of trading hardware, NSE can handle up to 1 million trades per day. NSE has also put in place NIBIS (NSE's Internet Based Information System) for on-line real-time dissemination of trading information over the Internet. In order to capitalise on in-house expertise in technology, NSE set up a separate company, NSE.IT, in October 1999. This is expected to provide a platform for taking up new IT assignments both within and outside India and attaining global exposure. NEAT is a state-of-the-art client server based application. At the server end, all trading information is stored in an in-memory database to achieve minimum response time and maximum system availability for users. The trading server software runs on a fault tolerant STRATUS main-frame computer while the client software runs under Windows on PCs.

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The telecommunications network uses X.25 protocol and is the backbone of the automated trading system. Each trading member trades on the NSE with other members through a PC located in the trading member's office, anywhere in India. The trading members on the Wholesale Debt Market segment are linked to the central computer at the NSE through dedicated 64Kbps leased lines and VSAT terminals. These leased lines are multiplexed using dedicated 2 Mbps, optical-fiber links. The WDM participants connect to the trading system through dial-up links.

The Exchange uses powerful RISC -based UNIX servers, procured from Digital and HP for the back office processing. The latest software platforms like ORACLE 7 RDBMS, GUPTA - SQL/ORACLE FORMS 4.5 Front Ends, etc. have been used for the Exchange applications. The Exchange currently manages its data centre operations, system and database administration, design and development of in-house systems and design and implementation of telecommunication solutions. NSE is one of the largest interactive VSAT based stock exchanges in the world. Today it supports more than 3000 VSATs and is expected to grow to more than 4000 VSATs in the next year. The NSE- network is the largest private wide area network in the country and the first extended C- Band VSAT network in the world. Currently more than 9000 users are trading on the real time-online NSE application. There are over 15 large computer systems, which include non-stop fault-tolerant computers and high-end UNIX servers, operational under one roof to support the NSE applications.

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This coupled with the nation wide VSAT network makes NSE the country's largest Information Technology user.

In an ongoing effort to improve NSE's infrastructure, a corporate network has been implemented, connecting all the offices at Mumbai, Delhi, Calcutta and Chennai. This corporate network enables speedy inter-office communications and data and voice connectivity between offices. In keeping with the current trend, NSE has gone online on the Internet. Apart from having a 2mbps link to VSNL and our own domain for internal browsing and e-mail purposes, we have also set up our own Web site. Currently, NSE is displaying its live stock quotes on the web site (www.nseindia.com), which are updated online.

BOARD OF DIRECTORS OF NSE: Mr. S. B. Mathur Mr. Ravi Narain Ms. Chitra Ramkrishna Mr. S. P. Chhajed Mr. R. P. Chitale Mr. Indrajit Gupta Mr. N.S. Kannan Mr. S. H. Khan -do-do-doChairman Managing Director Deputy Managing Director Director -do-

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Mr. A. P. Kurian Mr. Anand G. Mahindra Mr. Y. H. Malegam Prof. (Dr.) K.R.S.Murthy Mr. Ravi Parthasarathy Dr. R. H. Patil Mr. Justice M.L. Pendse (Retd.) Mr. M. Raghavendra Mr. M. Raghavendra Mr. R. N. Bhardwaj -do-do-do-

-do-

-do-

-do-do-

-do-do-do-

Stock Exchanges in India: Totally there are 24 Stock Exchanges in India (Capital Stock Exchange is yet to start its function) Some of them are like this: 1. National Stock Exchange 2. Bombay Stock Exchange 3. Bangalore Stock Exchange 4. Delhi Stock Exchange 5. Vadora Stock Exchange 6. Kolkatta Stock Exchange

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7. Cochin stock exchange 8. Pune stock Exchange 9. Chennai Stock Exchange 10. Jaipur Stock Exchange

The geographical location of all the stock exchanges is shown below

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Stock market index

A stock Market Index is a Market. It should capture the behaviour of the overall equity market. Movements of the index should represent the returns obtained by "typical" portfolios in the country.
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The basic idea in an index Every stock price moves for two possible reasons: news about the company (e.g. a product launch, or the closure of a factory, etc.) or news about the country (e.g. nuclear bombs, or a budget announcement, etc.). The job of an index is to purely capture the second part, the movements of the stock market as a whole (i.e. news about the country). This is achieved by averaging. Each stock contains a mixture of these two elements - stock news and index news. When we take an average of returns on many stocks, the individual stock news tends to cancel out. On any one day, there would be good stock-specific news for a few companies and bad stock-specific news for others. In a good index, these will cancel out, and the only thing left will be news that is common to all stocks. The news that is common to all stocks is news about India. That is what the index will capture.

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Importance of Index Traditionally, indices have been used as information sources. By looking at an index we know how the market is faring. This information aspect also figures in myriad applications of stock market indices in economic research. This is particularly valuable when an index reflects highly upto-date information (a central issue which is discussed in detail ahead) and the portfolio of an investor contains illiquid securities - in this case, the index is a lead indicator of how the overall portfolio will fare. In recent years, indices have come to the fore owing to direct applications in finance, in the form of index funds and index derivatives. Index funds are funds which passively `invest in the index'. Index derivatives allow people to cheaply alter their risk exposure to an index (this is called hedging) and to implement forecasts about index movements (this is called speculation). Hedging using index derivatives has become a central part of risk management in the modern economy. These applications are now a multi-trillion dollar industry worldwide, and they are critically linked up to market indices. Finally, indices serve as a benchmark for measuring the performance of fund managers. An allequity fund should obtain returns like the overall stock market index. A 50:50 debt: equity fund should obtain returns close to those obtained by an investment of 50% in the index and 50% in fixed income. A wellspecified relationship between an investor and a fund manager should explicitly define the benchmark against which the fund manager will be compared, and in what fashion. BSE Sensex:

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BSE-SENSEX, short form of the BSE-Sensitive Index, is a "Market Capitalization-Weighted" index of 30 stocks representing a sample of large, well-established and financially sound companies. It is the oldest index in India and has acquired a unique place in the collective consciousness of investors. The index is widely used to measure the performance of the Indian stock markets. BSE-SENSEX is considered to be the pulse of the Indian stock markets as it represents the underlying universe of listed stocks at The Stock Exchange, Mumbai. Further, as the oldest index of the Indian Stock market, it provides time series data over a fairly long period of time (since 1978-79). Over the years, BSE-SENSEX has become one of the most prominent brands in the country S&P CNX Nifty; S&P CNX Nifty is a well-diversified 50 stock index accounting for 23 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds. S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialised company focused upon the index as a core product. IISL have a consulting and licensing agreement with Standard & Poor's (S&P), who are world leaders in index services.

The average total traded value for the last six months of all Nifty stocks is approximately 58% of the traded value of all stocks on the NSE

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Nifty stocks represent about 60% of the total market capitalization as on March 31, 2005. Impact cost of the S&P CNX Nifty for a portfolio size of Rs.5 million is 0.07% S&P CNX Nifty is professionally maintained and is ideal for derivatives trading

The ups and downs of an index: They reflect the changing expectations of the stock market about future dividends of India's corporate sector. When the index goes up, it is because the stock market thinks that the prospective dividends in the future will be better than previously thought. When prospects of dividends in the future become pessimistic, the index drops. The ideal index gives us instant-toinstant readings about how the stock market perceives the future of India's corporate sector.

