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Definition of 'Funds Management'

The management of the cashflow of a financial institution.


The funds manager ensures that the maturity schedules of the deposits coincide with the
demand for loans.
To do this, the manager looks at both the liabilities and the assets which influence the banks
ability to issue credit, In terms of following perspective :-
Personal
Business
Government
Deals with savings, lending, borrowing, investing, spending, budgeting etc.
One of the most important aspects of business management and includes decisions related to
the use and acquisition of funds for the enterprise.


Finance
Personal
Finance
Business
Finance
Public
Finance


Business Capital
Sources
of capital
1st Source
Internal
resources
2nd Source
Bank borrowings
Loans
3rd Source
Securities Market
As a Prime Focus


An UNSECURED LOAN is one that is obtained without the use of property as collateral for
the loan
'Convertible Debenture' A type of loan issued by a company that can be converted
into STOCK
Zero Coupon Bonds are those bond that is issued at a deep discount to its face value
but pays no interest.

Floating rate notes (FRNs) make up a significant component of the U.S. investment-
grade bond MARKET, and they tend to become more popular when interest rates are expected
to increase. Compared to fixed-rate debt instruments, floaters protect investors against a rise in
interest rates.


Securities
Debentures
- Secured or Unsecured
- Convertible or non-
convertible
- Zero coupon bonds
- Fixed or floating rate
bonds
Shares
Equity
Preference

Definition of 'Primary Market'

A market that issues new securities on an exchange. Companies, governments and
other groups obtain financing through debt or equity based securities. Primary markets
are facilitated by underwriting groups, which consist of investment banks that will set a
beginning price range for a given security and then oversee its sale directly to investors.

Also known as "new issue market" (NIM).
Definition of 'Secondary Market'

A market where investors purchase securities or assets from other investors, rather
than from issuing companies themselves. The national exchanges - such as the New
York Stock Exchange and the NASDAQ are secondary markets.

Secondary markets exist for other securities as well, such as when funds, investment
banks, or entities such as Fannie Mae purchase mortgages from issuing lenders. In any
Markets
Primary
Initial Public
Offering (IPO)

Rights Issue

Private Placement
Secondary
Post issue market
OTC
Non-exchange
market
secondary market trade, the cash proceeds go to an investor rather than to the
underlying company/entity directly.
Definition of 'Over-The-Counter Market'

A decentralized market, without a central physical location, where market participants
trade with one another through various communication modes such as the telephone,
email and proprietary electronic trading systems. An over-the-counter (OTC) market and
an exchange market are the two basic ways of organizing financial markets. In an OTC
market, dealers act as market makers by quoting prices at which they will buy and sell a
security or currency. A trade can be executed between two participants in an OTC
market without others being aware of the price at which the transaction was effected. In
general, OTC markets are therefore less transparent than exchanges and are also
subject to fewer regulations.
Participants in various market

Issuers
-
Government
- Companies
Intermediari
es
- Merchant
bankers

- Bankers to the
issue

- Underwriters

- Registrars to the
issue

- Credit rating
agencies

- Brokers

- Custodians

Infrastructur
e
- Stock
Exchange

-
Depositories
Investors
- Individuals

- Mutual
Funds

- Foreign
Institutional
Investors

- Insurance
cos.

- Private
Equity

- Venture
Capital

stock exchange
A stock exchange is a form of exchange which provides services for stock brokers and
traders to buy or sell stocks, bonds, and other securities.
Exchange (organized market):-
An exchange, is a highly organized market where (especially) tradable securities,
commodities, foreign exchange, futures, and options contracts are sold and bought.

The main fundamental difference between options and futures lies in the obligations
they put on their buyers and sellers. An option gives the buyer the right, but not the
obligation to buy (or sell) a certain asset at a specific price at any time during the life of
the contract.

A futures contract gives the buyer the obligation to purchase a specific asset, and the
seller to sell and deliver that asset at a specific future date, unless the holder's position
is closed prior to expiration.

