SECONDARY MARKET

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 Secondary Markets in India

Deals in second-hand issued securities.

Stock exchanges are secondary markets where buyers and
sellers trade in already issued securities.
Functions of stock exchanges:
Help determining fair prices based on demand and supply
forces and all available information
Ensures safe and fair dealing
Provide easy marketability and liquidity for investors
Dissemination of information
Self regulating organisation

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 Stock exchanges in India (Contd.)

India has one of the oldest stock markets in Asia, viz., Bombay
Stock Exchange (BSE) est. in 1875.
At present there are 23 stock exchanges in India.
However, in terms of business, the two most prominent all-
India stock exchanges are BSE and the NSE.
National Stock Exchange was set up in June 1994; first started
screen-based trading in India.
Government of India granted recognition to the Over-the-
Counter Exchange of India (OTCEI), also a screen-based
market, promoted by UTI, ICICI and
others.

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 Regulation of Stock Exchanges in India
To protect the savings of the investing community from
various kinds of malpractices, frauds, defaults it was
obligatory to establish regulatory bodies.
The Indian Governments intention to set up a separate
board for the regulation and orderly functioning of the
capital market was first declared in the Budget speech by
Shri. Rajiv Gandhi, the then Prime Minister and Minister of
Finance, while presenting the Budget for the year 1987-88.
The Securities Contracts (Regulation) Act 1956 was the first
all-India legislation to regulate stock exchanges.

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 Developments in Stock market

Impressive growth over last 2 decades.

Number of shareholders 40 million (20 years ago - 1 million);
second largest population of shareholders after USA.
6,229 listed companies in 1990-91; 9,413 in 2002-03; second
position in the world next to USA.
Number of sharebrokers 6,711 in 1995-96; 9,519 in 2002-03.
Turnover in 1993-94 203,703 crore; 28,80,990 crore in 2001.
Market capitalisation ratio (an indicator of the market size)
increased to 85% in 2000 from 20.6% in 1990-91.
NSEs S&P CNX Nifty and BSEs Sensex are two widely used
stock exchange indices.

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Recent developments in Indian Stock Market

1) New measures of risk management system:

a) Reduction of price volatility: To reduce this, the derivatives
products, Index futures, Index options, stock options and stock
futures were introduced.
b) Placement of circuit breakers
c) Intraday trading limit
d) Mark to market margin
2) Investigations in case a company violate any law.
3) Investor awareness campaign
4) Ban on insider trading
5)Trading Cycle Under T + 2

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 BSE

Is the oldest stock exchange in Asia What is now popularly

known as the BSE was established as "The Native Share &
Stock Brokers' 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.

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 It is also one of the worlds leading exchanges
(3rd largest in July 2012) for Index options trading (Source:
World Federation of Exchanges).
The companies listed on BSE command a total market
capitalization of USD Trillion 1.2 as of October 31, 2012.
BSE is the first exchange in India and the second in the world
to obtain an ISO 9001:2000 certification.
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 On-Line
trading System (BOLT).
Presently, it is ISO 27001:2005 certified, which is a ISO
version of BS 7799 for Information
Security.

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 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-to-market 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 transaction in MF schemes.

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 BSE offers AMFI Certification for Mutual Fund Advisors
through BSE Training Institute (BTI)
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'
BSE has been awarded by the World Council of Corporate
Governance the Golden Peacock Global CSR Award for its
initiatives in Corporate Social Responsibility (CSR).

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 Sensex the index the world tracks

Sensitivity Index, SENSEX, is India's first and most popular Stock

Market benchmark index.
is a value-weighted index composed of 30 largest & most
actively traded stocks that started Jan 1, 1986.
These companies account for around 50% of the market cap of
the BSE.
The base value is 100 on April 1, 1979, and the base year is
1978-79.
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.

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 Sensex

The index is calculated based on a free-float capitalization

method; a variation of the market cap method.
Instead of using a company's outstanding shares it uses its
float, or shares that are readily available for trading.

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 Stock Categories - BSE
The main factor for dividing into categories is market
capitalisation. Other factors are SEBI parameters, number of
years of listing, equity capital, liquidity, etc.
A Group comprises stocks that have fairly good growth rate.
They offer dividend to investors and have good appreciation
over time. They have the facility to carry forward to the next
settlement cycle.
B Group is basically a subset of all the listed stocks and the
stocks listed in this category have greater market
capitalisation than the rest of the stocks.

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 NSE
Is a stock exchange located at Mumbai, India.
It is the largest stock exchange in India in terms of daily
turnover and number of trades, for both equities and
derivative trading.
The NSE's key index is the S&P CNX Nifty, known as the NSE
NIFTY (National Stock Exchange Fifty)
Is mutually-owned by a set of leading financial institutions,
banks, insurance companies and other financial
intermediaries in India
Was incorporated in 1992

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 NSE

is mutually-owned by a set of leading financial institutions,

banks, insurance companies and other financial intermediaries
in India
There are at least 2 foreign investors NYSE Euronext and
Goldman Sachs who have taken a stake in the NSE
As of 2006, the NSE VSAT terminals, 2799 in total, cover more
than 1500 cities across India.
NSE has a market capitalization of around US$1 trillion and
over 1,652 listings as of July 2012.