Kinds of indices exist: The most important type of market index is the broad-market index, consisting of the large, liquid stocks of the country. In most countries, a single major index dominates benchmarking, index funds, index derivatives and research applications. In addition, more specialised indices often find interesting applications. In India, we have seen situations where a dedicated industry fund uses an industry index as a benchmark. In India, where clear

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categories of ownership groups exist, it becomes interesting to examine the performance of classes of companies sorted by ownership group.

GEERAK MARKETING, COMPANY OVERVIEW

About The Founder Mr. Nanalal Karva born in the year 1958 & completed his schooling at Dharwad, he completed his B.Com from J G College of Commerce, Hubli, after completion of graduation, he went to Mumbai for gaining experience & served for professionally managed concerns, private companies, for 4 years, which helped him to bring professional approach to his organisation. After gaining working experience at Mumbai, he went abroad i.e. to Muscat & Kuwait for 3 years & returned to Dharwad during 1985. Company Profile Mr.Nanalal Karva started Geerak Marketing, an investment consultancy firm in the year 1985. This firm was established with the view to bring the people of Northern part of Karnataka in the main stream of investors at national level. Since its establishment the firm is continuously engaged in serving the investors. In the given scenario it will be much appropriate to say that GEERAK is the first organization that has educated and introduced the people of this part of Karnataka to the capital market. Geerak Marketing was the first incorporated as a private Limited Company on 16th June 1992 and subsequently converted into a public Limited

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Company on 25th October1995 and was named as Geerak Marketing Stock and Shares Broker Limited (GMSSBL). Mr. Nanalal Karva and his family hold majority of the shares. The present Net Worth of the company stands around Rs. 54 lakhs. GMSSBL has taken over all the activities of Geerak Marketing, which was in existence since 1985. Ultimately GMSSBL has become the Flagship Company of GEERAK GROUP to serve the investors. Since its inception in the year 1985, the firm has grown to reach immense heights. It has withstood all odds in the market and has emerged as a true leader in the bargain. GEERAK is widely recognized as a trustworthy organization and has been successful in satisfying its clients interests. SCOPE OF ACTIVITIES: The scope of activities for Geerak has been: Stock and Shares broking as sub-broker of National Stock Exchange (NSE). Bombay Stock exchange (BSE). Investment advisory service for: Resident Indians. Non-Resident Indians. Mobilising the savings of the people towards Corporate.

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Establishment of service centers at semi-urban and rural areas to meet the investors needs. Depository services which are being offered through: Nirmal Bang securities Private Limited, Mumbai. Peninsular Capital Market limited, Cochin. Stock Holding Corporation of India limited, Hubli. Educating in Futures and Options. Investment related other diversified services provided by Geerak: New issue forms, applications for bonds, debentures and fixed deposits. Investment in mutual Fund of UTI, Alliance, Kothari, Zurich, Kotak Mahindra, LIC, GIC, Cholamandala etc. Investment in taxfree bonds. Investment of long term gains under section 54 EC in the prescribed infrastructure bonds (as of NHAI) Some Other Services provided by Geerak: Information regarding what shares to buy/sell, when to buy/sell and what are the market conditions.

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Technical Analysis and arriving the trends in the market of index and individual scrip. Arranging investors meeting to provide information on the day-to-day changes in the stock market and investment related activities. Arrangement of pre and post Budget meetings for the investors. Transfer of shares and transmission of Shares. GEERAK BRANCHES: Following are the branches of Geerak Marketing Ltd. Dharwad: #3, 1st Floor, Geeta complex, P B Road, Dharwad Belgaum: 9/10, 1st Floor, Biligi Plaza College Road, Belgaum Haveri: Banashankari Complex Vidyanagar, P B Road, Haveri Gadag: #6, Siddhhalingeshwar Complex, Station Road, Gadag Gulbarga: O/o Balaji Traders #20, Pal Complex Near City Bus stand Super Market, Gulbarga Gajendragad: 1st Floor, Natraj Hotel Building, Kalkaeshwar Circle Gajendragad

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Panvel (Mumbai): O/o Shri Balaji Investment #8, Shree Shayya Pride, Plot No-155, MCCH Society, Panvel, Dist. Raigad Ranebennur: C/o Siddheshwar Enterprise, P B Road, Near Forest Office, Ranebennur Settu Securities, Hubli (Station Road): 49, Shri Laxmi Balakrishna Square, Station Road, Hubli Sindhnur Geerak marketing, A newly branch started in Sindhnur, The major services provided by these branches are trading in Futures and Options, Buying and Selling of shares through national Stock Exchange and Bombay Stock Exchange. All the branches are fully controlled by the Head Office at Hubli. In the administrator server (situated at the H.O) the trading limits for each of the branches and for the clients trading are defined. Further every transaction that takes place in these branches can be monitored from the head office; the whole system is controlled with the help of the software called ODIN (Open Dealer Integrated Network) developed by financial technologies (India) ltd. At the end of the day the contract notes for the transactions executed on the behalf of the clients are also issued from Head Office. Payments from clients received at the branches are deposited at the designated Bank account, and the payment for the Clients are Made from the Head office.

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Customer Profile: The clients base of Geerak includes bank employees, business people, retired persons, government employees, teachers and professors. Here some speculate while some others take up delivery based trading. For few their objective remains investing their surplus cash while some others enjoy hedging, many clients also invest in Mutual funds, Company deposits and still some others invest their money in Debentures of various companies. Brokerage charges: The brokerage charged by GEERAK varies from 0.05% to 0.205 for trading purposes and from 0.25% to 0.75% as delivery charges.

Topic:

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Functioning of Capital Market (stock exchange) & Role of Intermediaries in Capital Market

Objective: Getting an in-depth knowledge of the working of the capital market with special reference to the stock exchange and understanding the role of intermediaries in capital market. Sub-Objectives: Getting the over view of the Capital Market (Primary & Secondary Market).
To study about the settlement procedures in the stock exchanges.

To study about the intermediaries, their functioning & importance of

their presence in the capital market. To study about the Auction Trading in the Stock Exchange.

