Articles and Bye-laws of

Gauhati Stock Exchange

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A PROJECT REPORT ON

Articles and Bye-laws of the Gauhati

Stock Exchange

SUBMITTED BY

SHUVOBROTO BHATTACHARYYA
DEPARTMENT OF BUSINESS ADMINISTRATION,
ASSAM UNIVERSITY, SILCHAR
JUNE, 2010
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DECLARATION

I, Shuvobroto Bhattacharyya, hereby declare that the project report namely,

“Articles and Bye-laws of the Gauhati Stock Exchange” prepared by me is an
original work, is the result of independent research carried out by me in partial
fulfillment of the MBA program of Assam University, Silchar. To the best of
my knowledge and belief, this research is an original piece of my work and is
the sheer outcome of my efforts and has not been submitted to any other
University or Institution for the award of any degree or diploma.
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ACKNOWLEDGEMENT

At the very outset, I take the opportunity to convey my heartiest gratitude

to those persons whose cooperation, suggestions and support paved the way for
the accomplishment of my work successfully.

I am extremely grateful to Shri R.C. Choudhury, the General Manager of

The Gauhati Stock Exchange Limited, Guwahati for giving me the golden
opportunity to pursue my summer internship programme in this esteemed
organization.

I extend my warm thanks to all the members of this office, who have
extended their kind support whatever & wherever needed. I also extend my
gratitude to the Department of Business Administration, Assam University
because it is the endeavor of the faculty that has given me such a scope.

Last but not the least, I am immensely grateful to my family members,

who not only rendered sustained help, moral and encouragement but also
provide me the necessary motivation for this work.

With regards

Shuvobroto Bhattacharyya
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PREFACE

This project has been carried out while working as summer trainee in The
Gauhati Stock Exchange Limited, Guwahati. All efforts have been made to
know the Articles and Bye-laws of the Gauhati Stock Exchange. All efforts
have been made so that the information gathered is free from any biasness.

Besides gathering information from the institutional guide, it has been

my endeavor to gather information from the brokers and other trading staffs
also.

Many interesting facts have come out in course of investigation. Every

endeavor has been made so that the result remains meaningful as well as
fruitful.

Further, I solemnly declare that all information furnished in this project is

true to the best of my knowledge.

Shuvobroto Bhattacharyya

MBA 3rd Semester

Assam University

Silchar
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EXECUTIVE SUMMARY
Title of the project: Articles and Bye-laws of the Gauhati Stock
Exchange

Name of the organization: The Gauhati Stock Exchange

Organizational Guide: Sri R.C.Choudhury

Objective of the study:

(a) To have an idea about the various Articles and Bye-laws of the
Gauhati Stock Exchange
(b) To gather some knowledge about the Bye-laws of trading on
Exchange.
(c) To understand the Articles in a better way.
(d) To understand the trends of trade in the stock market in the last few
years.

Methodology: Descriptive research type

Data Source: For the collection of data secondary source has been
used. Data has been collected from the internal source of the organization.
Further information is gathered from the records, Internet and staff of the
company.
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CONTENTS
SECTION A – Introduction 2 - 13
1.1 Introduction of Stock Exchange 10 - 11
1.2 Historical Background of Stock Exchanges 11 - 12
1.3 About the Organization 12 - 13

SECTION B - Research Design 14 - 15

2.1 Introduction 14
2.2 Research Objective 14
2.3 Scope of Research 14
2.4 Research Methodology 14
2.5 Data Source 15
2.6 Limitation of the Study 15

SECTION C – Analysis of the topic 16 - 23

3.1 Introduction 17 - 19

3.2 History 19 - 20

3.3 Regulatory Framework related with Trade Practices in

Securities Market 20 - 23

SECTION D – Bye-laws of trading

on the exchange 24 - 30

4.1 Trading days 24

4.2 Alteration or cancellation of Exchange Holidays 24
4.3 Trading Segments 24
4.4 Restrictions on trading 24
4.5 Trading Sessions 24
4.6 Eligibility to trade 25
4.7 Permission to trade through trader workstations 25
4.8 Trading during good behavior 25
4.9 Management of the ATS 25
4.10 Prices 25
4.11 Daily official list 25
4.12 Trading Facility 26
4.13 Registration and De-registration of Approved Users 26
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4.14 Operational Parameters for Trading

4.15 Loss of access to ATS 26

4.16 Loss of closing out-Trading member’s responsibility 26
4.17 Maintenance of Relevant Records 27
4.18 Trade management 27
4.19 Trading Member Liable for Trades 28
4.20 Trades Irrevocable 28
4.21 Order validation 28
4.22 Matching Rules 29
4.23 Types of Transactions Allowed 29
4.24 Transactions not allowed 29
4.25 Transactions in Government Securities and Debentures 30
4.26 Suspension of Trading 30
4.27 Use of technology 30

SECTION E – Articles of Association 32 – 38

SECTION F – Conclusion 39 - 40

SECTION G – Bibliography 41 - 42
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List of Abbreviation

GOI – Government of India

GSE –The Gauhati Stock Exchange Limited

IPO – Initial Public Offerings

NSE - National Stock Exchange

BSE - Bombay Stock exchange

CDSL – Central Depository Services (India) Limited

NSDL – National Securities Depositories Limited

SEBI – Securities and Exchange Board of India

SBTS – Screen Based Trading System

WAP – Wireless Application Protocol

BOLT - BSE On Line Trading (System)

TWS - Trader Work Station

CRSS - Compulsory Rolling Settlement Segment

CC – Clearing Corporation

NSCCL – National Securities Clearing Corporation

SAT - Securities Appellate Tribunal

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Section A
Introduction
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Stock Exchanges in
India

1.1 Introduction of Stock

Exchange
A Stock Exchange is the single most important institution in the secondary market for
providing a platform to the investors for buying and selling of securities through its member.
It is a place where already issued securities of companies are bought and sold by investors.
Stock Exchanges are an organized marketplace, either corporation or mutual organisation,
where members of the organisation gather to trade company stocks or other securities. The
members may act either as agents for their customers, or as principals for their own accounts.
It also facilitates for the issue and redemption of securities and other financial instruments
including the payment of income and dividends.

