A Project Report on

STUDY ON BOMBAY STOCK EXCHANGE

Under the partial fulfillment of

T .Y. BCOM (FINANCIAL MARKET)
SEMESTER 5 th

Submitted By
Ms. AMITA RAHI VIVEK
Roll no. 07

Project Guide
PROF. (MRS.) SHRADDHA BHOME

Submitted to
UNIVERSITY OF MUMBAI
Academic Year
2010-2011

CHENDANI
& N.G. BEDEKAR
K.G.BUNDER
JOSHICOLLEGE
COLLEGE
ROAD,
VPMS THANE
OF
OFCOMMERCE
ATRS
(W) 400601.

ACKNOWLEDGEMENT

I would like to extend my sincere gratitude to all those people

who have
helped me in the successful completion of my Project.
Its gives us immense pleasure in expressing our gratitude to us
project guide
prof. Mrs. Shraddha Bhome for giving her precious time and
help us in
completing our project.
We would also like to thank Prof.D.M.Murdeswar (coordinator), our
principal Dr. (Mrs.) S.A. Singh for their valuation suggestion
and support
provided during the project and also the library staff providing
the books
whenever demanded by us.
We thank them for being informative and tolerant. We would
not have been
able to complete our project without sincere guidance and
effort of above
mentioned people, whose presence was blessing in disguise for
me, which
motivated us to complete our project on time.
And at last but not the least, a special thank to my parents for
their constant
support & assistance, to make these project worth presenting
before you.

DECLARATION

I, AMITA V. RAHI the student of JOSHI-BEDEKAR

COLLEGE, studying
in the T.Y.B.Com (Financial market), Semester-5
course TH
for the
academic year 20010 11. Hereby declare that I have
completed the project
on Study on Bombay Stock Exchange in fulfillment
of the course
completion requirement at the University of Mumbai.
I further declare that information presented in this project is
true and original
to the best of my knowledge.

DATE:
student

signature of

PLACE:
Rahi)

(Amita V.

INDEX
Sr. No Contents Page no.
1 Title Page
2 Certificate
3 Acknowledgement
4 Declaration
5 Index
6 List of Chart and Diagram
7 Researcher methodology
8 Chapter Schemes
1 Overview of financial market
1.1 what is Financial System?
1.2 Function of the Financial System
1.3 Components of the Financial System
1.4 Capital Market
1.5 Primary Market
1.6 Secondary market

2 Secondary market
2.1 Introduction
2.2 Definition
2.3 Advantages
2.4
2.5
2.6
Features of in
Ingredients
Innovation
secondary
of
ofsecondary
secondary
secondary
market
market
market
market

3 Study on Bombay Stock Exchange

3.1 Introduction
3.2 History of BSE
3.3 Milestones of BSE
3.4 Achievements & Awards by BSE

4 Finding @ BSE
4.1 Trading @ BSE
4.2 BSE Indices
4.3 BSE Technology
4.4 Risk Management
4.5 Derivative
4.6 Safeguards for Investors

9 Bibliography
10 Annexure

List of chart and Diagram

Sr. no.

List

1 1.1 Function of the financial system

2 1.2 Indian Financial System

3 2.1 Features of Secondary Market

4 2.2 Advantages of Secondary Market

5 2.3 Ingredients of Secondary Market

6 3.1 Milestones of BSE

REASHER METHODOLOGY
Why I have chosen this topic ?

As being the student of financial market I have chosen my

topic for
project on study on Bombay Stock Exchange. The financial
market deals
with the various securities and these securities are
traded on stock
exchanges. Thats why I have done my project on the oldest
and first stock
exchange in India that is Bombay Stock Exchange.
I havechosen this topic to get more overview on Bombay
Stock
Exchange. To know the role played by BOMBAY STOCK
EXCHANGE in
Indian capital market. How BSE Sensex perform in the market.
This topic
will increase my knowledge and will be benefited to my career.

OBJECTIVES OF PROJECT
To get an overview of Bombay Stock Exchange.
To know the role of Bombay Stock Exchange
in capital market
How BSE provide services to investor, companies, Government
and society.
To know the
about
new
BSE
risk
derivative
management
INDICES
segment
by BSE
on BSE

 Newspaper
Internet
Prospectus of BSE

RESEARCH DESIGN
In order to conduct the research an appropriate
methodology became
necessary. In this direction both primary as well as secondary
data were
attempted to be collected. The methodology is concentrated in
the following
area:
1. Primary Data.
2. Secondary Data.
Primary Data
The primary data collection is specially designed to have
information from
the manager level officer. The questionnaire was presented to
the officers of
the bank. Questionnaire was collected and arranged in one after
the other in
recording sheet. Incomplete responses were deleted.
SOURCE Sample
Interview at BSE Questionnaire 20

The methodology for collecting data with reference to the

Secondary

secondary
was
Books
taken from
dataData
the following:-

 Journals
Magazines

LIMITATIONS
The project has been limited to the visit on Bombay Stock
Exchange.
During
research for
the project it was noticed that the officers
of
the above
mentioned,
were hesitant to provide general information as
regards
the of the Exchange
functioning
At the same time they were reluctant to disclose information
such
as the
accurate
facts and figures (commission for mercantile services
etc.)
theyconsidered to be confidential.
were as
being
Thankfully, these limitations did not act as hindrances for
completion
of the
project.

CHAPTER: 1 OVERVIEW OF FINANCIAL

SYSTEM

1.1 WHAT IS FINANCIAL SYSTEM?

The economic development of any country depends upon the
existence of
a well organized financial system. A financial system plays a
vital role in the
economic growth of a country. It intermediates between the
savers and
investor and promotes faster economic development. It
mobilizes and
usefully allocates scarce resources of a country.
A financial system is a complex, well-integrated set of subsystem of
financial institutions, markets, instruments, and services which
facilitates the
transfer and allocation of funds, efficiently and effectively. An
efficient
functioning of the financial system facilities the free flow of
funds to more
productive activities and thus promotes investment.

1.2 FUNCTIONS OF THE FINANCIAL SYSTEM .

Chart 1.1 functions of Financial System
F

Provision of Liquidity

U
N

Mobilization of Savings

C
T

Size Transformation Function

I
O
S
N

Maturity
Risk Transformation
Transformation
Function
Function

(Source: By Researcher)

1. Provision of liquidity
The major function of financial system is the provision of
money and
monetary assets for the production of goods and services. There
should
not be any shortage of money for productive ventures. In
financial
language, the money and monetary assets are referred to as
liquidity. The
term liquidity refers to cash or money and other assets which
can be
converted into cash readily without loss of value and time.
Hence, all
activates in a financial system are related to liquidity- either
provision of
liquidity or trading in liquidity. In India the R.B.I. is the leader
of the
financial system and hence it has to control the money
supply and
creation of credit by banks and regulates all the financial
institutions in
the country in the best interest of the nation.

2. Mobilization of Savings
Another important activity of the financial system is to
mobilize
saving and channelize them into productive activities. The
financial
system should offer appropriate incentives to attract saving and
make
them available for more productive ventures. Thus, the
financial system
facilitates the transformation of saving into investment and
The
financial intermediaries have to play a dominant role in
consumption.
3. Size
Transformation Function
this
activity.

Generally, the savings of millions of small investors are in the

nature
of a small unit of capital which cannot find any fruitful
avenue for
investment unless it is transformed into perception size of
credit unit.
Banks and other financial intermediaries perform this size
transformation
function by collecting deposits from a vast majority of small
customers
and giving them as loan of a sizeable quantity. Thus,
this size
transformation function is considered to be one of the very
important
functions of the financial system.

4. Maturity Transformation Function

Another function of the financial system is the maturity
transformation
function. The financial intermediaries accept deposits from
public in
different maturities according to their liquidity preference and
lend them
to the borrowers in different maturities according to their
needs and
promote the economic activities of a country.

5. Risk Transformation Function

Most of the small investors are risk-averse with their small
holding of
savings. So, they hesitate to invest directly in stock market. On
the other
hand, the financial intermediaries collect the saving from
individual saver
and distribute them over different investment units with
their high
knowledge and expertise. Thus, the risks of individual
investors
distributed.getThis
development.
Moreover,
risk transformation
various risk mitigating
function
tools
promotes
are
industrialsystem
available
financial
in the like hedging, insurance, use of derivatives etc.