STOCK EXCHANGE ONLINE TRADING:

The trading on stock exchange in India used to take place through open outcry without use of information technology for immediate matching or

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recording of trades. This was time consuming & inefficient. These imposed limits on trading volumes & efficiency. In order to provide efficiency, liquidity & transferency, NSE introduced a nation-wide on-line fullyautomated screen based trading system (SBTS) where a member can punch into the computer quantities of securities & the price at which he likes to transact & the transaction is executed as son as it finds a matching sales or buy order from a counter party. SBTS electronically matches order on a strict price/time priority & hence cut down on time. Cost & times or, as well as on fraud resulting in improving operating efficiency NSE is the first Stock Exchange to introduce screen based trading system in India. Advantages of SBTS It allows to faster incorporation of price sensitive information into prevailing price. It allows the market participant to trade from any where in the world. Providing equal access to everybody. Improving the depth & liquidity of the market. It also provides a perfect Audit Trial. Market Timings; Trading on the equities segment takes place on all days of the week (except Saturdays and Sundays and holidays declared by the Exchange in advance). The market timings of the equities segment are:

Normal Market Open : 09:55 hours

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Normal Market Close : 15:30 hours The Closing Session is held between 15.50 hours and 16.00 hours Limited Physical Market Open: 09:55 hours Limited Physical Market Close: 15:30 hours

Market Segments:
The Exchange operates the following sub-segments in the Equities segment:

Limited Physical Market Institutional Segment Trade for Trade Segment

Limited Physical Market: Pursuant to the directive of SEBI to provide an exit route for small investors holding physical shares in securities mandated for compulsory damaterialised settlement, the Exchange has provided a facility for such trading in physical shares not exceeding 500 shares. This market segment is referred to as 'Limited Physical Market' (small window). The Limited Physical Market was introduced on June 7, 1999.

Institutional Segment: The Reserve Bank of India had vide a press release on October 21, 1999, clarified that inter-foreign-institutional-investor (inter-FII) transactions do not require prior approval or post-facto confirmation of the Reserve Bank of
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India, since such transactions do not affect the percentage of overall FII holdings in Indian companies. (Inter FII transactions are however not permitted in securities where the FII holdings have already crossed the overall limit due to any reason).

To facilitate execution of such Inter-Institutional deals in companies where the cut-off limit of FII investment has been reached, the Exchange introduced a new market segment on December 27, 1999.

The securities where FII investors and FII holding has reached the cut-off limit as specified by RBI (2% lower than the ceiling specified by RBI) from time to time would be available for trading in this market type for exclusive selling by FII clients. The cut off limits for companies with 24% ceiling is 22%, for companies with 30% ceiling, is 28% and for companies with 40% ceiling is 38%. Similarly, the cut off limit for public sector banks (including State Bank of India) is 18% whose ceiling is 20%. The list of securities eligible / become ineligible for trading in this market type would be notified to members from time to time. Trade for Trade Segment: Trading in this segment is available only for the securities

Which have not established connectivity with both the depositories as per SEBI directive. The list of these securities is notified by SEBI from time to time. On account of surveillance action

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Securities Available for Trading: The Capital Market (Equities) segment of NSE facilitates trading in the following instruments: A. Shares

Equity Shares Preference Shares

B. Debentures

Partly Convertible Debentures Fully Convertible Debentures Non Convertible Debentures Warrants / Coupons / Secured Premium Notes/ other Hybrids Bonds

C. Units of Mutual Funds Trading System: NSE operates on the 'National Exchange for Automated Trading' (NEAT) system & BSE operates on the Bombay Stock Exchange Online Trading System (BOLT) a fully automated screen based trading system, which adopts the principle of an order driven market. NSE & BSE consciously opted in favour of an order driven system as opposed to a quote driven system. This has helped reduce jobbing spreads not only on NSE & BSE but in other exchanges as well, thus reducing transaction costs.

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Types of Trading: Basket Trading: The purpose of basket trading is to provide NEAT user with a facility to create offline order file for a selected portfolio. On inputting the values, the orders are created for the selected portfolio of securities according to the ratio of their market capitalisation. All the order generated through the offline order file are priced at the available market price. Quantity of shares of a particular security in portfolio are calculated as under: No. of shares of a security on portfolio = Amount multiplied by Issued Capital for the Security divided by Current Portfolio Capitalisation.

Where: Current Portfolio Capitalisation = Summation [Last Traded price (previous close if not traded) * No. Of issued shares] Index Trading: The purpose of index trading is to provide NEAT users with a facility of buying & selling of indices, in terms of security that comprise the index. Currently, the facility is only for NIFTY security. The users have to specify the amount, and other inputs that are sent to the host, and the host generates the orders. The index trading provide user the choice of gaining with the rise/decline in index values either by buying or selling them. The buying & selling of

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indices are simulated by entering orders in securities in proportion to the composition of the index. Quantity of shares of a particular security of NIFTY is calculated as under: No. Of shares of a security in index = Amount * Issued Capital for the security divided by Current Market Capitalisation of the index. Where, Current Market Capitalisation of index = Summation [last traded price (previous close if not traded) * No. Of Issued Shares]

Insider Trading: It is a trading done on the basis of inside information, which is not available to general public. The price sensitive information is any information, which if published, is likely to materially affect the price of the securities of a company. Such information may relate to the financial results of the company, intended declaration of dividend, issue of securities or buy back of securities, amalgamation, merger, takeover etc. Insider trading is prohibited & is considered an offence. The SEBI (Prohibition of Trading) Regulation Act, 1992, prohibits the insider trading. SEBI appoints an Adjudication Officer to make investigation into insider trading & if any body found guilty, then he impose monetary penalty. Short Sale:

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It is a kind of trading where the market participant sells the shares (without having possessing) with an expectation that market will go down, once the market goes down, he purchases the shares and makes his position clear.

Market Types: The NEAT system has four types of market. They are: Normal Market: All orders which are of regular lot size or multiples thereof are traded in the Normal Market. For shares that are traded in the compulsory damaterialised mode the market lot of these shares is one. Normal market consists of various book types wherein orders are segregated as Regular lot orders, Special Term orders, Negotiated Trade Orders and Stop Loss orders depending Odd Lot Market: on their order attributes.

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All orders whose order size is less than the regular lot size are traded in the odd-lot market. An order is called an odd lot order if the order size is less than regular lot size. These orders do not have any special terms attributes attached to them. In an odd-lot market, both the price and quantity of both the orders (buy and sell) should exactly match for the trade to take place. Currently the odd lot market facility is used for the Limited Physical Market as per the SEBI directives.

Spot Market: Spot orders are similar to the normal market orders except that spot orders have different settlement periods vis--vis normal market. These orders do not have any special terms attributes attached to them. Currently the Spot Market is not in use. Order Books: The NSE trading system provides complete flexibility to members in the kinds of orders that can be placed by them. Orders are first numbered and time-stamped on receipt and then immediately processed for potential match. Every order has a distinctive order number and a unique time stamp on it. If a match is not found, then the orders are stored in different 'books'. Orders are stored in price-time priority in various books in the following sequence: -Best Price -Within Price, by time priority.
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Price priority means that if two orders are entered into the system, the order having the best price gets the higher priority. Time priority means if two orders having the same price are entered, the order that is entered first gets the higher priority. The Equities segment has following types of books: Regular Lot Book; The Regular Lot Book contains all regular lot orders that have none of the following attributes attached to them. - All or None (AON) - Minimum Fill (MF) - Stop Loss (SL) Special Terms Book; The Special Terms book contains all orders that have either of the following terms attached: - All or None (AON) - Minimum Fill (MF) Negotiated Trade Book; The Negotiated Trade book contains all negotiated order entries captured by the system before they have been matched against their counter party trade entries. These entries are matched with identical counter party entries only.
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It is to be noted that these entries contain a counter party code in addition to other order details. Stop-Loss Book; Stop Loss orders are stored in this book till the trigger price specified in the order is reached or surpassed. When the trigger price is reached or surpassed, the order is released in the Regular lot book.