Stock
Exchang
e
Debenture
s
Equity
shares
Preference
shares


50 major stock exchanges in the world

Stock Market Indices
USA
Africa
Asia and Pacific
Canada
Europe
Middle East
South America
International
BBC Global 30 - world stock market index of 30 of the largest companies by stock market value in
Europe, Asia and the Americas.
iShares MSCI EAFE Index (EFA) - provides investment results generally equivalent to publicly
traded securities in the European, Australasian and Far Eastern markets. Maintained by Morgan Stanley
Capital International.
MSCI World - free-float weighted equity index. Index includes stocks of all the developed markets.
Common benchmark for world stock funds.
S&P Global 1200 - global stocks index covering 31 countries and around 70 percent of global market
capitalization.
United States
AMEX Composite - composite value of all of the stocks traded on the American Stock Exchange.
Dow Jones Indexes - leading global index provider.
Dow Jones Industrial Average - one of the most widely quoted of all the market indicators. Consists
of 30 of the largest publicly traded firms in the U.S.
Dow Jones Wilshire 5000 - designed to track the performance of all publicly traded companies based
in the U.S.
NASDAQ Composite - broad market index of all of the common stocks and similar securities traded
on the NASDAQ stock market.
NYSE Composite - covers all common stocks listed on the New York Stock Exchange.
Russell Indexes - leading U.S. equity index family for institutional investors.
Russell 3000 Index - measures the performance of the largest 3000 U.S. companies representing
approximately 98% of the investable U.S. equity market.
S&P 500 - stock market index containing the stocks of 500 Large-Cap corporations. Comprises over
70% of the total market cap of all stocks traded in the U.S. Owned by Standard & Poor's.
Africa
Egypt
Case 30 - index of the Cairo & Alexandria Stock Exchange; includes the top 30 companies in terms of
liquidity and activity.
Morocco
MASI Index - stock index of the Casablanca Stock Exchange.
South Africa
Johannesburg All Share Index
Asia and Pacific
S&P ASIA 50
Australia
All Ordinaries - index of shares listed on the Australian Stock Exchange (ASX).
S&P/ASX 200
China
SSE Composite - index of all listed stocks (A shares and B shares) at Shanghai Stock Exchange.
Hong Kong
Hang Seng Indexes - record daily changes of the largest companies of the Hong Kong stock market
(represent about 67% of capitalization of the Hong Kong Stock Exchange).
India
BSE SENSEX 30 - includes the 30 largest and most actively traded stocks on the Bombay Stock
Exchange.
S&P CNX Nifty - index for 50 large companies on the National Stock Exchange of India.
Indonesia
JSX Composite - index of all stocks traded on the Jakarta Stock Exchange.
Japan
Nikkei 225 - stock market index for the Tokyo Stock Exchange.
Malaysia
FTSE Bursa Malaysia Index
New Zealand
NZX 50
Pakistan
KSE 100 - index acting as a benchmark to compare prices on the Karachi Stock Exchange.
Philippines
PSEi Index - index acting as a benchmark to compare prices on the Karachi Stock Exchange.
Singapore
ST Index
South Korea
KOSPI - index of all common shares on the Korean Stock Exchanges.
Taiwan
TSEC - capitalization-weighted index of all listed common shares traded on the Taiwan Stock Exchange.
Canada
S&P/TSX Composite - index of the stock prices of the largest companies on Toronto Stock Exchange.
Europe
Dow Jones Euro Stoxx 50 - free-float market capitalization-weighted index of 50 Eurozone stocks.
Provides a blue-chip representation of Supersector leaders in the Eurozone.
FTSEurofirst 300 Index - free-float capitalization-weighted price index. Measures the performance of
Europe's largest 300 companies by market capitalization. Covers 70% of Europe's market cap.
OMX Baltic Index - covers stock exchanges in Estonia, Latvia and Lithuania.
OMX Nordic 40 - market value-weighted index of the 40 most-traded stock classes of shares in
Copenhagen, Helsinki, Reykjavik and Stockholm.
S&P Europe 350 - free float market cap weighted index. Covers at least 70% of European equity
market capitalization.
Belgium
BEL20
Czech Republic
PX Index
Denmark
OMX Copenhagen 20
Finland
OMX Helsinki 25
France
CAC 40 - contains 40 stocks selected among the top 100 market capitalisation and the most active
stocks listed on Euronext Paris.
Germany
DAX - measures the performance of the Prime Standards 30 largest German companies in terms of
order book volume and market capitalization.
Ireland
ISEQ 20 - represents the 20 most liquid and largest capped equities quoted on the Irish Stock
Exchange.
Italy
S&P/MIB Index - capitalization weighted index developed by S&P and Borsa Italiana.
Netherlands
AEX Index - index of Euronext Amsterdam, consists of the 25 most active securities in the Netherlands.
Poland
Warsaw Stock Exchange WIG Index
Portugal
PSI-20
Russia
MICEX Index - capital-weighted price index of the 30 major and most liquid Russian stocks traded at
the Moscow Interbank Currency Exchange.
RTS Index - index of 50 Russian stocks traded on the RTS Stock Exchange.
Spain
IBEX 35
Sweden
OMX Stockholm 30 Index
Switzerland
Swiss Market Index (SMI) - includes the twenty largest and most liquid SPI stocks; represents about
85% of the free- float market capitalization of the Swiss equity market.
United Kingdom
FTSE 100 Index (Financial Times Stock Exchange Index) - capitalization-weighted index of the
100 most highly capitalized companies traded on the London Stock Exchange.
Middle East
Israel
TA-25 - index tracks the prices of the shares of the 25 companies with the highest market capitalization
on the Tel-Aviv exchange.
Jordan
ASE Market Capitalization Weighted Index
Oman
MSM 30
South America
iShares S&P Latin America 40 Index (ILF)
Argentina
MERVAL - index of the Buenos Aires Stock Exchange.
Brazil
Bovespa Index - index of about 50 stocks that are traded on the Sao Paulo Stock Exchange.
Mexico
Indice de Precios y Cotizaciones (IPC) - index of 35 stocks traded on the Bolsa Mexicana de
Valores.
Global Ranking of NSE
5
th
largest derivatives Exchange *
2
nd
largest in Index Options
3
rd
largest in Stock Futures
3
rd
largest in Index Futures
4th largest in terms of trades in equity markets
* Note :- A futures exchange or futures market is a central financial
exchange where people can trade standardized futures contracts; that is, a
contract to buy specific quantities of a commodity or financial instrument at
a specified price with delivery set at a specified time in the future. ...*
A brief on Indian financial system