1.3 COMPONENTS OF THE FINANCIAL

SYSTEM
Chart 1.2 Indian financial systems
Indian financial system
Organized system
system (moneylender)

Unorganized

Financial
Financial
Financial
Institutions
Instruments
.
Services
H
i
r
Long
term
Short term
e
.
Instrument
pVenture capital,
u
Banking
Non Banking
r
cFinancial Financial
hInstitution Institution
a
sCapital market
money market
e

Financial

e
Nonbanking Non- banking
t
.c
Financial
Development
.
market
Institution
Institution

Markets

Depositories,
Instrument

Equity market

Debt

Commercial
Derivative
Bank
market

Co-operative
Bank

T-bill

Primary

Secondary

market

market

Commercial paper

Certificate of deposit

(Source: The Indian financial System by Bharati V. pathak,

page no.7)
The financial system consists of four segment or components.
These are:
1. Financial institutions,
2. Financial markets,
3. Financial instruments, and
4. Financial services.

1. Financial Institutions
Financial institution are intermediaries that mobilize saving and
facilitate
the allocation of funds in an efficient manner.
Financial institutions can be classified as banking and nonbanking
financial institutions. Banking institutions are creators and
purveyors of
credit while non-banking financial institution is purveyors of
credit. In India,
non-banking financial institutions, namely, the
Developmental Financial
Institutions (DFIs), and Non-Banking Financial Companies
(NBFCs) as well
as Housing Finance Companies (HFCs) are major institutional
purveyors
Financial
such
Credit
asand
theinstitutions
of
Investment
Industrial can
Development
Corporation
also be classified
ofBank
Indiaof
as
(ICICI),
India
term-(IDBI),
financial
the the
credit.
institutionsFinancial
Industrial

Repo

Corporation of India (IFCI), the Small Industries

Development Bank of
India (SIDBI) and the industrial investment Bank of India
(IIBI).
In the post- reforms era, the role and nature of activity of these
financial
institutions have undergone a tremendous change.
Banks have now
undertaken non- bank activities and financial institutions
have taken up
banking functions. Most of the financial institution now resorts
to financial
markets for raising funds.

2. Financial Markets
Financial markets are a mechanism enabling participants to
deal in
financial claims. The markets also provide a facility in which
their demands
and requirements interact to set a price for such claims.
The main organized financial markets in India are the money
market and
the capital market. The first is a market for short- term
securities while the
second is a market for long- term securities, i.e., securities
having a maturity
period of one year or more.
Financial markets can be also be classified as primary and
secondary
markets. While the primary market deals with new issues, the
secondary
market is meant for trading in outstanding or existing
securities.

3. Financial Instruments
shares,
Financial
payment,
form
ofdebentures,
interest
at
instrument
a future
or dividend.
like
date,
is abonds
claim
of aFinancial
sum
and
against
notes.
of money
instruments
a person
Many
andfinancial
orperiodic
an
represent
institution
payment
paper
instruments
wealth
infor
the
are

marketable as they are denominated in small amount and traded

in organized
markets. This distinct feature of financial instruments has
enabled people to
hold a portfolio of different financial assets which, in turn,
helps in reducing
risk.
Financial instrument differ in term of marketability,
liquidity,
reversibility, types of options, returns, risk and transaction cost.
Financial
instruments help financial markets and financial
intermediaries to perform
the important role of channelizing funds from lenders to
borrowers.

4. Financial Services
Financial services are those that help with borrowing and
funding,
lending and investing, buying and selling securities, making
and enabling
payments and categories of financial services are funds
intermediation,
payments mechanism, and provision of liquidity, risk
management and
financial engineering.
Financial services are necessary for the management of risk in
the
increasingly complex global economy. They enable risk
transfer and
protection from risk.
The four financial system components discussed do not
function in
isolation. They are independent and interact continuously with
each other.
Their interaction leads to the development of a
smoothly functioning
financial
system. MARKET
1.4 CAPITAL

The capital market is a market for financial assets which have a

long or
indefinite maturity. Generally, it deals with long term securities
which have
a maturity period of above one year. Capital market may be
further divided
into three namely:
i Industrial securities market
ii Government securities market and
iii Long term loan market

i.
Industrial Securities Market
As the very name implies, it is a market for industrial securities
namely
Equity shares, Preference shares, and Debenture or Bonds. It is
a market
where industrial concerns raised their capital or debt by issuing
appropriate
instruments. It can be further subdivided in two. They are:
Primary market or new issue market
Secondary market or stock exchange

ii.
Government securities market

areistraded
It
Government
otherwise
in this
Securities
securities
called
market
Gild-Edged
while
shortare traded.
short
term
securities
term
and
Inlongsecurities
India
market.
term.
there
It
are
Long
istraded
aareterm
market
many
securities
in
money
kinds
where of

market. Securities issued by the Central Government, State

Governments,
Semi-Government authorities like City corporations, Port
Trusts etc.

iii.
Long- Term Loans Market
Development banks and commercial banks play a significant
role in this
market by supplying long term loans to corporate customers.
Long term
loans market may further be classified into:
a. Term Loans market
b. Mortgages market
c. Financial guarantees market.

a. Term loans market

Many industrial financing institutions have been created
by the
Government both at the national and regional levels to supply
long term and
medium term loans to corporate customers directly as well as
indirectly.

b. Mortgages market
The mortgages market refers to those centers which supply
mortgage loan
mainly to individual customers. A mortgage loan is a loan
against the
security of immovable property like real estate. This
mortgage
may Guarantees
be or legal one.
c. Financial
market
equitable
mortgage

A Guarantee market is a center where finance is provided

against the
Guarantee of a reputed person in the financial circle. Guarantee
is a contract
to discharge the liabilities of a third party in case of his default.
In case the
borrower fails to repay the loan, the liability falls on the
shoulders of the
Guarantor. Hence the guarantor must be known to both the
borrower and the
lender and he must have the means to discharge his liability.

1.5 PRIMARY MARKET

Primary market is a market for new issues or new financial
claims.
Hence, it is also called New Issue Market. The primary market
deals with
those securities which are issued to the public for the first time.
The market,
therefore, makes available a new block of securities for public
subscription.
In the primary market, borrower exchange new financial
securities for long
term funds. Thus, primary market facilitates capital formation.
There are
three ways by which a company may raise capital in a primary
market. They
are:
i Public issue
ii Rights issue
iii Private placement
The most common method of raising capital by new
companies is
through
sale
ofshareholders
securities
It is capital,
called
public
issue.
existing
to
Private
the existing
placement
company
wants
is a way
totoraise
of
onpublic.
selling
a additional
pre-emptive
securities
basis.
privately
securities
It is called
to
a
When
anoffered
are first
right
small
investors.
issue.
group
of

The new issue market encompasses all institution dealing in

fresh claims.
These claims may be in the form of equity shares,
preference shares,
debentures, rights issues, deposits etc. all financial
institutions which
contribute, underwrite and directly subscribe to the securities
are part of new
issue market.

1.6 SECONDARY MARKET

The Secondary market is a market for secondary sale of
securities. In
other words, securities which have already passed through the
new issue
market are traded in this market. The market where existing
securities are
traded is referred to as the secondary market or stock market. In
a stock
market, purchases and sales of securities whether of
Government or SemiGovernment bodies or other public bodies and also shares and
debentures
issued by joint stock companies are affected. The securities of
government
are traded in the stock exchange as a separate component,
called guilt edged
market. Government securities are traded outside the trading
wing in the
form of over the counter sales or purchases. Another
component of the stock
market deals with trading in shares and debentures of limited
companies.
Stock exchanges are the important ingredient of the capital
market. They
are the theatres of trading in securities and as such they assist
and control the
buying and selling of securities. The stock exchanges in India
are regulated
under the Securities Contract (Regulation) Act, 1956. The
Exchange is the principal stock exchange in India which sets
Bombay Stock
the tone
stock
markets.
of the

CHAPTER: 2 SECONDARY MARKET

2.1 INTRODUCTION
The market where existing securities are traded is referred to
as the
secondary market or stock market. In a stock market, purchases
and sales of
securities whether of Government or Semi- Government
bodies or other
public bodies and also shares and debentures issued
by joint stock
companies are affected. The securities of government are traded
market
securities
sales
as
purchases.
areseparate
traded outside
Another
component,
thecomponent
trading
called
wing
guilt
ofinthe
the
edged
stock
form market
of
in the or
stock
market.
over
deals
trading
the
with
in
counter
Government
shares and debentures of limited companies.
The secondary

market plays a very vital role as one of the indicators of the

industrial
development of a nation. Each and every country has the
secondary markets
some of the well known stock exchanges are Bombay Stock
Exchange
(BSE) of India, New York Stock Exchange (NYSE) of
America, National
Stock Exchange (NSE), London Stock Exchange of The
Great Britain,
NASDAQ etc. Various securities & financial instruments that
are traded in
the stock market are;

Equity Shares

Preference Shares

Bonus Shares

Bonds

Debentures

Commercial Papers

Treasury Bills

2.2 DEFINATION
Stock exchanges are the important ingredient of the secondary
market.
They are the citadel of capital and fortress of finance. They are
the theatres
of trading in securities and as such they assist and control the
buying and
selling of securities. Thus, according to Husband and Dockeray
securities
or stock exchange are privately organized markets which
are used to
facilities trading in securities. However at present stock
In
central
brief,and
stocks
stateexchanges
government,
constitute
public bodies
a market
and
where
jointsecurities
stock
exchanges
need
not
necessarily
be
privately
organized
ones.
issued by are
companies
traded.