The stop loss condition is met under the following circumstances: Sell order - A sell order in the Stop Loss book gets triggered when the last traded price in the normal market reaches or falls below the trigger price of the order. Buy order - A buy order in the Stop Loss book gets triggered when the last traded price in the normal market reaches or exceeds the trigger price of the order. Odd Lot Book: The Odd lot book contains all odd lot orders (orders with quantity less than marketable lot) in the system. The system attempts to match an active odd lot order against passive orders in the book. Currently, pursuant to a SEBI directive, the Odd Lot Market is being used for orders that have quantity less than or equal to 500 viz. the Limited Physical Market. Spot Book; The Spot lot book contains all spot orders (orders having only the settlement period different) in the system. The system attempts to match an active spot
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lot order against the passive orders in the book. Currently the Spot Market book type is not in use. Auction Book; This book contains orders that are entered for all auctions. The matching process for auction orders in this book is initiated only at the end of the solicitor period.

Order Matching Rules: The best buy order is matched with the best sell order. An order may match partially with another order resulting in multiple trades. For order matching, the best buy order is the one with the highest price and the best sell order is the one with the lowest price. This is because the system views all buy orders available from the point of view of a seller and all sell orders from the point of view of the buyers in the market. So, of all buy orders available in the market at any point of time, a seller would obviously like to sell at the highest possible buy price that is offered. Hence, the best buy order is the order with the highest price and the best sell order is the order with the lowest price.

Members can proactively enter orders in the system, which will be displayed in the system till the full quantity is matched by one or more of counterorders and result into trade(s) or is cancelled by the member. Alternatively, members may be reactive and put in orders that match with existing orders in the system. Orders lying unmatched in the system are 'passive' orders and

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orders that come in to match the existing orders are called 'active' orders. Orders are always matched at the passive order price. This ensures that the earlier orders get priority over the orders that come in later. Order Conditions: A Trading Member can enter various types of orders depending upon his/her requirements. These conditions are broadly classified into three categories: time related conditions, price-related conditions and quantity related conditions. Time Conditions: DAY - A Day order, as the name suggests, is an order which is valid for the day on which it is entered. If the order is not matched during the day, the order gets cancelled automatically at the end of the trading day. GTC - A Good Till Cancelled (GTC) order is an order that remains in the system until the Trading Member cancels it. It will therefore be able to span trading days if it does not get matched. The Exchange notifies the maximum number of days a GTC order can remain in the system from time to time. GTD - A Good Till Days/Date (GTD) order allows the Trading Member to specify the days/date up to which the order should stay in the system. At the end of this period the order will get flushed from the system. Each day/date counted is a calendar day and inclusive of holidays. The days/date counted are inclusive of the day/date on which the order is placed. IOC - An Immediate or Cancel (IOC) order allows a Trading Member to buy or sell a security as soon as the order is released into the market, failing
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which the order will be removed from the market. Partial match is possible for the order, and the unmatched portion of the order is cancelled immediately.

Price Conditions; Limit Price/Order An order that allows the price to be specified while entering the order into the system. Market Price/Order An order to buy or sell securities at the best price obtainable at the time of entering the order. Stop Loss (SL) Price/Order The one that allows the Trading Member to place an order which gets activated only when the market price of the relevant security reaches or crosses a threshold price. Until then the order does not enter the market. A sell order in the Stop Loss book gets triggered when the last traded price in the normal market reaches or falls below the trigger price of the order. A buy order in the Stop Loss book gets triggered when the last traded price in the normal market reaches or exceeds the trigger price of the order. E.g. If for stop loss buy order, the trigger is 93.00, the limit price is 95.00 and the market (last traded) price is 90.00, then this order is released into the system once the market price reaches or exceeds 93.00. This order is added to the regular lot book with time of triggering as the time stamp, as a limit order of 95.00

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Quantity Conditions: Disclosed Quantity (DQ)- An order with a DQ condition allows the Trading Member to disclose only a part of the order quantity to the market. For example, an order of 1000 with a disclosed quantity condition of 200 will mean that 200 is displayed to the market at a time. After this is traded, another 200 is automatically released and so on till the full order is executed. The Exchange may set a minimum disclosed quantity criteria from time to time. MF - Minimum Fill (MF) orders allow the Trading Member to specify the minimum quantity by which an order should be filled. For example, an order of 1000 units with minimum fill 200 will require that each trade be for at least 200 units. In other words there will be a maximum of 5 trades of 200 each or a single trade of 1000. The Exchange may lay down norms of MF from time to time. AON - All or None orders allow a Trading Member to impose the condition that only the full order should be matched against. This may be by way of multiple trades. If the full order is not matched it will stay in the books till matched or cancelled. Trader Workstation: The trader workstation is the terminal from which the member accesses the trading system. Each trader has a unique identification by way of Trading
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Member ID and User ID through which he is able to log on to the system for trading or inquiry purposes. A member can have several user IDs allotted to him by which he can have more than one employee using the system concurrently. The Exchange may also allow a Trading Member to set up a network of dealers in different cities all of whom are provided a connection to the stock exchanges central computer. A Trading Member can define a hierarchy of users of the system with the Corporate Manager at the top followed by the Branch Manager and Dealers. The Trader Workstation screen of the Trading Member is divided into several major windows:

Title Bar Tool Bar Ticker Window Market Watch Window On line Index and Index Inquiry Inquiry Window Snap Quote Order/Trade Window Systems Message Window Supplementary Menu

Title Bar

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The title bar displays the current time, Trading system name and date. Tool Bar A window with different icons which provides quick access to various functions such as Market By Order, Market By Price, Market Movement, Market Inquiry, Auction Inquiry, Snap Quote, Market Watch, Buy order entry, Sell order entry, Order Modification, Order Cancellation, Outstanding Orders, Order Status, Activity Log, Previous Trades, Net Position, Online Backup, Supplementary Menu, Security List and Help. All these functions are also available on the keyboard. Ticker Window The ticker displays information about a trade as and when it takes place. The user has the option to set-up the securities, which appear in the ticker.