Traditionally a stock exchange is an association of its members or stock brokers,

formed for the purpose of facilitating the buying and selling of securities by the public and
institutions at large and regulating its day to day operations. Of late however, stock
exchanges in India are operating now with due recognition from Security and Exchange
Board of India (SEBI)/ the Government of India under the securities contracts (Regulation)
Act, 1956. There are 24 recognized stock exchanges in India, out of which one has not
commenced its operations. Out of the 23 remaining stock exchanges, the trading volumes are
recorded. Most of the regional stock exchanges have formed subsidiary companies and
obtained membership of Bombay Stock Exchanges (BSE), or National Stock Exchange
(NSE) or both. Members of these stock exchanges are now working as sub brokers of BSE /
NSE brokers.

Securities listed on the stock exchange(s) have following advantages:-

√ The stock exchange(s) provides a fair market place
√ It exchanges liquidity
√ There is continuous reporting of their prices
√ Full information is available on the companies
√ Rights of investors are protected

List of Stock Exchanges in India

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• Bombay Stock Exchange

• National Stock Exchange
• Interconnected Stock Exchange
• Regional Stock Exchanges
o Ahmedabad Stock Exchange
o Bangalore Stock Exchange
o Bhubaneshwar Stock Exchange
o Calcutta Stock Exchange
o Cochin Stock Exchange
o Coimbatore Stock Exchange
o Delhi Stock Exchange
o Guwahati Stock Exchange
o Hyderabad Stock Exchange
o Jaipur Stock Exchange
o Ludhiana Stock Exchange
o Madhya Pradesh Stock Exchange
o Madras Stock Exchange
o Mangalore Stock Exchange
o Meerut Stock Exchange
o OTC Exchange Of India
o Pune Stock Exchange
o Saurashtra Kutch Stock Exchange
o Uttar Pradesh Stock Exchange
o Vadodara Stock Exchange

1.2 Historical Background of Stock Exchanges

Earliest records of securities trading in India are available from the end of the
eighteenth century. Before 1850, there was business conducted in Mumbai in shares of the
East India Company, which were considered as securities for buying, selling\ & exchange.
The shares of the Commercial Banks, mercantile bank & the Bank of Bombay were some of
the prominent shares traded.
In 1850, the Companies Act was passed & that heralded the commencement of
the joint stock companies in India.
It was the American civil war that helped Indian to establish broking business.
The leading broker, Shri Premchand Roy Chand designed & developed the procedure to be
followed while dealing in shares.
In 1874, the Dalal Street became the permanent place for meeting the brokers to
conduct their business. The brokers organized an association on 9th July 1875 known as
“Native share 7 stock Brokers Association” to protect the stock & interest of the native
brokers. That was the foundation of the Stock Exchange, Mumbai. The Exchange was
established with 318 members. The Stock Exchange, Mumbai did not have to look back as it
started riding high in the ladder of growth. In January 1899, Mr. James M.Maclen, M.P
inaugurated the Brokers hall.
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After the 1st World War, the stock exchange was housed properly at an old
building near the Town Hall. In 1928 the present premises were acquired surrounded by
Dalal Street, Bombay Samacher Marg and Hamman Street. At new building the present
location was constructed and was occupied on 1st December 1930.
In 1950, the regulation of business in securities and stock exchanges became an
exclusively Central Govt. subject following adoption of the constitution of India. In 1956,
the Parliament of India passed the Security Contract (Regulation) Act. To regulate the
security market, SEBI was initially established on October 12, 1988, as an interim board
under control of the Ministry of Finance, Govt. of India. In 1992 the SEBI Act came into
existence.
In 1992 Over the Counter Exchange of India (OTCEI) came into existence where
securities of small companies are listed. In 1994, National Stock Exchange (NSE) came
into existence, which brought an end to the open out cry system of trading securities which
was in vogue for 150 years, and introduced Screen Board Trading (SBT) system. BSE’s
one line trading system was launched on March 14, 1995. Now the trading in securities is
done using screen based trading system through duly authorized members of the exchange.

1.3 About the Organiation

The Gauhati Stock Exchange Ltd. (GSE) is located in Guwahati, Assam, India. It
was incorporated on 29 November 1983 and it was recognized by the Government of India on
1 May 1984. Those were the heydays of the Indian stock market and the GSE really took off
like anything. It was very vibrant and progressive. It was the fourth Stock Exchange in India
to computerize. In the eighties when the Reliance tapped the investor market to raise
resources, GSE contributed almost ten percent of the total resources mobilized by reliance
through numerous trances. Even local companies, like Premier Cryogenics and Prag Bosimi
saw their IPOs oversubscribed eight times through GSE.

1.3.1 Company’s Objective: - GSE has some organizational objective,

which are:
(i) It has a mission to regulate and control the transactions of business in stocks, in
shares, debentures, derivatives and other like securities and future and option transactions in
any of such securities on the stock exchange;
(ii) It will protect and support the character and status of brokers, dealers and jobbers
in stocks, shares and like securities and to further the interest of both brokers and the public
dealing in Guwahati and elsewhere in Assam and in India in stocks, shares and like
securities.

1.3.2 Achievements of the Gauhati Stock Exchange

Limited:-
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Though this stock exchange is situated at a remote corner of the country, GSE has been
rendering services to the investors of the North East Region. In spite of various location and
infrastructural bottlenecks, the GSE has been able to achieve some mile stones.

• Increase its membership from 21 to 200 at one point of time, thus it is providing
employment opportunities.
• Fully computerized with system integration (LAN & WAN) controlled by SYSTEM
DEPARTMENT.
• Implement a strict margin system thereby managing he risk of the brokers
effectively.
• WAN connectivity through RF (MAIN) / ISDN LINE (BACKUP)/ LEASED LINE
FOR ONLINE TRADING in National Stock Exchange (NSE) and Bombay Stock
Exchange (BSE) (Mumbai).
• Setup investors service cell to provide service to investors, redress their grievances
and depart various information of interest of them.
• Include the investment cult by increasing investors’ population in the region through
various investors’ awareness programmes, seminars, conferences etc.
• Develop an investor’s base for mobilizing fund to some industries set up in this
region.
• In future, it will help chanallising net saving into capital market, which in turn will
help installation of more industries, solving employment in the long run.
• It will increasing investment climate which will install confidence into enterprises to
come in a big way to put up industrial units in our region.
• Now days, the GSE member can operate the trading from any corner of the country.
• It has separate Investors Protection Fund, Investors Service Fund and Settlement
Guarantee Fund for full protection to the investing public.

