Report On FUNCTIONAL SPECIALIZATION OF MEMBERS OF STOCK EXCHANGE

Submitted Submitted By:Dr. Ankit Mahajan Amisha

To:gupta

Roll No. 9

STOCK MARKET
A stock market or equity market is a public entity for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. The size of the world stock market was estimated at about $36.6 trillion at the start of October 2010. The stocks are listed and traded on stock exchanges which are entities of a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. The largest stock market in the United States, by market capitalization, is the New York Stock Exchange (NYSE). In Canada, the largest stock market is the Toronto Stock Exchange. Major European examples of stock exchanges include the Amsterdam Stock Exchange, London Stock Exchange, Asian examples include the Singapore Exchange, the Tokyo Stock Exchange, the Hong Kong Stock Exchange, the Shanghai Stock Exchange, and the Bombay Stock Exchange. Securities traded on a stock exchange include shares issued by companies, unit trusts, derivatives, pooled investment products and bonds.

The first ever stock exchange in Asia (established in 1875) and the first in the country to be granted permanent recognition under the Securities Contract Regulation Act, 1956, BSE Limited has had an interesting rise to prominence over the past 133 years

Role and function of stock exchange

Established for the purpose of assisting, regulating and controlling business of buying, selling and dealing in securities. Provides a market for the trading of securities to individuals and organizations seeking to invest their saving or excess funds through the purchase of securities. Provides a physical location for buying and selling securities that have been listed for trading on that exchange. Establishes rules for fair trading practices and regulates the trading activities of its members according to those rules.

Raising capital for businesses

The Stock Exchange provide companies with the facility to raise capital for expansion through selling shares to the investing public.

Mobilizing savings for investment

When people draw their savings and invest in shares (through a IPO or the issuance of new company shares of an already listed company), it usually leads to rational allocation of resources because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized and redirected to help companies' management boards finance their organizations. This may promote business activity with benefits for several economic sectors such as agriculture, commerce and industry, resulting in stronger economic growth and higherproductivity levels of firms. Sometimes it is very difficult for the stock investor to determine whether or not the allocation of those funds is in good faith and will be able to generate long-term company growth, without examination of a company's internal auditing.

Facilitating company growth:

Companies view acquisitions as an opportunity to expand product lines, increase distribution channels, hedge against volatility, increase itsmarket share, or acquire other necessary business assets. A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways for a company to grow by acquisition or fusion.

DEMAT ACCOUNT:

It refers to a dematerialised account for individual Indian citizens to trade in listed stocks or debentures, required for investors by The Securities Exchange Board of India (SEBI). In a demat account, shares and securities are held electronically instead of the investor taking physical possession of certificates.

INTIAL PUBLIC OFFERING:

An initial public offering (IPO), is the first sale of stock by a formerly private company. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises.

NATIONAL SECURITIES DEPOSITORY LTD:

Under the provisions of the Depositories Act, NSDL acts as a clearing house of stock exchange.

Broker:
A broker is a party that arranges transactions between a buyer and a seller, and gets a commission when the deal is executed.

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 nation-wide within a record time of just 50 days. capacity of the BOLT the platform stands presently enhanced to 80 lakh orders per day.

TRADING IN STOCK MARKET

People who buy or sell stock on an exchange do so through a broker The broker takes your order to the floor of the exchange and looks for a broker representing someone wanting to buy/sell. If a mutually agreeable price is found the trade is made.

In India there are two companies who provide depository services.They are:

CDSL (central depository services limited) NSDL (national securities depository limited)

A Depository facilitates holding of securities in the electronic form and enables securities transactions to be processed by book entry by a Depository Participant (DP), who as an agent of the depository, offers depository services to investors. According to SEBI guidelines, financial institutions, banks, custodians, stockbrokers, etc. are eligible to act as DPs. The investor who is known as beneficial owner (BO) has to open a demat account through any DP for dematerialisation of his holdings and transferring securities.

The balances in the investors account recorded and maintained with CDSL can be obtained through the DP. The DP is required to provide the investor, at regular intervals, a statement of account which gives the details of the securities holdings and transactions. The depository system has effectively eliminated paperbased certificates which were prone to be fake, forged, counterfeit resulting in bad deliveries. CDSL offers an efficient and instantaneous transfer of securities. CDSL was promoted by Bombay Stock Exchange Limited (BSE) jointly with leading banks such as State Bank of India, Bank of India, Bank of Baroda, HDFC Bank, Standard Chartered Bank, Union Bank of India and Centurion Bank. CDSL was set up with the objective of providing convenient, dependable and secure depository services at affordable cost to all market participants. Using innovative and flexible technology systems, NSDL works to support the investors and brokers in the capital market of the country. NSDL aims at ensuring the safety and soundness of Indian marketplaces by developing settlement

solutions that increase efficiency, minimise risk and reduce costs.