Market Watch Window The Market Watch window is the main area of focus for a Trading Member. The purpose of Market Watch is to view market information of pre-selected securities that are of interest to the Trading Member. To monitor various securities, the trading member can set them up by typing the Security Descriptor consisting of a Symbol field and a Series field. Securities can also be set up by invoking the Security List and selecting the securities from the window. The Symbol field incorporates the Company

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name and the Series field captures the segment/instrument type. A third field indicates the market type. For example, Company (Symbol) : ACC Instrument type (Series): EQ Market Type: N For each security in the Market Watch window, market information is dynamically updated on a real time basis. The market information displayed is for the current best price orders available in the regular lot book. For each security, the corporate action indicator (e.g., Ex or cum dividend, interest, rights etc.), the total buy order quantity for the best buy price, best sell price, total sell order quantity for the best sell price, the Last Traded Price (LTP), the last traded price change indicator ('+' if last traded price is better than the previous last traded price and '-' if it is worse) and the no delivery indicators are displayed. If the security is suspended, "SUSPENDED" appears in front of the security. On line Index and Index Inquiry With every trade in a security participating in Index, the user has the information on the current value of the Nifty. This value is displayed at the extreme index right values at hand the time corner of of invoking the this ticker inquiry window. screen. Index Inquiry gives information on Close, Open, High, Low and current

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Inquiry Window In this window, the inquiries such as Market by Order, Market by Price, Previous Trades, Outstanding Orders, Activity Log, Order Status and Market Inquiry can be viewed.

1. Market By Order (MBO) The purpose of Market by Order is to enable the user to view outstanding orders in the trading books in the order of price/time priority. The information is displayed for each order. Stop Loss orders, which are not triggered will not be displayed on the window. Buy orders are displayed on the left side of the window and Sell orders on the right side. The orders are presented in a price/time priority with the "best priced" order at the top. 2. Market by Price (MBP) The purpose of Market By Price is to enable the Trading Member to view aggregate orders waiting in the book at given prices. 3. Previous Trades (PT) The purpose of this window is to provide information to users for their own trade.

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4. Outstanding Orders (OO) The purpose of Outstanding Orders is to enable a Trading Member to view his/her own outstanding buy or sell orders for a security. An outstanding order will be an order that was entered by the user, but is not yet completely traded or cancelled. 5. Activity Log (AL) The Activity Log shows the activities that have been performed on any order of the Trading Member such as whether the order has been traded against fully or partially, it has been modified or has been cancelled. It displays information only of those orders in which some activity has taken place. It does not display orders, which have entered the books but have not been matched (fully or partially) or modified or cancelled. 6. Order Status (OS) Order Status enables the user to look into the status of a specific order. Current status of the order and other order details are displayed. In case the order is traded, the trade details are also displayed. 7. Market Inquiry (MI) Market Inquiry enables the user to view the market statistics like Open, High, Low, Previous close, Last traded price change indicator, Last traded quantity, date and time etc. A user may find inquiry screens like Market

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Movement, Most Active Securities and Net Position useful. These are available in the supplementary menu. 8. Market Movement (MM) The Market Movement screen provides information to the user regarding the movement of a security for the current day. It gives details of the movement of the scrip for a time interval. The details include total buy and sell order quantity value, Open, High, Low, Last traded price etc. 9. Most Active Securities
This screen gives a list of the securities with the highest traded value during the day and the quantity traded for each of them. 10. Net Position

This functionality enables the user to interactively view his net position for all securities in which he has traded. Snap Quote: The Snap Quote feature allows a Trading Member to get instantaneous market information on any desired security. This is normally used for securities that are not already on display in the Market Watch window. The information presented is the same as that of Market Watch window.

Order/Trade Window:

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Order entry mechanisms enable the Trading Member to place orders in the market. The system will request re-confirmation of an order so that the user is cautioned before the order is finally released into the market. Orders once placed on the system can be modified or cancelled till they are matched. Once orders are matched they cannot be modified or cancelled. There is a facility to generate online order/trade confirmation slips as soon as an order is placed or a trading is done. The order confirmation slip contains among other things, order no., security name, price, quantity, order conditions like disclosed or minimum fill quantity etc. The trade confirmation slip contains the order and trade no., date, trade time, price and quantity traded, amount etc. Orders and trades are identified and linked by unique numbers so that the investor can check his order and trade details. Systems Message Window: This window is used to view messages from the Exchange to all specific Trading Members. Supplementary Menu: Some of the supplementary features in the NEAT system are:

On line back up

An on line back up facility is provided which the user can invoke to take a back up of all order and trade related information. There is an option to copy the file to any drive of the computer or on a floppy diskette. Trading members find this convenient in their back office work.

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Off Line Order Entry

A member is able to make an order entry in the batch mode. Computer-to-Computer Link (CTCL) facility: NSE offers a facility to its trading members by which members can use their own trading front-end software in order to trade on the NSE trading system. This facility called Computer-to-Computer Link (CTCL) facility is available only to trading members of NSE.

About the CTCL facility: Trading Members can use their own software running on any suitable hardware/software platform of their choice. This software would be a replacement of the NEAT front-end software that is currently used by members to trade on the NSE trading system. Members can use software customised to meet their specialised needs like provision of on-line trade analysis, risk management tools, integration of back-office operations etc. The dealers of the member may trade using the software remotely through the member's own private network, subject to approvals from Department of Telecommunication etc. as may be required in this regard. CTCL software: Members can procure the CTCL software either from software vendors who are empanelled with NSE or they may develop the software through their own in-house development team or may procure the software from other non-empanelled vendors.
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Internet Based Trading: The Securities & Exchange Board of India (SEBI) approved the report on Internet Trading brought out by the SEBI Committee on Internet Based Trading and Services In January 2000. Internet trading can take place through order routing systems, which will route client orders to exchange trading systems for execution. Thus a client sitting in any part of the country would be able to trade using the Internet as a medium through brokers' Internet trading systems. SEBI-registered brokers can introduce Internet based trading after obtaining permission from respective Stock Exchanges. SEBI has stipulated the minimum conditions to be fulfilled by trading members to start Internet based trading and services, vide their circular no. SMDRP/POLICY/CIR06/2000 dated January 31, 2000. WAP Trading: The SEBI Committee on Internet Based Trading and Services in its meeting held on August 2, 2000 approved the minimum requirements for brokers offering securities trading through wireless medium on Wireless Application Protocol (WAP) platform. SEBI-registered brokers who have been granted permission to provide Internet based trading services can introduce WAP trading after obtaining permission from respective stock exchanges. SEBI has stipulated the minimum conditions to be fulfilled by trading members to start Internet based trading and services, vide their circular no.SMDRP/POLICY/CIR48/2000 dated October 11, 2000.
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WAP trading at NSE: NSE became the first exchange to grant permission to its members for providing WAP trading services. NSE has Custodians. Custodians are clearing members but not trading members. They settle trades on behalf of their clients that are executed through other trading members. A trading member may assign a particular trade to a custodian for settlement. The custodian is required to confirm whether he is going to settle that trade or not. If it confirms the trade, the Clearing Corporation assigns the obligation to the custodian. If the custodian rejects the trade, the obligation is assigned back to the trading member. The following custodians ABN Amro Bank N.V. Citibank N.A. Deutsche Bank A.G. HDFC Bank Ltd. HongKong & Shanghai Banking Corpn. Ltd. ICICI Ltd. IndusInd Bank Ltd. are empanelled with NSCCL:

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Infrastructure Leasing & Financial Services Ltd. Standard Chartered Bank State Bank of India Stock Holding Corporation of India Ltd. anted permission to one of its trading members M/s.Gogia Capital Services Ltd. to provide securities trading through WAP. This is the first WAP enabled online stock trading facility in the country.