2.3 FEATURES OF SECONDARY MARKET

Chart 2.1 Features of Secondary Market

(Source: By Researcher)
Stock exchange is a mechanism, which facilitates listing and
trading in
securities. The main features of stock exchange are as follows:

1.Organized body:A stock exchange is an organized association or corporate body.

The
organized stock exchanges can take any of the following forms:
Public Limited by Guarantee.
Companies Limited by Guarantee.
2.Facilitates
OfOrganization.
Shares : Voluntary Listing
Non- profit

The stock exchanges facilities listing of shares issued by public

limited
companies. The companies that issue shares to the public can
get their shares
listed on one or more stock exchange in the country. The listing
of shares is
done through the listing agreement. The listing agreement is
signed by the
shares issuing company and the concerned stock exchange. Due
to listing of
shares, companies are able to raise long term funds through the
issue of
shares.

3.Facilities Trading of Securities :The stock exchange facilitate of shares. The shares listed on the
exchange
can be traded. The shares can be traded between the sellers and
buyers on
the stock exchange. The trading of shares brings liquidity to the
shares. The
investors can sell the shares and realize cash as and when they
are in need of
funds, or as and when they want to book profits.

4. Controlled by SEBI:The activities of stock exchanges are controlled by SEBI. SEBI

has
framed rules and regulations to be followed by stock
exchanges. If the rules
and regulations are not followed, SEBI may cancel the
registration of such
stock exchange. SEBI may also impose penalty on
defaulting stock
exchange.

5. Membership:Every stock exchange has its members. The members are

normally the
stock brokers. Membership charges must be paid to become
members
of the
Annual
stock
Entrance
Membership
exchange.
subscription
fees.
The
security
membership
fees.
deposit.
fees include:

The membership charges vary depending upon the stock

exchange. The
highest membership charges are at Bombay Stock Exchange
and Calcutta
stock Exchange.

6. Governing Body:The stock exchanges are managed by Governing Body/ Board.

The
Governing board consists of:
President and Vice- president.
Chief Executive.
Directors.
Public Representative.
Government Nominees.
The Government nominates the president and Vicepresident.
Government nominees are nominated by SEBI. The Directors
are elected by
the stock broker members. The governing body has
administrative powers
relating to the functioning of the stock exchange.

7. Trading Through Registered Brokers:Transactions on the stock exchange are done only through the
registered
stock brokers. Transactions through any other party are
considered invalid.

8. Important Element of Capital Market:-

companies
A
stock
capital
exchange
market
to raise
plays
is medium
a market
an important
and
for medium
longrole
termin
term
funds
capital
andthrough
long
market.
term
the It
9. Barometer
funds.
enable
issue
and
debentures.
ofA
the
shares of Economic Strength:-

Stock exchanges are indicators or barometers of economic

stability of a
nation. If the national economy is strong and healthy,
then the stock
exchanges will reflect such a strong economic position. This is
because the
stock markets are at high, the economic growth is high, and
vice- versa.

10. Central Government Recognition:-

The stock exchanges need to obtain recognition from the

Central
Government. At present, only 8 stock exchanges are granted
permanent
recognition by the Central Government.

11. Location :The stock exchanges are mostly located in the capital cities of
major
states in India. At present, there are 25 stock exchanges in the
country.
There are four national level stock exchanges and 21
regional stock
exchanges. The oldest stock exchange in the country is the
Bombay Stock
Exchange, located in the financial capital of India.

2.4 ADVANTAGES OF SECONDARY MARKET

Chart2.2 Advantages of secondary market
A
D
V
A
N

Assist in raising funds

Capital
Generate
Facilitates
Stimulates
Formation
Employment
listing
Industrial
of shares
Development

Facilitates Regional Development

Provides Investment Opportunities

Provides Revenue to the Government

E
Promotes Efficient Management of
Listed Companies
S
(Source: By Researcher)

Stock market is vital for the economic development of a nation.

The
advantages of stock market are briefly stated as follows:

1. Assist in Raising funds:The stock exchange is enables public limited companies to

raise long
term funds from the stock market. The companies can issue
shares and
debentures and obtain long term funds. The long term funds
can be utilized
for the purpose of expansion and modernization of
existing units.
Companies can also utilize the funds for the purpose of setting
new projects.

2. Facilitates Listing of Shares :The stock exchanges facilitate listing of shares issued by public
limited
companies. The companies that issue shares to the public can
get their shares
listed on or more stock exchanges in the country. Readymade
market to buy
or
sale
shares,
soalso
company
canindirect
listin
their
share
easily.
It generates
subStock
brokers,
exchange
employment
and
other
facilities
dofacilities
get
their
employment
the
employment
country.
because
A in
number
theof of
3. Generates
brokers,
stock
various
exchange.
sectors. Employment:-

Due to availability of long term funds, companies undertake

expansion and
modernization programs, which in turn generate more
employment.

4. Capital Formation:-

The stock exchange encourages investors to invest in the

primary and
secondary stock market. For investing in stock market,
investors need to
save money. Savings lead to investment in shares and other
securities.
Investment leads to capital formation.

5. Stimulates Industrial Development:The Stock exchanges facilities mobilization of long term funds
through
the issue of shares and debentures. The long term funds can be
utilized by
companies for the following purpose: Expansion and modernization.
Setting up of new projects.

6. Facilitates Regional Development:The stock exchange also facilitates regional development in the
country.
Companies can generate long term funds due to stock
exchanges. The funds
generated can be utilized for setting up units in backward areas.
This leads to
regional
in fixed
thewith
country.
The investors
other
stock
thandevelopment
exchange
investment
are provided
provides
an
deposits
an
investment
additional
in bank
opportunity
opportunity
or in other
totothe
7. Provides
Investment Opportunity:investors.
invest
forms.
in
It shares,
has been

proved that the returns from the stock markets are much higher
as compare
to traditional forms of investment. But the investor must
only in good
companies that provide good return to investors.

8. Provides Revenue to the Government:The stock exchange provides revenue to the Government, either
directly
or indirectly. The stock exchanges pay tax on the revenue or
profits earned
by them. Also, the investors who invest on stock markets are
subject to
capital gain tax.

9. Promotes Efficient Management of Listed

Companies:Stock exchange indirectly promotes efficiency of the
management of
listed companies. Higher the efficiency, higher is the
performance, and as
such higher the prices of the shares on the stock market.

2.5 INGREDIENTS OF SECONDARY MARKET

Ingredients are citadel of capital and fortress of finance. They
are the
theatres of trading in securities and as such they assist and
control the
buying and selling of securities. Ingredients of secondary
market are as
follow:-

Chart 2.3 Ingredients of secondary market

Stock Exchanges

N
G

Jobbers

R
E

Tarawaniwala

D
I

commission Brokers

E
N

Sub-Brokers / Remisiers

T
S

Authorized Clerks

(Source: By researcher )

1. Stock Exchanges:Stock exchanges are the important ingredient of capital market.

Stock
exchanges provide an organized market place for the investors
to
and
sellbuy
where
exchanges
participate
securities
a large
provide
to ensure
freely.
number
ancontinuity
auction
The of
market
market
seller
of price
offers
in
and
and
which
perfectly
buyer
liquidity
member
participate.
competitive
to of the
conditionsstock
Further,
exchange
investors.

The first stock exchange in India was started in Bombay in

1875 with
formation of the Native Share and Stock Brokers
Association. Thus
Bombay Stock Exchange is the oldest one in the country. With
the growth of
joint stock companies, the stock exchanges also made a steady
growth and at
present these are 22 recognized stock exchanges.

2. Jobbers:A jobber is a professional independent broker who deals in

securities on
his own behalf. In other words, he purchases and sells
securities in his own
name. His main job is to earn a margin of profit due to price
variations of
securities. A jobber plays in the market for quick
returns. He is a
professional broker who carefully judges the worth of the
securities and
makes a good forecast of their future price movements. He
buys securities as
a owner, keeps them for a very short period and sell them for
profit known
as the jobbers turn. Thus, a jobber does not work on
commission basis but
work for profit. So, a jobber can deal either with a broker or
with another
jobber.