INDIAN
FINANCIAL
SYSTEM
BANKS INSURANCE
MUTUAL
FUNDS
STOCK
MARKETS
DEBT
MARKET


A few terms explained :- FMC : FORWARDS MARKET COMMISSION
The Forward Markets Commission (FMC) is the chief regulator of commodity futures
markets in India. As of July 2014 for the year 2014-15, it regulated Rs 17 trillion worth
of commodity trades in India. It is headquartered in Mumbai and this financial
regulatory agency is overseen by the Ministry of Finance.
SEBI : SECURITIES AND EXCHANGE BOARD OF INDIA

The Preamble of the Securities and Exchange Board of India describes the basic functions of
the Securities and Exchange Board of India as

"...to protect the interests of investors in securities and to promote the
development of, and to regulate the securities market and for matters connected
therewith or incidental thereto"
RBI : RESERVE BANK OF INDIA
IRDA : INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA
Insurance Regulatory and Development Authority (IRDA) is an autonomous apex statutory
body which regulates and develops the insurance industry in India. It was constituted by a
Parliament of India act called Insurance Regulatory and Development Authority Act, 1999 and
duly passed by the Government of India.

The agency operates from its headquarters at Hyderabad, Telangana where it shifted from Delhi
in 2001.
IRDA batted for a hike in the foreign direct investment (FDI) limit to 49 per cent in the insurance
sector from the erstwhile 26 per cent. The FDI limit in insurance sector was raised to 49% in July
2014.

PFRDA : PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY
OF INDIA
Pension Fund Regulatory and Development Authority was established by the
Government of India on 23
rd
August 2003 to promote old age income security by
establishing, developing and regulating pension funds, to protect the interests of subscribers
to schemes of pension funds and for matters connected therewith or incidental thereto.

*As segregated & governed by ministry of corporate affairs & NSE.*

Listing criteria at NSE
Criteria Initial Public Offering Companies Listed on other
Exchanges
Paid up equity capital
(PUEC)/ Market
Capitalisation (MC) / Net
Worth
Definition of 'Paid-Up Capital'

The amount of a company's capital
that has been funded by
shareholders. Paid-up capital can
be less than a company's total
capital because a company may
not issue all of theSHARES that it
has been authorized to sell. Paid-
up capital can also reflect how a
company depends on equity
PUEC Rs. 10 cr. and MC
Rs. 25 cr.