1.3.3 Services Offered by GSE:

• Access to Cash market in NSE & BSE
• Access to derivatives market in NSE
• Depositary Participant (DP) services in CDSL.
• Investor Services Education Programme
• Training Programmes on Capital Markets, Depository & Derivatives.
• Distribution of mutual fund products.
• Primary Market offerings.

1.3.4 Departments of GSE:

● Personal Cell
● Accounts Cell
● Listing Cell
● Depository Participants Operation
● System Cell
● Investors Service Cell
● Market Surveillance Department
● Member’s Security Cell
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● Training Institution – which is coming very shortly (by next month itself)

1.3.5 Financial Results of the organization : -

Profit/loss for the year ended: - Rs.
2007………………………………………………………..18,514,592.84
2008………………………………………………………..16,873,762.58
2009………………………………………………………..17,651,209.53

Section B
Research
Design
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2.1 Introduction : -
In this chapter, it is discussed in detail about the assigned topic, objective of the study, scope
of the study, research methodology used i.e., data source, research design and limitation of
the study are described.

2.2 Research Objective:-

(a) To have an idea about the various important Articles and Bye-laws of the Gauhati Stock
Exchange.
(b) To gather some knowledge about the Bye-laws of trading on Exchange.
(c) To understand the settlement process in a better way.
(d) To understand the trends of trade in the stock market in the last few years.

2.3 Scope of Research:-

In this study, the Articles and Bye-laws of Gauhati Stock Exchange have been analyzed. It
gives an idea about the various courses of conduct made in the stock market in trading and
settlement part. And also, the various rules regulating trading and settlement have also been
discussed here. Besides that, the trends of trade with the passage of time can also be known
from the analysis.

2.4 Research Methodology:-

The research conducted in the above case is an Analytical one. Here information has been
gathered from the related sources to analyze them in a suitable order. Moreover, some data
have also been analyzed to know the market movement in a better way.

2.4 Data Source: -

The source of information is both primary and secondary. The secondary data has been taken
through the help of internet to get the figures required for the research purpose.

2.5 Limitations of the study: -

A portion of the study has been conducted with the help of different data collected from
secondary sources. So, there is a possibility of including few less accurate or appropriate
information in the report.
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Secondly, the time limit of the training is only 8 weeks, within such a small time it is
very uphill task to prepare a project on such an important and wide subject. Hence, the time
period is also a limitation for the project.

Section C
Analysis of
the topic
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3.1 Introduction: -
BYE-LAWS
PREAMBLE

In exercise of the powers conferred under the Securities Contracts (Regulation) Act,
1956, the Securities Contracts (Regulation) Rules, 1957, and the Securities and Exchange
Board of India Act, 1992, The Gauhati Stock Exchange Ltd., Guwahati, has made the
following Bye-laws which have been approved by the Securities and Exchange Board of
India.

These Bye-laws are known as “The Bye-laws of The Gauhati Stock Exchange,
Guwahati” and are for the sake of brevity and convenience, herein referred to as “these Bye-
laws”.

These Bye-laws came into force from the date of their publication in the Gazette of
India as per he provisions of the Securities Contracts (Regulation) Act, 1956.

These Bye-laws shall at all times be read subject to the provisions of the Securities
Contracts(Regulation) Act, 1956{hereinafter referred to as “SCRA”}, the Securities
Contracts(Regulation) Rules, 1957{hereinafter referred to as “SCRR”}, and the Securities
and Exchange Board of India Act, 1992 {hereinafter referred to as “SEBI Act”}as amended
from time to time and the rules, regulations, directives, orders, guidelines, norms and
circulars issued by the Government of India and/or SEBI there under from time to time and
in case of any inconsistency between these Bye-laws and any of the said enactments then the
specific enactments shall prevail.
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3.1.1 Who can be a Member:

◙ Individual
◙ Corporate entity

Conditions for eligibility for becoming a member:

The selection criteria for individual members and directors in case of corporate
members are:-
Qualifications for individuals –
1. Minimum age of 21 years.
2. Citizenship of India; provided that the Governing Board may in suitable case relax
this condition.
3. Not been adjusted bankrupt or insolvent.
4. Not compounded with his creditors.
5. Not been convicted of an offence involving fraud or dishonesty.
6. Not engaged as principal or employee in any business other than of securities.
7. Not been at any time expelled or declared a defaulter by any other Stock Exchange.
8. Either matriculate or has the 10 plus 2 years qualification. Generally, preference is
given to professionally qualified persons.

Conditions for getting corporate membership of the stock exchange:-

A company as defined in the Companies Act, 1956 shall be eligible to be elected as a

member of a stock exchange if-
1. such company is formed in compliance with the provision of selection 322 of the said
Act,
2. a majority of the directors of such company are shareholders of such company and
also members of that stock exchange; and
3. the directors of such company, who are members of that stock exchange, have ultimate
liability in such company:

A company as defined in the Companies Act, 1956 (1 of 1956), shall also be eligible
to be elected as a member of a Stock Exchange if-
1. such company is formed in compliance with the provisions of Section 12 of the said
Act;
2. such company undertakes to comply with such financial requirements and norms as
may be specified by SEBI for the registration of such company under sub-section (1) of
section 12 of SEBI Act, 1992,
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3. the directors of the company are not disqualified for being members of a stock
exchange under the provisions of the Act and the Director of the company had not held the
offices of the Director in any company which had been a member of the stock exchange and
had been declared defaulter or expelled by the stock exchange; and
4. not less than two directors of the company are persons who possess a minimum two
years’ experience-
(a) in dealing in securities; or
(b) as portfolio managers; or as investment consultants.