The WAP technology has been harnessed jointly by NSE.IT and Bharti Telesoft using Bharti Telesoft's WAP interface and NSE.IT's E-broking products NeatXS/ iXS, leading to convenience of livestock trading for people on the move.

Role of Intermediaries in the Capital Market: The capital Market has been divided in to two parts i.e. Primary Market, Secondary Market, Primary Market Intermediaries: Following are the intermediaries in the primary market,

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Merchant Banker "Merchant Banker" means any person who is engaged in the business of issue management either by making arrangements regarding selling, buying or subscribing to securities as manager, consultant, adviser or rendering corporate advisory service in relation to such issue management; The term Issue is defined as - "issue' means i. ii. Public offer of securities for sale; Sale or purchase of securities or transfer thereof by any other means, by any body corporate or any person on his own behalf or on behalf of the body corporate through a merchant banker; As per Rule No.3 of the aforesaid Rules "No person shall carry on any activity as a merchant banker unless he holds a certificate granted by the Board under the regulations". Merchant Banker is mainly doing the business of collecting the biding forms, cheques, demand drafts ect, from the bidder for the issue. & Submitting it to the issuer of IPO. For doing all these activities he gets commission. Registrar to an Issue: Registrar to an Issue means the person appointed by a body corporate or any person or group of persons to carry on the following i. ii. Collecting applications from investors in respect of an issue; Keeping a proper record of applications and monies received from investors or paid to the seller of the securities. And
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iii.

Assisting body corporate or person or group of persons ina. b. c. Determining the basis of allotment of securities in consultation with the stock exchange; Finalising of the list of persons entitled to allotment of securities; Processing and dispatching allotment letters, refund orders or certificates and other related documents in respect of the issue.

Underwriters:
The words underwriting and Underwriter are defined as under.

Underwriting, means an agreement with or without conditions to subscribe to the securities of a body corporate when the existing shareholders of such body corporate or the public does not subscribe to the securities offered to them. Underwriter means a person, who engages in the business of underwriting of an issue of securities of a body corporate;

As per the prior agreement between the company & the underwriter, an underwriter underwrites those shares that are not subscribed by the general public. For doing this, he gets underwriting commission. Credit Rating Agencies: Credit Rating Agencies to be eligible to operate in India need to be registered with SEBI and comply with provisions of SEBI (Credit Rating Agencies) Regulations, 1999

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As per the aforesaid Regulations the terms of "credit-rating" and "creditrating agency" are defined as under

"Rating" means an opinion regarding securities, expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency and used by the issuer of such securities, to comply with a requirement specified by these regulations; "Credit rating agency" means a body corporate which is engaged in, or proposes to be engaged in, the business of rating of securities offered by way of public or rights issue;

Share Transfer Agent: Share Transfer Agent meansi. Any person, who on behalf of any body corporate maintains the record of holders of securities issued by such body corporate and deals with all matters connected with the transfer and redemption of its securities. ii. A department or division (by whatever name called) of a body corporate performing the activities referred in sub-clause (i) if, at any time the total number of the holders of securities issued exceed one lakh.

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Intermediaries In Secondary Market: Stock Broker: Broker is a member of stock exchange who enters into the contract on behalf of his client to execute the trade. They have two clearly distinguishable functions. The member acts as Broker, that is, as agents for buying & selling securities on behalf of their client & charging a commission on the processed. The member can also act as dealers, that is, as principals for buying & selling securities on their own account for a profit or at a loss. Capital adequacy Norms for Broker: The capital adequacy requirement consists of the following two components, 1) Base minimum capital, 2) Additional/optional capital related to volume of business. Base Minimum Capital: The broker should maintain an absolute minimum of Rs. 5 lakhs as a deposit with the stock exchange. The security deposit kept by members in the exchange forms a part of the base minimum capital; 25 per cent of the base capital is to be maintained in cash with exchange, another 25 per cent remains in the form of long term fixed deposit with a bank on which the stock exchange is a completely unencumbered & unconditional lien, the remaining requirement being in the form of securities with a 30 per cent

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margin. The securities should be in the name of member & are pledged in favour of stock exchange. Additional Capital Related to volume Of Business: The optional or additional capital required form a member should be at any point of time be such that together with the base minimum capital it is not less than 8 per cent of the gross outstanding business in the exchange defined as the aggregate of up-to-date sales & purchase by the memberbroker in all the securities out together. The gross outstanding business of a member at any point of time should not exceed 12.5 times the base capital & additional capital requirements. Duty of Broker Towards Investor: A Broker/sub-broker, in his dealing with the client & the general public, should faithfully execute the order for buying & selling of securities at all the best available price & promptly inform his client about the execution ornon execution of an order & make payment in respect of securities sold & arrange for the prompt deliver of securities purchased. He should issue promptly to his clients; The contract note for the all the transaction entered into by him with his clients, or through his principal agent, Scripwise split the contract note & similarly, bills & receipts of the transaction in the prescribed form. He should not disclose his clients account in front of third person. Sub-Broker:
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The trading members of the Exchange may appoint sub-brokers to act as agents of the concerned trading member for assisting the investors in buying, selling or dealing in securities. The sub-brokers would be affiliated to the trading members and are required to be registered with SEBI. A sub-broker would be allowed to be associated with only one trading member of the Exchange. Trading members desirous of appointing sub-brokers are required to submit the following documents to the Membership Department of the Exchange:

Eligibility: A sub-broker may be an individual, a partnership firm or a corporate. In case of corporate or partnership firm, the directors or partners and in the case of an individual sub-broker applicant, each of them shall comply with the following requirements: They shall not be less than 21 years of age; They shall not have been convicted of any offence involving fraud or dishonesty; They shall have at least passed 12th standard equivalent examination from an institution recognised by the Government; They should not have been debarred by SEBI
The corporate entities applying for sub-brokership shall have a

minimum paid up capital of Rs. 5 Lakh and it shall identify a dominant shareholder who holds a minimum of 51% shares either singly or with the unconditional support of his/her spouse.

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Foreign Broker: The foreign institutional investors (FII) are playing a significant role in the stock market. With a view to helping the FIIs to allow the procedures & to encourage them to invest in India, SEBI has issued a different set of guidelines for foreign broker. Right now there are 29 Foreign Brokers on both NSE & BSE. Other members of stock exchange: As such there are no major distinction but here is a functional classification of members. In Bombay Stock Exchange members are classified as:
1. Commission Broker: A commission Broker executes buys & sells

order of his client against a commission (termed as brokerage) prescribed by the authority. By and large every member acts as commission agents.
2. Floor Broker: A floor broker is officially not attached to other

members. He executes buy & sell orders on behalf on any commission broker & earn a share of the brokerage form the commission broker. Floor broker are now a days very few in number.