3. Tarawaniwalas:A Tarawaniwala is an active member in the Bombay Stock

Exchange. A
Tarawaniwala can act both as a broker as well as a jobber.
jobber.and
drawback
investors
prices
But
by
of
selling
atpurchasing
this
same
system
thetime,
same
securities
ishethat
securities
is not
a Tarawaniwala
from
prohibited
to them
themfrom
at
incan
higher
hisacting
act
own
against
prices.
as
name
a
Basically he is a
broker.
the
at
Now,
lower
interest
the
The of

Securities Contract act of 1956 provides that a member of a

stock exchange
can act as a principal only for a member of a recognized stock
exchange. In
case he wants to act as such for a non-member, he must get his
consent and
this fact must disclose in agreement also.

4. Commission Brokers:A commission broker is nothing but a broker. He buys and sells
securities
on behalf of his client for a commission. He is permitted to deal
with nonmembers directly. He does not purchase or sell in his own
name. Generally,
a broker acts for a large number of his clients, and therefore, he
deals in a
large variety of securities. He get the orders from his clients
and executes
them through jobbers.

5. Sub- Brokers/ Remisiers:As a stated earlier, a sub-broker is an agent of a stock broker.

He helps the
client to buy and sell securities only through the stock broker.
Since he is not
a member of a stock exchange, he cannot directly deal in
securities. He is
subject to similar restrictions as are applicable to member
brokers. He is
called remisier in the Bombay Stock Exchange. His
commission is paid out
of the commission received by brokers for whom he is acting as
an agent.
Hence, remisiers are also called half commission men.
Generally, their
commission cannot exceed 40% of the commission received on
the
business
An
him
authorized
in the by
business
clerkof
is securities
one who istrading.
appointed
A broker
by a stock
cannot
broker
be
transacted
them
6. assist
Authorized
to
present
always Clerks:-

on the trading floor of a stock exchange, and therefore, he

requires the
assistance of others to carry on the trading activities on his
behalf. In
Bombay Stock Exchange, each member broker can employ a
maximum
number of 5 clerks. Generally, authorized clerks are given
power of attorney
to act on behalf of brokers and hence they can sign on behalf of
brokers.

2.6 Innovations in Secondary market

Many steps have been taken in recent years to reform the
secondary
market so that it may function efficient and effectively. Steps
are also being
taken to broaden the market and make it function with greater
degree of
transparency and in the best interest of investors. Some of the
developments
in the secondary market are as following:-

1. Change in the Management Structure:In the early periods, the boards of stock exchanges were
dominated by
brokers whose decisions were not fair and transparent. The
SEBI now
requires that 50 per cent of the directors must be non-broker
directors or
government Representatives. Further, it is obligatory that
a non-broker
professional shall be appointed as the Executive Director.

2. Insistence of Quality Securities:For efficient and active functioning of a stock exchange,

quality
securities
announced
only
qualityare
revised
securities
absolutely
norms
are for
listed
essential.
companies
and traded
Realizing
accessing
in stock
this
the capital
fact,
3. Transparency
of Accounting Practices:the SEBI
market
exchanges.
so that
has

To ensure correct pricing mechanism and wider participation,

all attempts
are being taken to achieve transparency in trading and
accounting
procedures. Brokers are asked to show their prices, brokerage,
service tax
etc. separately in the contract notes and their accounts. Of
course the service
tax is collected from the client and paid to the Government.

4. Introduction of Depository system:A depository is an organization where the securities of a

shareholder are
held in the electronic form through a process of
dematerialization. The
investors have to simply open an account with the depository
through a
depository participant. The account will be credited with the
purchase of
securities and debited with the sale of securities. There is
no physical
transfer of shares. Everything is done through
electronic media. The
depository system facilitates investors to hold securities in the
electronic
form rather than in physical form. Since the operations are
computer linked,
they are transparent, speedier, less speculative and cost
effective.
The SEBI has directed that all offer of public/ rights issue/ offer
for sale
should only be of dematerialized shares. So, the
investors will be
compulsorily required to open a depository account with a
Depository
Participant (DP) for making an application. All DPs will act as
collection
agents.
Credit
money
debt
instruments
rating
market
agencies
instruments,
mustRating
have
be compulsorily
been
deposits
set up
andcredit
for
even
awarding
rated
to equity
bycredit
ashares
credit
5. Setting
up
of Credit
Agencies:also. Now,
rating
to theall
agency

so that the investing public may not be deceived by financially

unsound
companies. It is a healthy trend towards a developed capital
market.

6. Introduction of Electronic Trading:The OTCEI has started its trading operations through the
electronic
media. Similarly, BSE switched over to electronic trading
system in January
1995, called BOLT. Again, NSE went over to screen based
trading with a
national network. Under this system, investment counters can
be spread
throughout the country under the electronic network. The
buyers and sellers
living apart from each other can trade in corporate
securities through
electronic media and through telephone/ teller / computer in the
case of
OTC. Hence, there is a national market with no physical
location, no trading
ring, no stock exchange building, no hustle, and bustle scenes
etc. which are
commonly found in conventional stock exchanges.

7. Stock Watch System:The SEBI is contemplating to introduce a New Stock Watch

system to
trace out the source of undesirable trading if any in the market.
The Stock
Watch System simply works as a mathematical model
which keeps a
constant watch on the market movement. When the model is
activated,
certain parameters are put to work at once. It would
bring to light
automatically the scrip which are under alert. This alert divided
into
three such as least bothersome, bothersome and
categories
8. Trading
Derivatives:most in
indicating
bothersome
blue, yellow and red signals respectively.

Dr. L. C. Gupta committee which had gone into the

question of
introduction of derivative trading has recommended
introducing trading in
Index Futures to start with and then trading in options. Byelaws have
already been framed by NSE and BSE based on the
recommendation of the
Committee. Trading in derivatives has been introduced
by bringing
necessary amendment to the Securities Contract Regulation
Act. These
measures would make the capital market active.

9. Window For Block Deals:A separate window has been created in both BSE and NSE for
executing
huge block deals to check intra-day volatility on this count on
the bourses.
Large intra-day volatility was experienced on the stock
exchanges when
these block deals were carried out. Keeping them outside the
purview of the
time after the first half-an hour will stem this volatility.
10.

Know Your Customer (KYC) Norms:-

KYC norms are providing quite a deterrent for the population

to put its
money into various investment channels. The hassles
of KYC
documentation are creating obstacles in the path of investor and
advisors
alike.
In 2002, KYC norms were introduced in India with the RBI
directing all
Bank and Financial Institution to put in place a policy
Their Customer.
money
identity
laundering,
and address
The
terrorist
by
basic
asking
purpose
financing
themoftoetc.
KYC
submit
this
was
involve
document
to prevent
verifying
that
framework to Know
identity
customers
are
relevant
accepted
theft,
proof.
as

CHAPTER 3: STUDY ON BOMBAY STOCK

EXCANGE
3.1 INTRODUCTION
Bombay
now
popularly
Stock known
Exchange
as the
is the
BSE
oldest
was stock
established
exchange
as "The
in Asia
What is
Native
Stock
Brokers'
Share &Association" in 1875.

Over the past 135 years, BSE has facilitated the growth of
the Indian
corporate sector by providing it with an efficient capital raising
platform.
Today, BSE is the world's number 1 exchange in the world in
terms of the
number of listed companies (over 4900). It is the world's 5th
most active in
terms of number of transactions handled through its
electronic trading
system. And it is in the top ten of global exchanges in terms of
the market
capitalization of its listed companies (as of December
31, 2009). The
companies listed on BSE command a total market
capitalization of USD
Trillion 1.28 as of Feb, 2010.
BSE is the first exchange in India and the second in the world
to obtain
an ISO 9001:2000 certifications. It is also the first Exchange in
the country
and second in the world to receive Information Security
Management
System Standard BS 7799-2-2002 certification for its BSE OnLine trading
System (BOLT). Presently, BSE are ISO 27001:2005 certified,
which is a
ISO version of BS 7799 for Information Security.
The BSE Index, SENSEX, is India's first and most popular
Stock Market
benchmark index. Exchange traded funds (ETF) on SENSEX,
are listed on
BSE and in Hong Kong. Futures and options on the index are
also traded at
BSE.