3.1.2 Trading Members Capital: - The trading members are required to

maintain the under mentioned capitals with the Exchange:

(i) BASE MINIMUM CAPITAL (BMC): BMC of Rs.10 lakh is to be kept by all the Trading
Members and the same is not available for adjustment towards margin obligations.

(ii) TRADE GUARENTEE FUND (TGF): Trading Members are also required to deposit
with the Exchange a sum of Rs.10 lakhs towards his contribution to the Trade Guarantee
Fund(TGF). The Trading Members are allowed to deposit cash/FDRs/Bank Guarantee (i.e.
Cash & Cash Equivalent) towards their contribution to TGF. TGF will be available for
adjustment towards margins (i.e. for taking trading exposure).

(iii) ADDITIONAL CAPITAL (AC): For availing higher trading limits, Trading members
can deposit additional capital in form of cash & non-cash equivalents. AC will be available
for adjustment towards margins.

3.2 HISTORY: -
The trading on stock exchanges in India used to take place through open outcry
without use of information technology for immediate matching or recording of trades. This
was time consuming and inefficient. This imposed limits on trading volumes and efficiency.
In order to provide efficiency, liquidity, and transparency, NSE introduced a nation-wide on-
line fully-automated screen based trading(SBTS) where a member can punch into the
computer quantities of securities and the prices at which he likes to transact and the
transaction is executed as soon as it finds a matching sale or buy order from a counter party.
SBTS electronically matches orders on a strict price/time priority and hence cuts down on
time, cost and risk of error, as well as on fraud resulting in improved operational efficiency.
It allows faster incorporation of price sensitive information into prevailing prices, thus
increasing the informational efficiency of markets. It enables market participants, irrespective
of their geographical locations, to trade with one another simultaneously, improving the
depth and liquidity of the market. It provides full anonymity by accepting orders, big or
small, from members without revealing their identity, thus providing equal access to
everybody. It also provides a perfect audit trial, which helps to resolve disputes by logging in
the trade execution process in entirety. This diverted liquidity from other exchanges and in
the very first year of its operation, NSE became the leading stock exchange in the country,
impacting the fortunes of other exchanges and forcing them to adopt SBTS also. Today India
can boast that almost 100% trading takes place through electronic order matching.
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Technology was used to carry the trading platform from the trading hall of stock exchanges
to the premises of brokers. NSE carried the trading platform further to the PCs at the
residence of investors through the Internet and to handheld devices through Wireless
Application Protocol (WAP) for convenience of mobile investors. This made a huge
difference in terms of equal access to investors in a geographically vast country like India.

Talking about BSE, the exchange had an open outcry trading till March 1995, where
member-brokers used to assemble in a trading ring for doing transactions in securities. It had
switched over to a fully automated computerized mode of trading known as BOLT (BSE On
Line Trading) System w.e.f. March 14, 1995. Through the BOLT system, the member-
brokers enter orders for purchase or sell of securities from Trader Work Stations (TWSs)
installed in their offices instead of assembling in the trading ring. The trading in securities at
the exchange is conducted in an anonymous; environment and the counterparty identity are
not revealed. The buyers and sellers of securities do not know the names of each other. The
member-brokers of the Exchange were permitted to open trading terminals only within the
city limits of Mumbai till 1996. Later the Exchange obtained permission from SEBI for
expansion of its BOLT network to locations outside Mumbai.

3.3 Regulatory Framework related with Trade

practices in Securities Market
The four main legislations governing the securities market are: -

(a) the Securities Contracts (Regulation) Act, 1956, which provides for regulations of
transactions in securities through control over stock exchanges;
(b) the Companies Act, 1956, which sets out the code of conduct for the corporate sector in
relation to issue, allotment and transfer of securities, and disclosures to be made in public
issues;
(c) The SEBI Act, 1992 which establishes SEBI to protect investors and develop and regulate
securities market; and
(d) the Depositories Act, 1996 which provides for electronic maintenance and transfer of
ownership of dematerialized securities.

Securities Contracts (Regulation) Act, 1956

It was enacted to prevent undesirable transactions in securities by regulating the business

dealing therein and by providing for certain other matters connected therein. This is the
principal Act, which governs the trading of securities in India. It provides for direct and
indirect control of virtually all aspects of securities trading and the running of stock
exchanges and aims to prevent undesirable transactions in securities. It gives Central
Government regulatory jurisdiction over:
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(a) stock exchanges through a process of recognition and continued supervision,

(b) contracts in securities, and
(c) Listing of securities on stock exchanges.

As a condition of recognition, a stock exchange complies with conditions

prescribed by Central Government. Organized trading activity in securities takes place on a
specified recognized stock exchange. The stock exchanges determine their own listing
regulations which have to conform to the minimum listing criteria set out in the Rules.

SECURITIES CONTRACT (REGULATION) RULES,

1957
The Central Government has made Securities Contracts (Regulation) Rules, 1957, as
required by sub-section (3) of the Section 30 of the Securities Contracts (Regulation) Act,
1956 for carrying out the purpose of the Act. The powers under the SC®R, 1957 are
exercisable by SEBI.

SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992

To ensure effective regulation of the market, SEBI Act, 1992 was enacted to establish
SEBI with statutory powers for:
(a) protecting the interests of the investors in securities,
(b) promoting the development of the securities market, and
(c) regulating the securities market.