DEPOSITORY PARTICIPANTS

CDSL's demat services are extended through its agents called Depository Participants (DP). The DP is the link between the investor and CDSL. An investor who opens a demat account with a DP can utilise the services offered by CDSL. While the DP processes the instructions of the investor , the account and records thereof is maintained with CDSL. A DP is thus a "service centre" for the investor.

CDSL's system is based on centralised database architecture with on-line connectivity with DPs. This enables a CDSL-DP to offer depository services to investors at an attractive price and at the same time achieve break-even faster at much lower volumes. The centralised architecture also allows CDSL-DP to make available to the investors a to-the-minute status of their account and transactions.

CDSL Statistics Update on Sep 12, 2011 Companies: 8,711 Depository Participants: 556 DP Locations: 10,522 Investor Accounts: 77,06,153

NSDL Depository Participants DPs: 297 DP Service Centres: 13,336 Investor Accounts : 1,18,69,315

NSDL :Although India had a vibrant capital market which is more than a century old, the paper-based settlement of trades caused substantial problems like bad delivery and delayed transfer of title till recently. The enactment of Depositories Act in August 1996 paved the way for establishment of NSDL, the first depository in India. This depository promoted by institutions of national stature responsible for economic development of the country has since established a national infrastructure of international standards that handles most of the securities held and settled in dematerialised form in the Indian capital market. Using innovative and flexible technology systems, NSDL works to support the investors and brokers in the capital market of the country. NSDL aims at ensuring the safety and soundness of Indian marketplaces by developing settlement solutions that increase efficiency, minimise risk and reduce costs. At NSDL, we play a quiet but central role in developing products and services that will continue to nurture the growing needs of the financial services industry. In the depository system, securities are held in depository

accounts, which is more or less similar to holding funds in bank accounts. Transfer of ownership of securities is done through simple account transfers. This method does away with all the risks and hassles normally associated with paperwork. Consequently, the cost of transacting in a depository environment is considerably lower as compared to transacting in certificates.

NSCCL:NSCCL, The OrganisationThe National Securities Clearing Corporation Ltd. (NSCCL), a wholly owned subsidiary of NSE, was incorporated in August 1995. It was the first clearing corporation to be established in the country and also the first clearing corporation in the country to introduce settlement guarantee. It was set up with the following objectives: To bring and sustain confidence in clearing and settlement of securities; To promote and maintain, short and consistent settlement cycles; To provide counter-party risk guarantee, and To operate a tight risk containment system.

CLEARING MEMBERS A clearing member of NSCCL has the responsibility of clearing and settlement of all deals executed by trading members on NSE , who clear and settle such deals through them. Primarily, the CM performs the following functions :Clearing Computing obligations of all his TM's i.e. determining positions to settle. Settlement - Performing actual settlement. Only funds settlement is allowed at present. Risk Management Setting position limits based on upfront deposits / margins for each TM.

Types of Clearing Members 1. Trading Member Clearing Member (TM-CM) A Clearing Member who is also a TM. Such CMs may clear and settle their own proprietary trades, their clients' trades as well as trades of other TM's & Custodial Participants.

2. Professional Clearing Member (PCM) A CM who is not a TM. Typically banks or custodians could become a PCM and clear and settle for TM's as well as of the Custodial Participants.

Clearing Member Eligibility Norms

Net worth of at-least Rs.10 crores. Deposit of Rs. 50 lakhs to NSCCL which forms part of the security deposit of the CM.

INTERMEDIARIES
Commission brokers Jobbers Dealers in non-clear securities Odd lot dealers Budliwalas Security dealers

 Speculators Stags

Commission Brokers:- He does simple broking between

buyers and sellers and earns commission by providing services.

Floor broker:- These are authorized clerks and sub

brokers who enter the trading floor and execute orders for the clients or for the members.

Jobbers:- They are specialist who are ready to buy or sell

simultaneously or selective scrip. They offer both big and offer rates, for the brokers and sub brokers on the trading floor and then earn profit through the margin between buying and selling rates.

Dealers in non- clearing securities :- They are

specialized in buying and selling shares in their own account which are not traded in active market.

Budliwala:- They lend money or securities to the market.

Their purchases or sales on the last date of the current

clearing and are matched by corresponding concurrent sales to or purchases from same party for the ensuing clearing.

Arbitrageurs:- These specialized in the purchases and

sales of stock in different markets at the same time and earn profits by the difference in prices between the two centres.

Security Readers:- These specialized in buying and

selling of Gilt- edged securities.

Speculators:- There are two types of speculators:Bull and Bears. Bulls buys shares in expectation of selling at a higher price. Bears sells shares expecting a fall in prices and thus buying at a later date.

Stags:- Those members who are neither buying nor selling

but they apply for subscription to new issues expecting to sell them at higher price later when the issues are quoted on the stock exchange.