Vision
"Emerge as the premier Indian stock exchange by
To educate
and create awareness among
establishing
global
benchmarks"

Mission
investor

3.2 HISTORY OF BOMBAY STOCK

EXCHANGE
The Bombay Stock Exchange is known as the oldest exchange
in Asia. It
traces its history to the 1850s, when stockbrokers would
gather under
banyan trees in front of Mumbai's Town Hall. The
location of these
meetings changed many times, as the number of
brokers constantly
increased. The group eventually moved to Dalal Street in 1874
and in 1875
became an official organization known as 'The Native
Share & Stock
Brokers Association'. In 1956, the BSE became the first stock
exchange to
be recognized by the Indian Government under the Securities
Contracts
Regulation Act.
The Bombay Stock Exchange developed the BSE Sensex in
1986, giving
the BSE a means to measure overall performance of the
exchange. In 2000
the BSE used this index to open its derivatives market,
trading Sensex
futures contracts. The development of Sensex options along
with equity
derivatives followed in 2001 and 2002, expanding the
BSE's trading
platform.
Historically an open-cry floor trading exchange, the Bombay
Stock
Exchange switched to an electronic trading system in 1995. It
took the
exchange only fifty days to make this transition.

Today BSE is among the 10 major international exchanges in

context
market of
investment
investment
dominated
of by
thethe
firms
cataloged
registered
firmsunder
underit.BSE
Theas
total
on
3.3 MILESTONES
OF BSE SINCE 1875
amount
31st
2010
March,
wasofUSD 1.36 Trillion.

Table 3.1 Milestones of BSE

Date Milestones
9t h Jul 1875 The Native Share & Stock Broker's Association formed
2nd Feb 1921 Clearing House started by Bank of India
31st Aug 1957 BSE granted permenant recognition under Securities Contracts
(Regulation)(SCRA)
Act
2nd Jan 1986 SENSEX, country's first equity index launched (Base Year:197879 =100)
10th Jul 1987 Investor's Protection Fund (IPF) introduced
3rd Jan 1989 BSE Training Institute (BTI) inaugurated
25th Jul 1990 SENSEX closes above 1000
15th Jan 1992 SENSEX closes above 2000
30th Mar 1992 SENSEX closes above 4000
1s tMay 1992 SEBI Act established ( An Act to protect, develop and
regulate the market)
securities
29th May 1992 Capital Issues (Control) Act repealed
1992 Securities Appellate Tribunal (SAT) established
14th Mar 1995 BSE On-Line Trading (BOLT) system introduced
19th Aug 1996 First major SENSEX revamp
12th May 1997 Trade Guarantee Fund (TGF) introduced
21st Jul 1997 Brokers Contingency Fund (BCF) introduced
1997 BSE On-Line Trading (BOLT) system expanded nation-wide
Jun
Mar
1999
1999
Interest
Central
Rate
Depository
Swaps (IRS)
Services
/ Forward
Ltd.(CDSL)
Rate Agreements
set up with(FRA)
other
st
111
22allowed
15
Jul
financial
1999
1999 institutions
CDSL
SENSEX
commences
closed above
work5000
nd Oct
th

11th Feb 2000 SENSEX crosses 6000 intra-day

9t h Jun 2000 Equity Derivatives introduced
1s tMar 2001 Corporatization of Exchanges proposed by the Union Govt.
1s tFeb 2001 BSE Webx Launched
4t h Jun 2001 BSE PSU index introduced
15th Jun 2001 WDM operations at commenced
1st Jun 2001 Index Options launched
2nd Jul 2001 VaR model introduced for margin requirement calculation
9th Jul 2001 Stock options launched
11th Jul 2001 BSE Teck launched, India 's First free float index
25th Jul 2001 Dollex 30 launched
1st Nov 2001 Stock futures launched
29th Nov 2001 100% book building allowed
31st Dec 2001 All securities turn to T+5
1st Apr 2002 T+3 settlement Introduced
15th Feb 2002 Negotiated Dealing System (NDS) established
1s tFeb 2002 Two way fungibility for ADR/GDR
1s tSep 2003 SENSEX shifted to free-float methodology
1s tJan 2003 India 's first ETF on SENSEX - SPICE' introduced
16th Jan 2003 Retail trading in G Sec
1s tApr 2003 T+2 settlement Introduced
May 2004 Second biggest fall of all time, Circuit filters used
s
t
June
2003
1s tDec
17
2003
inTBanker
agroup
(564.71
daylaunched
points, 11.14%)
th twice

2nd Jun 2004 SENSEX closes over 6000 for the first time
20th May 2005 The BSE (Corporatization and Demutualisation) Scheme,
(the Scheme) announced by SEBI
2005
8t h Aug 2005 Incorporation of Bombay Stock Exchange Limited
12th Aug 2005 Certificate of Commencement of Business
19th Aug 2005 BSE becomes a Corporate Entity
7t h Feb 2006 SENSEX closed above 10000
7t h Jul 2006 BSE Gujarati website launched
21st Oct 2006 BSE Hindi website launched
2nd Nov 2006 iShares BSE SENSEX India Tracker listed at Hong Kong Stock
Exchange
7t h Mar 2007 Singapore Exchange Limited entered into an agreement
to invest ina 5% stake in BSE
Appointed Date under the Scheme i.e. Date on which
16th MayCorporatisaton
2007
and Demutualisation was achieved.Notified by SEBI
in the Official Gazette on 29.06.2007
10th Jan 2008 SENSEX All-time high 21206.77
1s tOct 2008 Currency Derivatives Introduced
18th May2009 The SENSEX raised 2110.70 points (17.34%) and Indexupper circuit breaker applied
wide
7t h Aug 2009 BSE - USE Form Alliance to Develop Currency &
Interest RateDerivatives Markets
24th Aug 2009 BSE IPO Index launched
1s tOct 2009 Bombay
Stock Exchange
introduces
detailsfor
facility
the
BSE Introduces
New Transaction
Feetrade
Structure
Cash for
Equity
5t hInvestors
425
14
Segment
Dec
Nov2009
Dec
2009
2009BSE
Marathi
BSELaunches
launches
website
BSE
FASTRADE
launched
StAR MF -Mutual
a new market
Fund trading
access platform
platform
th

18th Dec 2009 BSE's new derivatives rates to lower transaction costs for all
4t h Jan 2010 Market time changed to 9.0 a.m. - 3.30 p.m.
20th Jan 2010 BSE PSU website launched

(Source: www.bseindia.com )

3.4 Achievements & Awards by BSE

Landmark Achievements:
Some of the landmarks achieved by the BSE are mentioned as
under:

Became the first national exchange to launch its website in

Gujarati and
Hindi and now Marathi
Purchased of Marketplace Technologies in 2009 to enhance the
in-house
technology development capabilities of the BSE and allow
faster time-tomarket for new products
Launched a reporting platform for corporate bonds christened
the ICDM
or Indian Corporate Debt Market
Acquired a 15% stake in United Stock Exchange (USE) to
drive the
development and growth of the currency and interest rate
derivatives
markets
Launched 'BSE StAR MF' Mutual fund trading platform, which
enables
exchange members to use its existing infrastructure for
BSE
now offers
AMFI Certification for Mutual Fund Advisors
transaction
in MF
schemes.
through
BSE
Co-location
Training
facilities
Institutefor
(BTI)
Algorithmic trading

BSE also successfully launched the BSE IPO index and PSU
website
BSE revamped its website with wide range of new features like
'Live
streaming quotes for SENSEX companies', 'Advanced
Stock Reach',
'SENSEX View', 'Market Galaxy', and 'Members'
Launched 'BSE SENSEX MOBILE STREAMER'

With its tradition of serving the community, BSE has been

undertaking
Corporate Social Responsibility (CSR) initiatives with a focus
on Education,
Health and Environment. BSE has been awarded by the World
Council of
Corporate Governance the Golden Peacock Global CSR
Award for its
initiative in Corporate Social Responsibility (CSR).

Awards:

The Annual Reports and Accounts of BSE for the year ended
March
31, 2006 and March 31, 2007 have been awarded the ICAI
awards for
excellence in financial reporting.
The Human Resource Management at BSE has won the Asia Pacific
HRM awards for its efforts in employer branding through
talent
management at work, health management at work and
excellence in
HR through technology

Drawing from its rich past and its equally robust performance
in the
recent times, BSE will continue to remain an icon in the
Indian capital
market.

CHAPTER
4.1
Trading 4@: BOMBAY
FINDING STOCK
@ BSE EXCHANGE

Timing
Trading on the BOLT System is conducted from Monday to
Friday
between 9:00 a.m. and 3:30 p.m. normally.