SEBI has been obligated to protect the interest of the investors in securities and to
promote and development of, and to regulate the securities market by such measures, as it
thinks fit. SEBI, in particular, has powers for:-

(a) regulating the business in stock exchanges and any other securities markets;
(b) registering and regulating the working of stock brokers, sub-brokers, share transfer
agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant
bankers, underwriters, portfolio managers, investment advisers and such other
intermediaries who may be associated with securities markets in any manner;
(c) registering and regulating the working of the depositories, participants, custodians
of securities, foreign institutional investors, credit rating agencies and such other
intermediaries as SEBI may, by notification, specify in this behalf;

SEBI (STOCK BROKERS & SUB-BROKERS) RULES, 1992

The Central Government has made SEBI (Stock-brokers and Sub-brokers) Rules,
1992 under the powers conferred by section 29 of SEBI Act, 1992. These rules provide these
provide the definition of a Stock-broker and a Sub-broker and specify that they shall not buy,
sell and deal in securities, unless they hold a certificate granted by SEBI.
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SEBI (INSIDER TRADING) REGULATIONS, 1992

Insider trading is prohibited and is considered an offence vide SEBI (Insider Trading)
Regulations, 1992. The Regulations prohibits an insider from dealing (on his own behalf or
on behalf of others) in securities on the basis unpublished price sensitive information,
communicating such information and also counseling any other person to deal in securities of
any company on the basis of such information.
In order to strengthen insider-trading regulations, SEBI has proposed a code of
conduct for listed companies, its employees, analysts, market intermediaries and professional
firms. The regulations also requires initial and continual disclosure of shareholding by
directors or officers, who are insiders, and substantial shareholders (holding mare than 5%
shares/voting rights) of listed companies. In this regard, SEBI can take any of the following
actions:
(a) directing the insider not to deal in securities in any particular manner;
(b) prohibiting the insider from disposing of any of the securities acquired in
violation of these regulations;
(c) restraining the insider to communicate or counsel any person to deal in
securities.

Any person aggrieved by an order of SEBI, on and after the commencement of the
securities laws (Second Amendment) Act, 1999 (i.e., after 16th December 1999), under these
regulations may prefer an appeal to a Securities Appellate Tribunal (SAT) jurisdiction in the
matter.

SEBI (PROHIBITION OF FRAUDULENT AND UNFAIR TRADE

PRACTICES RELATING TO SECURITIES MARKETS)
REGULATIONS, 1995

This act enables SEBI to investigate into cases of market manipulation and fraudulent
and unfair trade practices. These regulations empower SEBI to investigate into violations
committed by person, including an investor, issuer or an intermediary associated with the
securities market. The regulations specifically prohibit market manipulation, misleading
statements to induce sale or purchase of securities, unfair trade practices relating to
securities. SEBI can conduct investigation upon information received by it, through an
investigation officer in respect of conduct and affairs of any person dealing,
buying/selling/dealing in securities. Based on the report of the investigating officer, SEBI can
initiate action for suspension or cancellation of registration of an intermediary. SEBI, on
receipt of the report from the investigating officer may issue directions for ensuring due
compliance with the provisions of the Act, Rules and Regulations made thereunder. The
directions may be issued for the following purposes:
 24

(a) directing the person concerned not to deal in securities in any particular manner;

(b) requiring the person concerned to call upon any of its of its officers, other employees or
representatives to refrain from dealing in securities in any particular manner;

(c) prohibiting the person concerned from disposing of the securities acquired in
contravention of these regulations;

(d)directing the person concerned to dispose of any such securities acquired in any such
contravention of these regulations, in such manner as SEBI may deem fit, for restoring the
status-queue ante.

SEBI may, in the circumstances specified in Regulation 11, and without prejudice to
its power under Regulation 12, initiate action for suspension or cancellation of registration of
an intermediary holding a certificate of registration under section 12 of the Act.
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Section
D
Bye-laws of
trading on the
exchange
 26

The Bye-laws relating to trading on the exchange of the Gauhati Stock Exchange are:

4.1 Trading days

The exchange shall be open on all days except on such exchange holidays as the exchange
authority may declare in advance, or as may be specified by SEBI. The days on which the
ATS of the exchange shall be available for trading and securities other than mock trading
shall be called as Trading Days

4.2 Alteration or cancellation of Exchange Holidays

In exceptional circumstances and for reasons to be recorded in writing the Managing Director
may at any time:

(i) Alter or cancel any of the exchange holidays fixed in accordance with the Bye-laws.

(ii)Keep the ATS of the exchange available for trading on any day not withstanding that such
day had earlier been declared as Exchange Holiday.

(iii)Close trading on the ATS of the exchange for one day.

4.3 Trading Segments

The trading segment of the exchange may include cash market, debt market, government
securities market, money market, futures and options market and other segments, as may be
decided by the Governing Board/Relevant Authority and as may be specified in the relevant
regulations from time to time. The Governing Board or the Managing Director may admit
securities for dealing on the respective trading segments of the exchange, as may be eligible
under the Securities Contracts (Regulation) Act, 1956.

4.4 Restrictions on trading

The Governing Board or Managing Director or the Relevant Authority may, from time to
time impose such restrictions on trading in such securities or on such trading member, as may
be provided in the Bye-laws relating to risk management.
 27

4.5 Trading Sessions

The Governing Board or Managing Director or the Relevant Authority may prescribe
different trading sessions on the ATS of the exchange and also decide on the timings and
operational requirements for the same, as may be provided in the relevant Regulations from
time to time. The Governing Board or Managing Director or the Relevant Authority may
reduce, extend or otherwise alter the timings of the trading sessions for any particular trading
day.
4.6 Eligibility to trade

Managing Director or the Relevant Authority may, at his / its discretion, grant permission to
the trading member of the exchange or their authorized persons or approved users to trade
through the TWS connected to the ATS of the Exchange. The trading member shall be solely
responsible for all the transactions done by or through the respective TWSs on the exchange ,
subject to the provisions contained in this bye-laws.

4.7 Permission to trade through trader workstations

No person shall be permitted to trade through the TWS connected to the ATS unless such
person complies with the requirements prescribed in the relevant Regulations or with such
requirements as the Governing Board or Managing Director or Relevant Authority may
prescribe from time to time.

4.8 Trading during good behavior

A person shall be allowed to trade on the ATS of the exchange only during good behavior
and shall be bound to observe the provisions contained in the rules, Bye-laws and
Regulations of the exchange. The Governing Board or Managing Director or the Relevant
Authority may, in its / his absolute discretion, refuse any person to trade on the ATS and
may, at any time, withdraw or terminate the right of trading of any such person for any
reason whatsoever, to be recorded in writing for internal records.