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 NSE

NSE is the 3rd largest stock exchange in the world in terms of

the number of trades in equities.
It is the 2nd fastest growing stock exchange in the world with a
recorded growth of 16.6%
NSE commenced operations in the Wholesale Debt Market
(WDM) segment in June 1994.
The Capital market (Equities) segment of the NSE commenced
operations in November 1994, while operations in the
Derivatives segment commenced in June 2000.

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 Pioneering Efforts of NSE

Being the first national, anonymous, electronic limit order

book (LOB) exchange to trade securities in India. Since the
success of the NSE, existent market and new market
structures have followed the "NSE" model.
Setting up the first clearing corporation "National Securities
Clearing Corporation Ltd." in India. NSCCL was a landmark in
providing innovation on all spot equity market (and later,
derivatives market) trades in India.
Co-promoting and setting up of National Securities
Depository Limited, first depository in India

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 Pioneering Efforts of NSE

Setting up of S&P CNX Nifty.

NSE pioneered commencement of Internet Trading in
February 2000, which led to the wide popularization of the
NSE in the broker community.
Being the first exchange that, in 1996, proposed exchange
traded derivatives, particularly on an equity index, in India.
After four years of policy and regulatory debate and
formulation, the NSE was permitted to start trading equity
derivatives
Being the first and the only exchange to trade GOLD ETFs
(exchange traded funds) in India.

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 NSE CNX Nifty 50

Started with a base value of 1000 on Nov. 3, 1995 and is

calculated using free float method which takes into account of
market capitalisation.
Is the list of blue chip stocks listed on the NSE representing 24
sectors in the economy.
Components of Nifty represent 77% of all trading volume on
the NSE and 60% of the total market capitalisation.
Nifty and Sensex are often used as benchmark for tracking the
health of the Indian stock market.

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 Over The Counter Exchange of India (OTCEI)

Was incorporated in 1990 as a Sec. 25 company under the

Companies Act 1956
& is recognized as a stock exchange under Sec. 4 of the SCR Act,
1956.
Was set up to aid enterprising promoters in raising finance for
new projects in a cost effective manner and to provide investors
with a transparent & efficient mode of trading.
Modelled along the lines of the NASDAQ market of USA
Introduced many novel concepts such as screen-based
nationwide trading, sponsorship of companies, market making
and scripless trading.

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 OTCEI
Currently has 115 listings
Has assisted in providing capital for enterprises that build
successful brands for themselves like VIP Advanta, Sonora
Tiles & Brilliant mineral water, etc.
Became the first Exchange in the country to open Investor
Grievance Cells (IGCs) at four Metros Chennai, Delhi,
Mumbai and Kolkata.
It was suggested in Dave Committee report in 1996, that
equity shares of unlisted companies should be allowed to be
traded on OTCEI.
Is the first screen based nationwide stock exchange in India. Is
the first exchange to introduce Market Making in
India
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 OTCEI
Is the first exchange to introduce Sponsorship of companies in
India
Is the only exchange to allow listing of companies with paid-up
below Rs.3 crores
is the only exchange to allow companies with less than 3 year
track record to tap capital market
has shifted trading from counter receipts to share certificates
has introduced Weekly Settlement Cycle
allows short selling
allows demat trading through NSDL
has tied-up with NSCCL for Clearing

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 OTCEI is helpful for

high-technology enterprises
companies with high growth potential
companies focused on new product development
entrepreneurs seeking finance for specific business
projects

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 Inter-connected Stock Exchange of India Ltd. (ISE)
The Inter-connected stock exchange of India Limited started its operation
in Mumbai in 1998. Inter-connected stock exchange is an association of
the 14 regional stock exchanges
It is a national-level stock exchange, providing trading, clearing,
settlement, risk management and surveillance support to its trading
members
Has floated ISE Securities & Services Ltd. (ISS) as a wholly-owned
subsidiary under the policy formulated by the SEBI for Revival of Small
Stock Exchanges.
The policy enunciated by the SEBI permits a stock exchange to float a
subsidiary, which can take up membership of larger stock exchanges, such
as the NSE, and Bombay Stock Exchange Ltd. (BSE).

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 ISE
ISS has been registered by SEBI as a Trading-cum-Clearing Member in the
Capital Market segment and Futures & Options segment of NSE and
Capital Market segment of BSE.
Trading Members of ISE can access NSE and BSE by registering themselves
with SEBI as Sub-brokers of ISS.
Thus, the trading intermediaries of ISS can access other markets in
addition to the ISE market and their local market.
Provides the investors in smaller cities, a one-stop solution for cost-
effective and efficient trading and settlement services in securities.

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 Securities Exchange Board of India (SEBI)
A major development in the Indian capital market
Established on 12 April 1988 on the lines of the Securities and
Investment Board of UK.
Regulate and promote the securities market by:
Providing fair dealings in the issues of securities and ensuring a market
place where funds can be raised at a relatively low cost;
Providing a degree of protection to the investors and safeguard their
rights and interests so that there is a steady flow of savings into the
market;
Regulating and developing a code of conduct and fair practices by
intermediaries like brokers, merchant bankers to make them
competitive and professional.

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