Groups
The scrips traded on BSE have been classified into various
groups.
BSE has, for the guidance and benefit of the investors,
classified the scrips
in the Equity Segment into 'A', B,'T', S', TS' and 'Z' groups
on certain
qualitative and quantitative parameters.
The "F" Group represents the Fixed Income Securities.
The "T" Group represents scrips which are settled on a trade-totrade basis
as a surveillance measure.
The "S" Group represents scrips forming part of the
"BSE-Indonext"
segment.
The "TS" Group consists of scrips in the "BSE-Indonext"
segment, which is
settled on a trade-to- trade basis as a surveillance measure.
Trading in Government Securities by the retail investors is done
under the
"G" group.
Theresolve
which
to
arrangements
'Z'have
group
failed
investor
was
withto
introduced
both
comply
complaints
the depositories,
with
by BSE
itsand/or
listing
in July
viz.,
have
requirements
1999
Central
not
and includes
made
companies
and/or
the
Depository
required
haveServices
failed

(I) Ltd. (CDSL) and National Securities Depository Ltd.

(NSDL) for
dematerialization of their securities.
BSE also provides a facility to the market participants for online trading
of odd-lot securities in physical form in 'A', 'B', 'T', 'S', 'TS' and
'Z' groups
and in rights renunciations in all groups of scrips in the Equity
Segment.
With effect from December 31, 2001, trading in all securities
listed in the
Equity segment takes place in one market segment,
viz., Compulsory
Rolling Settlement Segment (CRS).
The scrips of companies which are in demat can be traded in
market lot of
1. However, the securities of companies which are still in the
physical form
are traded in the market lot of generally either 50 or 100.
Investors having
quantities of securities less than the market lot are required to
sell them as
"Odd Lots". This facility offers an exit route to investors to
dispose of their
odd lots of securities, and also provides them an opportunity to
consolidate
their securities into market lots.
This facility of selling physical shares in compulsory demat
scrips is
called an Exit Route Scheme. This facility can also be
used by small
investors for selling up to 500 shares in physical form in
respect of scrips of
companies where trades are required to be compulsorily
settled by all
investors in demat mode.

Listed Securities

The securities of companies, which have signed the Listing

Agreement
with BSE, are traded as "Listed Securities". Almost all scrips
traded in the
Equity segment fall in this category.

Permitted Securities
To facilitate the market participants to trade in securities of
such
companies, which are actively traded at other stock exchanges
but are not
listed on BSE, trading in such securities is facilitated
as Permitted
Securities" provided they meet the relevant norms specified by
BSE

Tick Size:
Tick size is the minimum differences in rates between two
orders on the
same side i.e., buy or sell, entered in the system for particular
scrip. Trading
in scrips listed on BSE is done with the tick size
of 5 paise.
However, in order to increase the liquidity and enable
the market
participants to put orders at finer rates, BSE has reduced the
tick size from 5
paise to 1 paise in case of units of mutual funds, securities
traded in "F"
group and equity shares having closing price up to Rs. 15 on
the last trading
day of the calendar month. Accordingly, the tick size in
various scrips
quoting up to Rs.15 is revised to 1 paise on the first trading day
of month.
The tick size so revised on the first trading day of month
remains unchanged
during the month even if the price of scrips undergoes a
change.
Computation of Closing Price of Scrips

The closing price of scrips is computed by BSE on the basis of

weighted
average price of all trades executed during the last 30
minutes of a
continuous trading session. However, if there is no trade
recorded during the
last 30 minutes, then the last traded price of scrip in the
continuous trading
session is taken as the official closing price.

Basket Trading System

BSE has commenced trading in the Derivatives Segment with
effect from
June 9, 2000 to enable investors to hedge their risks. Initially,
the facility of
trading in the Derivatives Segment was confined to
Index Futures.
Subsequently, BSE has introduced the Index Options and
Options & Futures
in select individual stocks.
Investors in the cash market had felt a need to limit their risk
exposure in
the market to the movement in Sensex. With a view to provide
investors the
facility of creating Sensex-linked portfolios and also to create a
linkage of
market prices of the underlying securities of Sensex in the Cash
Segment
and Futures on Sensex, BSE has provided to the investors as
well as to its
Members a facility of Basket Trading System on BOLT with
effect from
August 14, 2000. In the Basket Trading System, the investors
through the
Members are able to buy/ sell all 30 scrips of Sensex in one go
in the
proportion of their respective weights in the Sensex. The
investors
need
not
calculate
Sensex-linked
investors
scrips
in
suchinprofiled
the
the
canSensex.
quantity
also
portfolios
baskets
create
Further,
of and
Sensex
their
andenter
this
the
own
scrips
investors
function
their
baskets
to
own
beis
can
by
weights.
bought
performed
deleting
alter the
or
The
certain
sold
weights
by the
for
creating
system.
scrips
of
investors
securities
from
The
can30also

select less than 100% weightage to reduce the value of the

basket as per their
own requirements.
To participate in this system, the Members need to indicate the
number of
Sensex basket(s) to be bought or sold, where the value of one
Sensex basket
is arrived at by the system by multiplying Rs.50 to the
prevailing Sensex.
For example, if the Sensex is 15,000, the value of one basket
of Sensex
would be 15000 x 50= i.e., Rs. 7,50,000/-. The investors can
also place
orders by entering value of Sensex portfolio to be brought or
sold with a
minimum value of Rs. 50,000 for each order.
The Basket Trading System provides the arbitrageurs an
opportunity to
take advantage of price differences in the underlying Sensex
and Futures on
the Sensex by simultaneous buying and selling of baskets
comprising the
Sensex scrips in the Cash Segment and Sensex Futures. This
would provide
a balancing impact on the prices in both cash and futures
markets.
The Basket Trading System thus meets the need of investors
and also
improves the depth in cash and futures markets.
The trades executed under the Basket Trading System are
subject to intraday trading and gross exposure limits available to the
Members. The VaR,
MTM margins etc, as are applicable to normal trades in the
Cash Segment,
are also recovered from the Members.

4.2 BSE INDICES

Bombay Stock Exchange Indices are as follow:

SENSEX: -

SENSEX or Sensitive Index is not only scientifically designed

but also
based on globally accepted construction and review
methodology. First
compiled in 1986, SENSEX is a basket of 30 constituent stocks
representing
a sample of large, liquid and representative companies. The
index is widely
reported in both domestic and international markets through
print as well as
electronic media.
The index was initially calculated based on the Full
market
Capitalization methodology but was shifted to the free-float
methodology
with effect from September 1, 2003.
The objective of SENSEX is:To measure Market Movements,
Benchmark for Funds Performance,
For Index Based Derivatives Products

BSE-100:-

After the launch of SENSEX, a need was felt for a more broadbased
index,
which
reflect
theprices
movement
of A
stock
on
a
Initially,
constituents
Calcutta,
local
scrips
the
Delhi,
from
BSE
for
Ahmadabad
100
five
which
National
major
and
stocks
Index
were
Madras.
exchange
taken
was
calculated
from
distinction
in prices
the
only
country
by
one
was
taking
national
scale.
prices
viz.
made
exchange
Mumbai,
between
of its
and

Inter-Exchange Scrips for which an average of the prices

quoted on two or
more exchanges was considered for index compilation.

BSE PSU INDEX:th

BSE launched BSE PSU Index onJune
4 2001.
Like other on- line

Indies, the BSE-PSU Index is also displayed on- line on the

BOLT. BSE
PSU Index tracks the performance of the listed PSU stocks on
exchange.
BSE PPSU index is a sub-set of BSE-500 index and
hence all its
constituents are part of the BSE-500 index. The BSE PSU
Index ensure a
reasonable measure of how the Government wealth
fluctuation on the
bourses.

BSE TECk Index- The TMT benchmark:-

Attuning itself to the global standard in equity index

construction
methodology and leading the way in responding to the market
demand for a
TMT Benchmark (technology, media and telecommunications).
It launched
on 11 July, 2001.

BSE-500:-

Although BSE-100 and BSE- 200 indices are broad- based

indices, a
need was felt to construct BSE-500 index to represent all
segment
of listed
stocksmarket
capitalization
listed
and
tocapitalization
and
giveturnover.
more coverage
of
The
BSE
BSE-500
in
and
term
around
represent
of number
99%around
of of
the
scrips,ofmarket
94%
average
turnover
the
daily
ontotal
the exchange.

BSE Mid-Cap and BSE Small-Cap:-

BSE introduced the new index series called BSE Small-Cap

index on
11th April 2006 to track the performance of the companies with
relatively
small market capitalization that would exclusively represent
the mid and
small cap companies listed on the Stock Exchange. BSE MidCap and BSE
Small-Cap index have proved to be great utility to the investing
community
as they would truly capture the movement of the segment they
are represent
(mid and small).

BSE Sectoral Indices:

Stock belonging to major sectors in the BSE-500 index

constitutes
respective sect oral indices.