3. Taravaniwala or Jobber: a member in addition to being a broker can

also act as a dealer or principal. A jobber is a member who acts as a

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principal, that is, he himself buys & sells stocks. A jobber specialise in stocks located at the same trading post & trades in & put of market for a small difference in price. (For instance: a jobber in Asian Paints can buy Asian Paints shares form a commission broker at Rs. 100 & sell the same to other broker at Rs. 105. The Rs. 5 difference in price will be the jobbers margin. Generally a jobber squares up his position at the end of the day i.e. he does not maintain any outstanding sale or purchase contract at the end of the trading hours.

4. Dealer in non-cleared securities: The principal acts as principal for buying & selling those shares that are not actively traded in the market. Though the buy & sell any volume of shares, the price at which they trade depends on the trading activity of the shares during the transaction. At times, jobber too specialize in trading in inactive a stocks. They receive orders from other members at a price recorded in their books & the orders are executed when business is possible. 5.Arbitrageur: The member buys the shares on one stock exchange & sells it on other stock exchange to get the benefit of price difference. In the case the shares is required to be listed on both the stock exchanges where member in going to do the arbitrage. (For instance, if he L & T shares are quoted at Rs. 422 at the BSE and the same is quoted at Rs. 422 in the NSE, then he buys on BSE & sells

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on NSE, there by making a profit of Rs.2 per share, which is called an arbitrage).

6. Security Dealer: A security dealer is a member who specializes in buying & selling of gilt-edge securities. Only few members are invited to such dealing, due to lack of public interest in such securities. New Membership: Membership of the Exchange is open to all persons desirous of becoming trading members of the Exchange, subject to their meeting certain requirements and criteria as laid down by SEBI and the Exchange. Persons or Institutions desirous of securing admission as Trading Members (Stock Brokers) on the Exchange may apply for any one of the following segment groups available in stock market; WDM segment Eligibility; The following persons are eligible to become trading members, subject to Securities Contract Regulation Act (SCRA), Securities Contract Regulation Rules (SCRR) and other requirements of Securities and Exchange Board of India (SEBI): a. Institutions, including subsidiaries of banks engaged in financial services.

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b. Body Corporates including companies as defined in the Companies Act, 1956. c. A company as defined in the Companies Act, 1956 (1 of 1956), shall also be eligible to be elected as a member of the Exchange a. Such other persons or entities as may be permitted from time to time by RBI / SEBI under the Securities Contracts (Regulations) Rules, 1957. Fees, Deposit & Networth Requirements: Applicants recommended for admission will be required to pay the following fee and deposits: Particulars (Amt.in Rs. Lakhs) Advance annual subscription 1.00 Interest free security deposit 150.00 Annual subscription fee 1.00

New Membership CM and F&O segment: Eligibility The following persons are eligible to seek membership of the Exchange as Trading Members (Brokers): a. Individuals b. Partnership Firms registered under the Indian Partnership Act, 1932

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c. Corporations, Companies or institutions or subsidiaries of such Corporations, Companies or institutions set up for providing financial services d. Such other persons or entities as may be permitted from time to time by RBI / SEBI under the Securities Contracts (Regulations) Rules, 1957. General Eligibility Conditions; Criteria Individual
Minimum age: 21 years Maximum age: 60 AGE years

Members Firm Corporate

(applicable

Minimum age: 21 Minimum age: 21 years (applicable for years partners) Registered Partnership firm for directors) Corporate registered under The Companies Act, 1956 (Indian)

STATUS

Indian Citizen

under Indian Partnership Act, 1932

At least a graduate or Partners should be equivalent qualification EDUCATION equivalent qualification

Two graduate equivalent

Directors or

at least a graduate or should be at least

qualification EXPERIENCE Should have the experience in the capital market related activity BABASAB PATIL Partners should be equivalent qualification Two Directors graduate or equivalent

at least a graduate or should be at least

qualification MINIMUM PAID UP EQUITY CAPITAL Clearing and settlement thereof. Rs.30 lacs

Fees, Deposit & Networth Requirements: Applicants recommended for admission will be required to pay the following fee and deposits: (All figures in Rs. lakhs)
Particulars CM and Segments Trading Additional Clearing Membership of NSCCL (F&O Segment) Interest Free Cash Security Deposit with NSEIL Interest Free Cash Security Deposit with NSCCL Total Interest Free Cash Security Deposit (1+2) Collateral Security BABASAB PATIL 25 25 50 125 25 150 15 25 40 110 110 Total for CM and Trading & Clearing Membership of F&O Segment

Membership of F&O requirements for Segment

Deposit with NSCCL Annual Subscription Charges Advance Minimum Transaction Charges for Futures & Options Segment Networth Requirement 100 300 (100 for selfclearing members in F&O) 300 (100 for self-clearing members in F&O) 1 1 1 1

Deposit for setting up VSAT terminals and operating cost for the VSAT network will be levied separately as per the policy prevailing from time to time.

Capital Market Overview:Primary Market :The securities market has two interdependent & inseparable segments, the new issue (Primary Market) & the stock (Secondary) market. The primary market provides the channel for sale new securities while the secondary market deals in securities already issued. The price signals, which subsume all information about the issuer & his business including associates risk,
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generated in the secondary market, help the primary market in allocation of fund. The issuer of securities issue (create & sell) new securities in the primary market to raise fund for investment and/or to discharge some obligation. They do so either by public issue or by private placement. It is public issue if any body & every body can subscribe for the securities. If the issue is made to selected people, it is called private placement. In terms of the companies Act 1956, an issue becomes public if results in the allotment to more than 50 people. There are two major types of issuer who issues securities. The corporate entities issue mainly debt & equity instruments while the Government issues debt securities. The government & corporate sector raised a total of Rs. 2,52,108/- crore during 2002-03 as against Rs. 2,26,911/- crore during the preceding year. Government raised about two third of the total resources, the central government alone raising nearly Rs. 1,51,126/- crore. Secondary Market:The secondary market enables participant who hold securities to adjust their holdings in response to change in their holdings in response to change in their assessments of risk & return. They also sell securities for cash to meet their liquidity needs. The secondary market has further two components, namely the over-thecounter (OTC) market & the exchange trade market. OTC is different from

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the market place provided by the Over The Counter Exchange of India Limited. OTC market is essentially informal market where trades are negotiated. Most of the trades in government securities are in the TOC market. All the spot trades where securities are traded for immediate delivery & payment take place in the OTC market. The exchange does not provide facility for spot trade in strict sense. Closest to the spot market in the cash market where settlements takes place after some time. Trade taking place over a trading cycle, i.e. a day under rolling settlement, are settled together after a certain time (currently 2 working days) All the 24 stock exchanges in the country provide facility for trading of equities. Nearly 100% of the trades are settled in the demat form. A variant of secondary market is the forward market, where the securities are traded for the future deliver & payment. Pure forward is put side the formal market. The version market is future & options. In futures market, standardized securities are traded for future delivery & settlement. These futures can be on a basket of securities like index or an individual security. In case of options, securities are traded for conditional future delivery. There are two types options: A put option it permits the owner to sell a security to the writer of option at a predetermined price.

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 A call option permits the owner to purchase a security from the writer of the option at a predetermined price.
These options can also be an individual stock or a basket of stock like index.