About MC:-

The total
dollar MARKET value of all of
a company's outstanding
shares. MARKETcapitalization
is calculated by multiplying a
company's shares
outstanding by the
current MARKET
PUEC Rs. 10 cr. and MC
Rs. 25 cr. OR
PUEC Rs. 25 cr. OR
MC Rs. 50 cr. OR
The company shall have a
net worth of not less than
Rs. 50 cr. In each of the
preceding 3 financial years.
financing.

Company / Promoters
track record
At least 3 years track record
of either :
a) The applicant
seeking listing OR
b) The promoters /
promoting company
incorporated in or
outside India
At least 3 years track record
of either :
a) The applicant
seeking listing OR
b) The promoters /
promoting company,
incorporated in or
outside India


Criteria Initial Public Offering Companies Listed on other
Exchanges
Divident Record / Net Worth /
Distributable Profits
- Dividend paid in at least 2 out
of last 3 financial years
immediately preceding the year
in which the application has
been made OR
The networth of the applicants
is atleast Rs. 50 cr. OR
The applicant has distributable
profits in at least 2 out of the
last 3 financial years.
Listing - Listed on any other stock
exchange for at least 3 years
OR listed on the exchange
having nationwide trading
terminals for at least one year.
Criteria Initial Public Offering Companies Listed on other
Exchanges
Other requirements a) No disciplinary action
by other stock
exchanges /
regulatory authority
in past 3 years.
b) Satisfactory
redressal mechanism
f) No disciplinary action
by other stock
exchanges / regulatory
authority in past 3
years.
g) Satisfactory redressal
mechanism for investor
for investor
grievances
c) Distribution of
shareholding
d) Details of litigation
record in past 3
years.
e) Track record of
Directors of the
Company
grievances
h) Distribution of
shareholding
i) Details of litigation
record in past 3 years.
j) Track record of
Directors of the
Company
k) Change in control of a
Company / utilisation of
funds raised from public




About the NCFM
(NSEs Certification in Financial Markets)
Launched in July, 1998, taking into account international experience and the
needs of the Indian financial markets.
Fully automated process of testing, assessing, score reporting
Tests the practical knowledge and skills required to operate in the financial
markets.
27 certifications are available under NCFM
Tests conducted across the country in over 85 cities
Widely accepted among market intermediaries, institutions and regulators.

More than 1.5 lakh candidates appear for
the examination every year.
NCFM Modules



Only persons who have passed Capital Market (Dealers) Module of NCFM are
authorized to use the trading system (Cash Segment) of the National Stock Exchange.
Circular CMDM

Similarly persons who have passed Derivative Market (Dealers) Module of NCFM are
authorized to use the trading system (F&O Segment) of the National Stock Exchange.
Circular DMDM







NCFM Circulars
NCFM Certification Circular No.
Capital Market (Dealers) Module Circular No.550
- Membership Department
Derivative Market (Dealers) Module CIRCULAR NO. 309
- Membership Department
NISM Series VI: Depository Operations Certification
Examination

NISM Series I: Currency Derivative Certification
Examination
Circular No. 685
- Membership Department
NISM V A: Mutual Fund Distributors Certification
Examination
NSE/MFS/0004/2002
-MUTUAL FUND SERVICE
NISM VII: Securities Operation & Risk management
Certification
The Gazette of India, Part III, Section
4, dated 10
th
December 2010, Mumbai
NISM II A & II B: Registrars to an Issue..

Capital Market (Dealers) Module reading purpose :-
To understand the capital market trading operations.
To understand the clearing, settlement and risk management processes.
To know about the eligibility criteria for seeking membership.
To learn the other important regulatory aspects.


Derivative Market (Dealers) Module
To learn the basics of the derivatives market
To understand the use of derivative products in speculating, hedging and
arbitraging
To learn the trading, clearing, settlement and risk management in equity
derivatives
To learn the regulatory, accounting and taxation issues relating to equity
derivatives.

Registration, enrollment, payment of fees for NCFM can be done Online :
For more details please log on to :- http://www.nseindia.com/

Highlights Financial Markets Career Opportunities in :
Mutual Funds
Broking Houses
Financial Planners
Financial Analysts
Commodities Markets
Depository Participants
BPOs / IT cos. (finance verticals)
Compliance Officers
Trainers in Financial markets etc.