4.9 Management of the ATS

The management of the ATS shall be under the charge of the employees of the exchange or
such other agency authorized by the exchange on this behalf.

4.10 Prices

Prices of the transactions in securities dealt in on the ATS of the exchange shall be recorded
daily in the manner , as may be prescribed in the relevant Regulations from time to time. No
price of any transaction done on the exchange shall be recorded unless it is made in the
regular course of trading on the ATS.

4.11 Daily official list

 28

The daily official list of prices shall be issued by or under the authority of the exchange. Such
daily official list of the prices may be published or provided in such media as may be decided
by the exchange from time to time, or may be made available on the official website of the
exchange.

4.12 Trading Facility

Transactions on the ATS of the exchange ay be effected through order driven, quote
driven( trough market makers or through jobbers) and or other such systems as the Exchange
may provide for training and as ay be specified in the relevant regulations from time to time.

The exchange at its discretion may provide the ATS to its trading members and their sub
brokers, revisers, authorized persons and authorized users, which shall be on a non-
discriminatory basis.

No trading member shall have any title, right or interest in the ATS of the Exchange, its
facilities and software and the information provided on the ATS and no such claim shall lie
against the exchange at any time.

The permission to use the ATS may be given to a trading member, subject to a compliance
with such terms and conditions as the Exchange may prescribe from time to time and as may
be specified in the relevant regulations which may, inter alia, include payment of such
deposits and / or charges, as may be provided in the relevant regulations from time to time.

A trading member shall not by himself or through any person on his behalf publish, supply,
show or make available to any other person or reprocess , retransmit, store or use the
facilities of the ATS.

4.13 Registration and De-registration of Approved Users

Trading members shall allow only their sub-brokers, authorized persons and / or approved
users to operate the TWS approved by the Exchange, subject to the following conditions:

(i) The appointment of users by a trading member and approval thereto by the Exchange
shall be subject to such terms and conditions and submission of applications in such forms as
the Relevant Authority may prescribe from time to time.

(ii) The Exchange may, at its discretion, de-register sub-brokers, remisiers, authorized
persons and approved users of a trading member for failure to comply with the applicable
provisions of the Rules, Bye-laws and Regulations, as may be in force from time to time, and
the concerned trading member shall continue to be liable for acts of commissions and / or
omissions and / or loss / damage consequent to the de-registration, for such acts of
 29

commissions and / or omissions and / or loss / damage committed by such person/s upto the
time of de-registration by the Exchange.

(iii) The Relevant Authority shall have the right to disallow any person from being registered
as a sub-broker, remisier, an authorized person or an approved user, without assigning any
reason whatever, and may allow registration with such conditions, as may be deemed
necessary by the Relevant Authority.
(iv) No person shall be appointed at any time as a sub-broker, remisier, an approved person
or an approved user by more than one trading member.

(v) The Relevant Authority shall have the power to prescribe different levels of usage on the
ATS, provisions for enquiry on the TWS, provision for order entry, etc. by the sub-brokers,
remisiers, an authorized person or approved user of member.

4.14 Operational Parameters for Trading

The Managing Director or Relevant Authority may prescribe from time to time in the
relevant Regulations the operational parameters regarding transactions in securities on the
ATS of the Exchange. Such operational parameters may include:

(i) Determination of functional details of the TWS including the system design, user
infrastructure, user interface and system operations.

(ii) Limits on the spread between bid and offer rates

(iii) Fixation of market lots and /or minimum quantity of securities which may be offered to
be bought or sold.

(iv) Fixation of tick sizes

(v) Determination of the types of trades permitted for a trading member and for a security.

(vi) Specifications of different order books, types of orders, order conditions and other details
related to orders and trades and other matters, which may affect smooth operation of
trading in securities keeping inn view the public interest.

4.15 Loss of access to ATS

In the event of a failure or malfunctioning of a trading member’s TWS and / or loss of access
to the ATS, the Exchange may, at its discretion, and without any guarantee, undertake on
behalf of the trading member to close-out the outstanding transactions of the trading member
on a valid request received from such trading member, subject to such terms and conditions
as the Exchange may impose from time to time.

4.16 Loss of closing out-Trading member’s responsibility

 30

The trading member shall be fully accountable for the closing out transactions affected by the
exchange on his behalf and shall indemnify the exchange against any loss or cost arising out
of or incidental to such close out of transactions, either directly or indirectly.

4.17 Maintenance of Relevant Records

A trading member shall maintain the relevant records relating to the orders received from his
client or modifications there of, as may be specified in the chapter relating to compliance
from time to time.

4.18 Trade management

Trading may be allowed on the ATS in such securities as may be admitted to dealings on the
Exchange and for such categories of trading members, trade types, market types, settlement
periods and for such trading hours, as the Managing Director or Relevant Authority may
specify from time to time or as may be provided in the Regulations from time to time.

4.19 Trading Member Liable for Trades

A trading member shall be liable for all the trades executed on the ATS arising out of orders
entered into the system by him. The trading member shall be solely responsible for all the
acts of commission and / or omission of authorized persons or approved users, employees
and other persons deployed by such trading members, sub-brokers, remisiers, in relation to
performance of obligations arising therefrom connected therewith and incidental to such acts
of commission and / or omission.

4.20 Trades Irrevocable

Trades executed on the ATS are irrevocable and locked-in and shall be cleared and settled in
accordance to the Rules, Bye-laws and Regulations of the Exchange. The Exchange may,
however, by a notice annul the trades on an application by a trading member in that behalf. If
the Governing Board or Managing Director is satisfied, after hearing the other trading
member /s to the trades, that the trades are required to be annulled on account of fraud or
willful misrepresentation or the material mistake in the trade.

4.21 Order validation

Orders placed on the ATS shall be subject to such validation checks relating to quantity or
value etc., as may be prescribed in the relevant Regulations from time to time.