Two exchanges viz. NSE & BSE provide trading of derivatives of securities. Regulatory Framework: The four main legislations governing the security market are: The SEBI ACT, 1992, which establish SEBI to protect investor & develop & regulate securities market; The Companies Act, 1956, which sets out the transfer of securities, and disclosure to be made in the public issue: The Securities Contract (Regulation) Act, 1956, which provide for regulation of transaction in securities through control over the stock exchange; The Depositories Act, 1996, which provides for electronic maintenance & transfer of ownership of demat securities;

Clearing & Settlement Procedures In The Stock Exchanges.

The clearing & settlement mechanism in Indian security market has witnessed several innovations during the last decade. These include use of the state-of-art information technology, compression of settlement cycle, dematerialization & electronic transfer of securities, securities lending & borrowing, professionalisation of trading members, fine-tuned risk

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management system, emergence of clearing corporations to assume country party risk, though many of these are yet to permeate the whole market. Till recently, the stock exchanges in India were following a system of account period settlement for cash market transaction, except for transactions in a few active securities, which were settled under T+3 rolling settlement. The rolling settlement has now been introduced for all securities. With effect from April 1st, 2003 T+2 rolling settlement has been introduced. The transactions are not settled immediately but after 2 days after the two days. The member receives the fund/securities in accordance with the pay in/pay out schedules notified by the respective stock exchanges. Movement of securities has become almost instantaneous in the damaterialised environment. Two depositories viz. National Securities Depositories Ltd. (NSDL) & Central Depositories Service Ltd. (CSDL) provide electronic transfer of securities & more than 99% of turnover is settled in demat form. The obligation of members is downloaded to the member/custodian by the clearing agency. The members/custodian make available the required securities in their pool account with depository participant by the prescribed pay-in time for securities the depository transfer the securities form the pool account of members/custodian to the settlement account of clearing agency. As per the schedule determined by the clearing agency, the depository transfers the securities on the payout day from the settlement account of clearing agency to the pool account of members/custodians. The pay-in & pay-put of securities is affected on the same day for all settlements.
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Selected banks have been empanelled by clearing agency for electronic transfer of funds. The members are required to maintain accounts with any of these banks. The members are informed electronically of their pay-in obligation of funds. The members make available required fund in their accounts with clearing bank by the prescribed pay-in day. The clearing agency forwards fund obligation file to clearing banks which. In turn, debit the account of member & credit the account of clearing agency. In same cases, the clearing agency runs an electronic file to debit members accounts with clearing banks & credit its own account.

GRAPHICAL PRESENTATION OF CLRAGING HOUSE ACTIVITY.

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Functions of intermediaries & their importance in capital market

There are some basic services offered by the intermediaries in the capital market, those services are as follows; 1) Online buying and selling of the shares though any stock exchange 2) Trading in Futures and Options. The intermediary is acting like a link in between the buyer & seller of the scrips on the stock exchange. He executes the orders of his client through the computer & takes care that the trade is being carried out for best price. He provides all the assistance to his client that is providing the daily information about the stock exchange and ups & downs, which are likely to happen in the market. He advises client that which scrip is to purchase at what time & at what price so that the client is benefited. Value added Services: Apart from providing basic services, it also becomes very important on the part of the sub broker to guide an investor in this changing technological environment. The concept of dematerialisation of shares is relatively new. Further the rolling settlement and T+2 system of settlement has recently being started. Derivative trading is also introduced. To explain to an investor all these New things, a broker/sub broker plays a crucial role. Unless an investor becomes familiar with all these new things, he wont be in a better

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position. Therefore a broker/sub broker doesnt have much option but to guide a common investor by providing value added services. Following is the value added services provided by the broker/sub broker Derivatives trading How to trade in F&O, Trading strategy in F&O, Settlement procedure in F&O, Margin Money required for trading in F&O, Dematerialisation procedure It working, Its advantage, Procedure involved, The scrips which is compulsorily traded in demat form, Different depositories that exist in India, There charges, procedure of delivery ect. Explaining the client about the T+2 system existing in the current market, To guide an investor about the sources from where he can get the market information, Arrangement of pre and post budget meetings for the investors,

Making the client aware about the technical & fundament analysis,
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 Conducting meetings every now and then to explain the investors about the changes in SEBI guidelines and stock exchanges guidelines, From above explanation, we can say that the broker/sub broker is playing an active role in the stock market, he helping the client from all the angels so that the investor doesnt incur any lose by investing in the stock market,

Auction Sale
The Exchange on behalf of trading members for settlement related reasons initiates auctions. The main reason is shortage. There are three types of participants in the auction market:
Initiator: The party who initiates the auction process is called an

initiator.
Competitor: The party who enters on the same side as of the initiator

is called a competitor.
Solicitor: The party who enters on the opposite side as of the initiator

is called a competitor. The trading members can participate in the exchange-initiated auction by entering orders as solicitors. E.g. if the exchange conducts a Buy-in action, the trading members entering sell orders are called solicitors. When the auction starts, the competitor period for that auction starts. Competitor period is the period during which competitor orders entries are allowed. Competitor orders are the orders that compete with the initiators order i.e. if

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the initiators order is a buy order, then all the buy order for that auction other then the initiators order are competitors order. And if the initiators order is a sell order for that auction other than the initiations order are competitors orders. After the competitors period ends, the solicitors period for that that auction starts. Solicitors order is the period during which solicitors order are allowed. Solicitors order are the orders, which are opposite to the initiators order i.e. if the initiators order is a buy order than all the sell order for that auction are solicitors order & if the initiator order is a sell order, then all the buy order for that auction are solicitors order. After solicitors period, order matching takes place. The system calculates trading price for the auction & all possible trade for the auction are generated at the calculated trading price. After this the auction is said to be complete. Competitor period & solicitors period for any auction are set by the exchange.

Entering Auction order:

Auction order entry allows the user to enter orders into auctions that are currently running.

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Auction Order Modification: The user is not allowed to modify any auction orders. Auction Order Cancellation: The user can cancel any solicitors order placed by him in any auction provided the solicitors period for that auction is not over. Auction Order Matching: When the solicitors period for auction is over, auction order matching stars for that auction. During this process, the system calculates the trading price for that auction based on the initiators order entered during the competitor & solicitors period. At present for exchange-initiated auction, the matching takes place at the respective solicitors order price. All auction orders are entered into the auction order book. The rules for matching of auction are similar to that of the regular lot book except for the following point; 1) Auction order matching takes place at the end of for the solicitors period for the auction. 2) Auction matching takes place only across orders belonging to the same auction. 3) All auction trades take place at the auction price.

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Example: Auction is held in TISCO for 5,000 shares. The closing price of TISCO on that day was Rs. 155.0 The last trade price of TISCO on that day was Rs. 150.0 The price of TISCO last Friday was Rs. 151.0 The previous days close price of TISCO was Rs. 160.0 What is the maximum allowable price at which the member can put a sell order in the auction for TISCO? (Assuming that the price band applicable for auction market is +/- 15%). Max price applicable in Auction = previous days close price*price band = 160*1.15 Rs. 184.00

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