Afew more terms explained
About Demat Account :-
In India, shares and securities are held electronically in a Dematerialized (or "Demat")
(/dimt/;) account, instead of the investor taking physical possession of certificates. A
Dematerialized account is opened by the investor while registering with an investment
broker (or sub-broker). The Dematerialized account number is quoted for all
transactions to enable electronic settlements of trades to take place. Every shareholder
will have a Dematerialized account for the purpose of transacting shares.
Access to the Dematerialized account requires an internet password and a transaction
password. Transfers or purchases of securities can then be initiated. Purchases and
sales of securities on the Dematerialized account are automatically made once
transactions are confirmed and completed.

About Trading Account:-
1. An account similar to a traditional bank account, holding cash and securities, and is
administered by an investment dealer.

2. An account held at a financial institution and administered by an investment dealer
that the account holder uses to employ a trading strategy rather than a buy-and-hold
investment strategy.


Market timings:-
Trading takes place on all days of the week (except Saturdays and
Sundays and holidays declared by the Exchange)

Normal Market Open : 09:00
Normal Market Close : 15:30

Closing session is held between 15.50 hours and 16.00 hours
Trading on Currency Derivatives Segment:
9:00 to 17:00 hours
About Prices on quote :-
Open : price at which first trade takes place
High : highest price of the day
Low : lowest price of the day
LTP : last traded price
Previous Close : previous days close price
Formulation for Closing Price :-
Open Price, High Price, Low Price, LTP
Close Price of a share?
Last hours (3:00 to 3:30) weighted average price
(1000 X Rs.100) + (2000 X Rs.101) + (3000 X Rs. 102)
6000
= Rs. 101.35 (Closing Price)
Types of Orders
Market order :Buy or sell orders are to be executed immediately at current
market prices
Limit order: Specify prices at which buy or sell orders are executed
Buy : At or lower price
Sell : At or higher price
Stop-loss orders:
Sell stocks when price falls below a stipulated level, to stop further losses
from accumulating.
Buy stocks when price rises above a stipulated level, to limit potential
losses from a short position.






Concept of Stop Loss orders :-









Trading halts
% fall / rise
in Nifty or
Sensex
Time Action
10% Before 1 PM 1 hour market halt
10% At or after 1 pm but
Before 2.30 PM
an hour market halt
10% At or after 2.30 PM Market shall continue trading
15% Before 1 PM 2 hour market halt
15% At or after 1 pm but
Before 2 PM
1 hour market halt
15% At or after 2 PM Trading will halt for the remainder of the
day
20% Trading will halt for the remainder of the
day


Concept of Securities Transaction Tax for CM Segment
STT is levied on all transactions of sale and / or purchase
of equity shares and units of equity oriented fund and sale
of derivatives entered into in a recognised stock exchange.

Transaction Charges Capital markets
Total Traded Value in a month Transaction Charges (Rs. Per Lakh of
Traded Value)
Up to First Rs. 1250 crores Rs. 3.25 each side
More than Rs. 1250 crores upto Rs. 2500
crores (on incremental volume)
Rs. 3.20 each side
More than Rs. 2500 crores upto Rs. 5000
crores (on incremental volume)
Rs. 3.15 each side
More than Rs. 5000 crores upto Rs. 10000
crores (on incremental volume)
Rs. 3.10 each side
More than Rs. 10000 crores upto Rs. 15000
crores (on incremental volume)
Rs. 3.05 each side
Exceeding Rs. 15000 crores Rs. 3.00 each side







Transaction Charges F&O
Total Traded Value in a month Transaction Charges (Rs. Per Lakh of
Traded Value)
Up to First Rs. 2550 cores Rs. 1.90 each side
More than Rs. 2500 crores upto Rs. 7500
crores (on incremental volume)
Rs. 1.85 each side
More than Rs. 7500 crores upto Rs. 15000
crores (on incremental volume)
Rs. 1.80 each side
Exceeding Rs. 15000 crores Rs. 1.75 each side

Process for logging to the trading system
A valid combination of :
User ID
Trading Member ID
Password required
Concept of Active & Passive Orders
Active Order When any order enters into the system, it is an active order. If it
finds a match trade takes place.
Passive Order An order which has entered into the system, does not find a
match and is sitting in the system.

Concept of Price Time Priority




Buy Side :-
Firms that buy securities and assets for their own or their clients' accounts are said to
be on the buy side. Institutional investors like mutual FUNDS, pension FUNDS, hedge
funds, private equity funds, trusts, insurance companies and proprietary traders make
up the vast majority of the buy side.