4.22 Matching Rules

The Exchange may from time to time specify in the relevant Regulations the rules or
principles to be applied for matching orders on the ATS of the Exchange, which may vary for
the different order books.
 31

4.23 Types of Transactions Allowed

Save as otherwise provided, the following types of transactions in securities may be allowed
by the Governing Board or Relevant Authority from time to time:

For spot delivery contract as defined in the SCRR

For hand delivery, that is, delivery of securities and payment of funds on the prescribed date,
as may be notified by the Exchange from time to time, which date shall not be more than
such number of days following the date of the transaction as may be specified by SEBI from
time to time.

For rolling statement, i.e delivery of securities and payment of funds on such dates, following
the date of such transaction, as may be notified by SEBI / Exchange / Clearing Agency from
time to time.

4.24 Transactions not allowed

Transactions having any of the following characteristics shall not be allowed and shall be
liable to be excluded from the purview of the Settlement Guarantee Fund:

Transactions for carry over of securities from one settlement to another between two or more
trading members, whether done on the ATS or not, structured deals, cross deals, negotiated
deals, financing or financial deals, or deals affected to manipulate or subvert the fair price of
a security or orders of two or more clients matched by a trading member within his office or
as may be transacted on a trade for trade basis directly between the buyer and the seller and
whose settlement maybe done through the clearing agency or directly between the buying
trading member and selling trading member.

4.25 Transactions in Government Securities and

Debentures

Transactions in Government Securities and in bearer and registered debentures admitted to

dealings on the Exchange may be for spot delivery or for rolling statement or for hand
delivery. Transactions in Government Securities and in bearer and registered debentures shall
be made through the ATS of the Exchange or through any other automated trading
mechanism established with the approval of the relevant Regulatory authority, and the
delivery of such Government Securities and bearer and registered debentures shall be made
in physical form or in demat form, as may be prescribed by SEBI and / or any other
regulatory authority from time to time.

4.26 Suspension of Trading

The Exchange shall intimate to the other stock exchanges immediately about suspension of
trading in any security by it for market manipulation, price rigging, or any other similar
 32

reason. Where information about suspension of trading in any security for reasons such as
market manipulation, price rigging or any other similar reason is received by the Exchange
from any other stock exchange, the Exchange shall ipso facto suspend trading in such
security, if allowed for trading without notice to the issuer.

4.27 Use of technology

The Exchange shall from time to time specify necessary norms and requirements relating to
use of technology, which may include equipment, software, network, etc., to ensure safety,
security and integrity of the ATS provided by the Exchange so as not to endanger or harm in
any way the interest of investors and / or of the Exchange.

Section
E
Articles of
Association
 33

1. Title and Commencement

1.1 This Scheme shall be called The Gauhati Stock Exchange Limited (Corporatisation and
Demutualisation) Scheme, 2005 (hereinafter referred to as "this Scheme").

1.2 This Scheme shall have effect on its publication under sub-section (4) of Section 4B of
the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as "SCRA").

1.3 The Gauhati Stock Exchange Limited (herein after referred to as “GSE”) shall be
corporatised and demutualised in accordance with this Scheme on and from the Appointed
Date as may be notified by the Securities and Exchange Board of India (hereinafter referred
to as “SEBI”) in respect of GSE under Section 4A of the SCRA:

Provided that the activities specified in the respective clauses of this Scheme shall be
implemented as per the time schedule specified in those clauses.

2. Definitions

In this Scheme, unless the context otherwise requires, -

2.1 “Due Date" means the date, as may be determined by the Council of Management of
GSE, which shall not be later than 3 months from the date of publication of the order under
sub-section (7) of section 4B of the SCRA.
 34

2.2 "Gauhati Stock Exchange Limited" (GSE) means the company limited by guarantee
registered under the Companies Act, 1956, having its principal place of business at Saraf
Building Annexe, A.T. Road, Gauhati – 781 001 and recognised as a stock exchange by the
Central Government under the SCRA, and which shall be re-registered as a company limited
by shares, in pursuance of clause 3 of this Scheme.

2.3 "Governing Board" means the Board of Directors of GSE.

2.4 "Member" means a person who is a member of GSE on the day preceding the date of
re-registration, as per the register of members maintained by it.

2.5 "Shareholder" means a person who holds any equity share(s) of GSE.

2.6 "Trading Member" means a stock broker of GSE and registered with SEBI as such
under the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992.

2.7 Words and expressions used and not defined in this Scheme but defined in the SEBI
Act, 1992, the Depositories Act, 1996, the SCRA, the Companies Act, 1956, the Rules and
Regulations made under these Acts, the Memorandum and Articles of Association, Rules,
Bye-laws and Regulations of GSE shall have the same meanings respectively assigned to
them in the above mentioned Acts, Memorandum and Articles of Association, Rules, Bye-
laws and Regulations.

3. Re-registration

3.1 GSE shall re-register itself, prior to Due Date, as a company limited by shares under
section 12 of the Companies Act, 1956, in the name and style of “Gauhati Stock
Exchange Limited”, in accordance with section 32 of the Companies Act, 1956.

3.2 The Members, as may be identified by the Council of Management of GSE, shall
each subscribe to and pay for 1,000 fully paid up equity shares of Rs. 10/- each for
cash at par, for the purpose of its re-registration.

4. Governing Board
 35

4.1 The first Governing Board on re-registration shall comprise of Directors as are named
as first directors in the Articles of Association of GSE, subject to the condition that
the representatives of the Members do not exceed one-fourth of the total strength of
the Governing Board.
4.2 The Governing Board, on and from the Due Date, shall be constituted in accordance
with the provisions of the Articles of Association of GSE in force from time to time:
Provided that –
(i) the representation of Trading Members does not exceed one-fourth of the total
strength of the Governing Board, and the remaining directors are appointed in the
manner as may be specified by SEBI from time to time, and
(ii) the Chief Executive, by whatever name called, is an ex-officio director.
4.3 Notwithstanding anything contained in clause 4.2, SEBI may nominate directors on
the Governing Board as and when deemed fit.