BSE BANKEX:-

BANKEX, a benchmark for the banking sector, was launched

in June
2003 by Exchange to enable the market participants to track the
movement
of stocks from the banking sector

4.3BSE Technology
BSE places a great deal of emphasis on Information
Technology for its
operations
and
The
'Operations
&
Trading
continuously
enabling
members,
IS
policies
BSE
investors
and
upgrades
toperformance.
enhance
ISand
Security
the
other
the
hardware,
quality
market
policies
and
software
intermediaries.
and
standards
procedures
and
networking
ofBSE
service
for
Department'
at BSE
systems,
provided
strictly
its
day-to-day
adheres
thus
to its
to

operations on 24x7 basis which has enabled it to achieve

the BS7799
certification and the subsequent ISO 27001 certification. In
addition, BSE
has also been successful in maintaining systems and processes
uptime of
99.99%.

BOLT
To facilitate smooth transactions, BSE had replaced its open
outcry system
with the BSE On-line Trading (BOLT) facility in
1995. This totally
automated, screen-based trading in securities was put into
practice nationwide within a record time of just 50 days. BOLT has been
certified by DNV
for conforming to ISO 27001:2005 security standards.
The capacity of the BOLT platform stands presently enhanced
to 80 lakh
orders per day.

BSEWebx.co.in
BSE has also introduced the world's first centralized exchange
based
Internet trading system, BSEWEBx.co.in. The initiative enables
investors
anywhere in the world to trade on the BSE platform.

bseindia.com
BSE's
website
www.bseindia.com
provides
comprehensive
information
on the
and
is regularly
stock market.
visited
It is
byone
financial
of the
organizations
most popular
financial
and other
websites in India
stakeholders
updates.
for

Other Technology-based Initiatives

BSE, along with its strategic partners, have put into place
several critical
processes/systems such as

Derivatives Trading & Settlement System (DTSS)

Electronic Contract Notes (ECN)

Unique Client Code registration (UCC)

Real-time Data Dissemination System -

Integrated Back-office System - CDB / IDB

Book Building System (BBS)

Reverse Book Building System (RBBS)

Debt Market

Director's Database

A Large Private Network

BSE operates a large private network in India. The
network uses
following segments to cater to market intermediaries:-

Campus
BSE's LAN:
Connects market participant offices across 20 floors of BSE
campus to
BSE systems. BSE Campus comprises of 3 BSE buildings: P.J.
Towers,
Rotunda and Cama building
BSE WAN :

TDM / MPLS lines from different service providers cater to

connectivity
requirements of market participants across the country. Wired /
Wireless
media is used.

VSATs :
Satellite based communication system serves the
connectivity
requirements of market participants in remote areas. Services
are provided
through BSE's Satellite Communication Hub in Mumbai.

4.4 Risk Management:Nature of Risks:

The Exchange has been exposed to a large number of risks,
which have
been inherently borne by the member brokers for all
times. Since the
introduction of the screen based trading the nature of risks to
which the
members of the Exchange are exposed to has
undergone radical
transformation. At the same time the inherent risk involved
with the trading
of paper based securities still remains. Though the
process of
dematerialization has already begun, till such that it is made
compulsory in
all scrips, the risk of trading in fake/forged shares and instances
of loss of
shares etc. will continue to exist. The safe custody of
these shares in
physical form in the Exchange as well as in the member
brokers offices is
of
prime
importance.
The
1.Risks
Risks
can
associated
be classified
with Paper
as under:
Based Trading

Lost/misplaced securities

damage to securities

loss of securities in transit

2. Client Risk
o

Client default

Client absconding

Fake/ forged/stolen securities introduced by the client

Reduction and Control of Risks :

As a measure of the pro-active risk control several measures
have been
initiated by the Exchange to reduce the risks to which the
Exchange and the
member brokers are exposed. In this regard the Exchange has
initiated the
following measures:
1.

Know Your Client Scheme :

Under the procedure the member brokers of the

Exchange are
compulsory required to obtain detailed information of
clients prior to
commencement of any transactions for new clients. A similar
procedure is
also to be followed for existing clients. This information is to
be made
available to the Exchange authorities whenever called for.
In case the
member broker fails to furnish the same it is viewed seriously.
information
reported
The Exchange
as lost,
available
stolen,
maintains
through
duplicate
athe
database
etc.
database
by the
onisall
Companies
time
the relevant
shares/ that
thus
Database
of lost, Stolen, Misplaced Securities:
registrars.
the
have
database
been
The
2.

is modified on a regular basis and is downloaded by the

members through
BOLT on a weekly basis. This database is also provided to the
Clearing
House. The member brokers can thus reduce the instances of
delivery of
shares that have been reported by the Company as bad delivery
by checking
all the deliveries in their office with the database provided. The
Exchange
has designed and developed a software module for the above
for the benefit
of the members.
The Clearing House also uses the database. At the time of payin the
members of the Exchange are required to submit the details of
the shares
being deposited in the pay-in in a softcopy in a prescribed
format.. These
details are checked against the database and a report is
generated in case a
match is found. Such shares are then reported as bad
delivery in the
Exchange. Further follow-up is done with the delivering broker
and they are
directed to lodge a police complaint against the client
introducing the stolen
shares
3.

Client Caution Database:

The Risk Management department in conjunction with the Bad

Delivery
Cell of the Exchange, the Exchange has designed and
developed a client
database. All member brokers whose clients / sub-brokers have
introduced
fake / forged shares are required to lodge a FIR / Police
complaint
against
theirincorporated
such
members
are
clients
have
and
is called
toalso
incollect
the
report
fordatabase,
in
detailed
athe
prescribed
same
which
information
to is
the
format.
downloaded
Exchange.
about
As per
theThe
tothe
clients.
the
information
scheme
These
members,
details
theasof
a

precautionary measure. The member brokers at the time of

admitting new
clients can refer to the client caution database for further
verification.

4. Verification of shares at members office :

The Risk Management Committee has outlined a process for
minimizing
the risks arising out of Fake/ forged /stolen shares introduced
by the clients
of the member brokers.
As per the procedure outlined issued by the Exchange, in
case the
transaction in a script with one particular client in a settlement
exceeds Rs.
10 lakhs then the member brokers are required to send the
photocopies of the
transfer - deeds and the share certificates to the Company /
Registrar for
verification of the material particulars. The members can select
a random
sample for the same from the lot. A similar procedure
should also be
followed in case the shares worth more than Rs. 10 lakhs are
received from
the Clearing House during pay-out in one scrip.
The basic idea behind the introduction of this procedure is to
prevent
Fake/ forged/stolen shares from being introduced in the
market. The
Exchange issued a notice outlining the procedure to be
followed. The above
procedure is an important Risk Management Tool especially
where there
exists a large volume of deliveries. The Risk Management
Department acts
as a facilitator in this regard and has written to all "A" group
and
B1 group
companies
in this regard seeking their co-operation.

5. Inspection :
The department is carrying out inspection of the member
brokers records
as regards compliance of the risk management procedures

Integrated Comprehensive Insurance Policy for

Members
To reduce the systematic risk, Securities & Exchange Board of
India
(SEBI) vide its circular ref. No SMD/SED/RCG/270/96 dated
January 19th,
1996, had directed all stock exchanges to ensure that all active
Members are
properly insured. Insurance companies in consultation
with BSE have
offered an insurance policy which covers losses on account of
trading as
well as back office losses to the Members. The minimum sum
insured is
Rs.5 lakhs per Member
Presently, all active Members obtain the said policy directly
from the
insurance companies and then inform BSE about the same.

4.5 DERIVATIVE
Introduction
BSE created history on June 9, 2000 by launching the first
Exchangetraded Index Derivative Contract in India i.e. futures on the
capital market
benchmark
-the
themember
BSE
Sensex.
Themeasures
inauguration
of the
by Prof.
which
formulated
J.R.index
Varma,
risk
containment
of SEBI
and
Chairman
for the
trading
wasmarket.
done
committee
derivatives

Trading in derivatives is enabled through a separate front end

system
called the Derivatives Trading & Settlement System (DTSS)
Trader Work
station (TWS). It is also extendable through Intermediate
Messaging Layer
(IML) where trading members can access the exchange
systems through
their own customized software.
In sequence of product innovation, BSE commenced trading in
Index
Options on Sensex on June 1, 2001, Stock Options were
introduced on 31
stocks on July 9, 2001 and Single Stock Futures
were launched on
November 9, 2002.
September 13, 2004 marked another milestone in the history of
the Indian
capital market, when BSE launched Weekly Options, a
unique product
unparalleled worldwide in the derivatives markets. BSE
permitted trading in
weekly contracts in options in the shares of four leading
companies namely
Reliance Industries, Satyam, State Bank of India, and TISCO
( now Tata
Steel) in addition to the flagship index-Sensex.