5. Allotment of Shares
5.1 Every Member (other than the Members who have subscribed under clause 3.2) or
his nominee, as the case may be, shall be entitled to 1,000 fully paid-up equity shares
of the face value of Rs. 10/- each for cash at par of GSE.
5.2 GSE shall allot the equity shares to the entitled Members as referred to in clause 5.1
or their nominees, as the case may be, by the Due Date:
Provided that the allotment to a Member suspended by GSE shall be held in abeyance
till the suspension continues.
5.3 The invitation to subscribe to, and the offer, issue and allotment of equity shares of
GSE pursuant to this clause shall not be considered as being an invitation, offer, issue
or allotment to the public.

6. Listing of Shares
GSE may at any time list its securities on any recognized stock exchange.

7. Trading Rights
7.1 A Member, who is registered as a stock broker on the day preceding the Due Date,
shall become a Trading Member on the Due Date.
 36

7.2 A Member, who is not registered as a stock broker on the day preceding the Due
Date, shall become a Trading Member on being registered as a stock broker under the
SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 within 3 months from the
Due Date.
7.3 After the Due Date, a person desirous of becoming a Trading Member shall be
admitted if he complies with requirements and brings in specified fees and deposits as
specified in the Rules, Bye-laws and Regulations of GSE.
7.4 GSE shall, for the purpose of admitting any person as a Trading Member, follow
uniform standards in terms of capital adequacy, deposits, fees, etc. irrespective of
mode of acquisition of trading rights by that person:
Provided that different standards may be followed for admission of a person as a
Trading Member who has acquired trading rights by way of transmission.
7.5 A Trading Member may surrender his trading rights to GSE in the manner specified
in the Rules, Bye-laws and Regulations of GSE.
7.6 Irrespective of the date or mode of acquisition of trading rights, the Trading Members
shall have uniform rights and privileges.
7.7 Trading Members on the Due Date shall continue to have the same rights and
privileges in respect of their clients and constituents and other members arising out of
or under any act, omission or contract or law, notification, order, direction, etc. as had
accrued to them while being Members on or before the Due Date.
7.8 Trading Members shall be bound by all obligations and liabilities towards their clients
and constituents, SEBI, GSE and other authorities or other persons arising out of or
under any act, omission or contract or law, notification, order, direction, etc. while
being Members on or before the Due Date.
7.9 It shall not be necessary for a person to be a Trading Member, in order for him to be a
Shareholder.
7.10 It shall not be necessary for a person to be a Shareholder, in order for him to be a
Trading Member.

8. Shareholding Rights
 37

8.1 GSE shall ensure that at-least 51% of its equity shares are held by public other than
shareholders having trading rights in the manner and within the period prescribed in
sub-section (8) of Section 4B of the SCRA.
8.2 On and from the Appointed Date, GSE shall ensure that public, other than
shareholders having trading rights, continuously hold at least 51% of equity shares.
8.3 On and from Due Date, no Shareholder, who is a Trading Member, shall have voting
rights (taken together with voting rights held by him and by persons acting in concert
with him) exceeding 5% of the voting rights in GSE.

9. Memorandum and Articles of Association, etc.

9.1 The Memorandum and Articles of Association, Rules, Bye-laws and Regulations of
GSE on the day preceding the Due Date shall, unless contrary to or inconsistent with
or excluded by this Scheme, apply to it on and from the Due Date.
9.2 GSE shall incorporate the provisions of this Scheme appropriately in its
Memorandum and Articles of Association, Rules, Bye-laws and Regulations on or
before the Due Date.
9.3 The Memorandum and Articles of Association, Rules, Bye-laws and Regulations of
GSE may be amended after the Due Date in accordance with the applicable laws,
provided that no such amendment is inconsistent with any provision of this Scheme.

10. Transfer of Clearing and Settlement Functions

10.1 GSE shall, within two years of the Due Date, subject to the prior approval of SEBI,
transfer the duties and functions of its clearing house to a Clearing Corporation,
recognised under the SCRA.
10.2 Until the duties and functions of the clearing house are transferred as provided in
clause 10.1, the clearing and settlement functions in relation to trading on GSE shall
be carried out by the clearing and settlement mechanism as used by GSE at present or
in such other manner as the Governing Board may determine.
 38

11. Utilisation of Assets and Reserves

11.1 GSE shall not do anything contrary to the provisions of section 4B (3) of the SCRA.
11.2 Without prejudice to the generality of the provisions in 11.1, GSE shall not use its
assets and reserves as on the date of publication of this Scheme or the proceeds from
disposal of such assets or the proceeds from disposal of successive species of assets
acquired from the proceeds of disposal of such assets for any purpose other than
discharging the current liabilities outstanding as on the date of publication of this
Scheme or the business operations of stock exchange.

12. Compliance with this Scheme

12.1 GSE shall ensure compliance with the provisions of this Scheme at all times and shall
not do anything contrary to the provisions of this Scheme.
12.2 GSE shall report compliance with the provisions of this Scheme in such manner as
may be required by SEBI from time to time.

13. Removal of Difficulties

If any difficulty arises in giving effect to the provisions of this Scheme, SEBI may, at
the written request of GSE, relax any of the provisions of this Scheme
 39

Section
Don’t be led by market rumours or get into shady transactions.

Do not sign blank Delivery instruction slip(s) while meeting security payin
obligation
G
Conclusion
 40

Conclusion: -
Stock market is a place where the savers and the users if their funds come together in the
market for finance, and the rules of supply and demand are applicable and also subject to
Government regulation. In the trading, several transfers of funds and securities take place
between various investors. And after this trading, the accounts of all those investors need to
be settled within a specified time limit. SEBI has developed the rules and regulations to
protect the common investors from market failures by fixing margins, capital adequacy of
brokers, limits the turnover, indemnity insurance, on-line position monitoring etc.
 41

Section G
Bibliography
 42

◙◙ www.nseindia.com (website)
◙◙ www.bseindia.com (website)
◙◙ www.google.com (website)
◙◙ BSE’s CERTIFICATION ON SECURITIES MARKET
(BCSM)
◙◙ Securities Market (Basic) Module Work Book
◙◙ Research Methodology- Methods and Techniques (by
C.R. Kothari)
◙◙ Financial Management (by Ravi M. Kishore)

◙◙ Sandipan Bhattacharjee , Stock market Analyst