Chhota (mini) SENSEX

Chhota SENSEX was launched on January 1, 2008. With a
small or
'mini' market lot of 5, it allows for comparatively lower capital
outlay, lower
trading costs, more precise hedging and flexible trading. It is
a step to
encourage
and
enable
small
investors
to
mitigate
risk
and&The
to India'sSymbol
Security
available
for
most
one,
popular
for
two SENSEX
and
index,
three
SENSEX,
Mini
months
Contracts
along
through
with
is
futures
MSX.
weekly
enable
contracteasy
options.
The
is access

Long Dated Options

BSE also introduced 'Long Dated Options' on its
flagship index Sensex -on February 29, 2008, whereby the Members can
trade in Sensex
(in the normal lot of 15 only and not 'mini' Sensex) Options
contracts with
an expiry of up to 3 years.

Currency Derivatives:
Going ahead, on October 1, 2008 BSE launched its currency
derivatives
segment in dollar-rupee currency futures as the exchange traded
currency
futures contracts facilitate easy access, increased
transparency, efficient
price discovery, better counterparty credit risk
management, wider
participation and reduced transaction costs.

Futures on BOLT
BSE re-launched its Derivatives Segment by enabling trading
of Index
and Stock Futures on its BOLT Terminal. The change was in
response to
requests from trading members for a common front end from
which equities
and equity derivatives could be traded. The change will enable
a trader to
trade in cash scrips and futures products through BOLT TWS/
IML while
Option products would continue to trade through the DTSS
TWS/DIML.
The risk management and settlement of futures and option
trades will
continue
Why are
SENSEX
tomany
take reasons
place
Futures
onwhy
DTSS.
There
a SENSEX future makes sense:

SENSEX as compared with other indices shows less volatility

and at
the same time gives returns equivalent to the returns given by
the
other indices.
SENSEX is widely used to describe the mood in the Indian
stock
market. Because of its long history and wide acceptance, no
other
index matches the BSE SENSEX in reflecting market
movements
and sentiments and it makes an attractive underlying for indexbased
products like Index Funds, Futures & Options and Exchange
Traded
Funds.
SENSEX is truly investible as it is the only broad based index
in India
that is "free float market capitalization weighted", which
reflects the
market trends more rationally and takes into consideration only
those
shares that are available for trading in the market.

It may be noted that in addition to the SENSEX , five sectoral

indices
belonging to the 90/FF series are also available for trading in
the Futures and
Options Segment of BSE Limited. The term '90 /FF' means that
the indices
cover 90% of the market capitalization of the sector to which
the index
belongs and is thus well representative of that sector. Also, FF
stands for
free float - i.e. the indices are based on the globally followed
standard of free
float market capitalization methodology. The five sectoral
indices that are
presently available for F&O are BSE TECK, BSE FMCG, BSE
Metal, BSE
Banker
and
Oilof&the
Gas.
These
areBSE
some
safeguards the investors should keep in
4.6mind
Safeguards'
Investors'
before
trading in thefor
securities
market.

1.

Selecting a Broker/ Sub - Broker

Deal only with a SEBI registered Broker / Sub - broker after

due diligence. Details of the BSE Brokers can be obtained

from the
Member's List published by BSE and from the website :

2. Entering into an Agreement

Fill in a Client registration form with the Broker / Sub - broker

Enter into Broker / Sub - broker - Client Agreement. This

agreement is mandatory for all investors for registering as a

client of a
BSE Trading Member. Ensure the following before entering
into an
agreement:

Carefully read and understand the terms and conditions of the

agreement
before executing the same on a valid stamp paper of the
requisite value.
Agreement to be signed on all the pages by the Client and the
Member or
their representative who has the authority to sign the
agreement.
Agreement has also to be signed by the witnesses by giving
their names
and addresses.

Please note that Regulatory Authorities have not stipulated for

execution
of any document other than Broker/ Sub - Broker / Client
3. Transacting
Agreement.

Specify to the Broker / Sub - broker, the exchange through

which
your trade is to be executed and maintain separate account
for each
exchange.

Obtain a valid Contract Note from the Broker / Sub-broker

within
24 hours of the execution of the trade.

Contract note is a confirmation of trade(s) done on a particular

day for and
on behalf of a client in a format prescribed by BSE. It
establishes a legally
enforceable relationship between the Trading Member and
his Client in
respect of settlement of trades executed on BSE as stated in the
Contract
Note.
Contract Notes are made in duplicate, and the Trading Member
and Client,
both keep one copy each. The Client is expected to sign on the
duplicate
copy of the Contract Note, confirming receipt of the original.
a. Contract Note - Form 'A' - Contract Note issued where
Member is acting for constituents as brokers/ agents.
b. Contract Note - Form 'B' - Contract Note issued by Members
dealing with constituents as principals.

Ensure that the Contract Note contains:

SEBI registration number of the Trading Member/ Sub broker

Details of trade such as, Order no, trade no., trade time,
quantity,
price,
brokerage,
settlement
number,
details
of brokerage
other
Trade
As stipulated
2.5%
the
price
brokerage
of
the
should
contract
by charged
be
SEBI,
shown
price.
theby
separately
This
maximum
the
maximum
sub-broker
from
brokerage
brokerage
the
(Subthat levies.
can
is be
charged.
charged isof cannot
inclusive
brokerage

exceed 1.5% of the contract price.) Any additional charges

that a
Trading Member can charge are Service Tax on the brokerage,
any
penalties arising on behalf of client and Securities Transaction
Tax
(STT).
The brokerage, service tax and STT are indicated separately in
the
Contract Note.
Signature of authorized representative. Arbitration clause
stating that
the trade is subject to the jurisdiction of Mumbai must be
present on
the face of the Contract note.

4. Settlement

Ensure delivery of securities /payment of money to

the broker
immediately upon getting the Contract Note for sale / purchase
but in any
case, before the prescribed pay-in-day.

Member should pay the money or securities to the investor

within 24 hours of the payout.

Open a demat account.

Opt for buying and selling shares in demat form.

For delivery of shares from demat account, give the Depository

Participant (D
P) 'Delivery
out' account
instructions
to transfer
the same
beneficiary
account
to the pool
of broker
through
fromsecurities
the
whom
and
shares have been sold.

The following details to be given to the DP: details of the pool

a/c of
broker to which the shares are to be transferred, details of scrip,
quantity
etc. As per the requirement of depositories the 'Delivery out'
Instruction
should be given at least 48 hours prior to the cut-off
time for the
prescribed securities pay-in.
For receiving shares in your demat account, give the
Depository
Participant (D P) 'Delivery in' instructions to accept shares in
beneficiary
account from the pool account of broker through whom shares
have been
purchased.

If physical deliveries are received check the deliveries received

as per Good/Bad delivery guidelines issued by SEBI.

Bad delivery cases should be sorted out through BSE

mechanism immediately.

Ensure that all registration of physical shares for ownership by

transfer should be executed by a valid, duly completed and

stamped
transfer deed.

Rights of Investors
To receive all benefits/ material information declared for the
investors
by the Company.
As
Prompt
an equity
services
holder
from
have
theaCompany
right to subscribe
such as transfers,
to furtherSubissue of
andcapital
the
divisions
consolidation
Company. of holdings in the Company.
by

Brokerage not to exceed 2.5% of the contract price.

Receipt of the Contract Note from the broker in the specified

format
showing transaction price, brokerage, Service Tax and STT,
separately.
Expect delivery of shares purchased/value of shares sold within
24
hours from pay-out.

Approach concerned Regional Arbitration Centres of

BSE, by
confirming geographical jurisdiction .

The Complaint against trading members of the Exchange or

Applications
for Arbitration should be filed at the concerned Regional
Arbitration Centre
referred to in column 1 below covering that State or Union
Territory of
India, referred to in Column 2 below, within which the most
recent address /
registered office address of the constituent, as duly
communicated in writing
to the trading member in accordance with law, is located.
Provided in
respect of a non-resident Indian Constituent, the Seat of
Arbitration shall be
Regional Arbitration Centre which covers the States and Union
Territories
given in Column 2, in which lies the address or the
Registered Office
address, as the case may be, of the trading member,
depending upon
corporate or non-corporate membership of the trading member.
The hearings
shall be held in the concerned Regional Arbitration Centre in
which the
Applicant had duly filed the Application for Arbitration .

ANNEXURE
1) How Bombay Stock Exchange has established?

2) What are the various types of scrips traded on BSE?

3) How the trading took place at BSE?

4) What are the technologies used by BSE?

5) How BOLT helps the invertors?

6) What are the various types of BSE indices?

7) What is BSE derivative?

8) How the settlement took place @ BSE?

9) How the risks are managed by BSE?

10) What are investors rights given by BSE?

11) BSE safeguard for investors