SEMINAR ON CONTEMPORARY MANAGEMENT ISSUES (PRESENTATION)

FUNCTIONS AND LEGAL FRAME WORK OF STOCK EXCHANGE

{Going on the right track}

Presented by -: NITESH SAINI M.B.A. (II Sem.) ISIM

Flow of Presentation
Meaning of Stock Exchange Types of Securities History of Stock Exchange in India Stock Exchanges in India Functions of Stock Exchange Investment in Stock Exchange Legal Frame Work Research

Stock Exchange
Stock Exchange denotes a place where stocks, shares and other securities are bought and sold. In other words, a stock exchange is any organization or a group of persons which constitutes, maintains or provides a market place or facilities for bringing together purchasers and sellers of securities.

The term Securities include

Share

Scrip Stock Bond Debenture Derivative Security Receipts Government Securities other instrument

History of Stock Exchange in India

In 1860, the exchange flourished with 60 brokers.
At the end of the war in 1874, the market found a place in a street (now called Dalal Street). In 1887, "Native Share and Stock Brokers' Association" was established. In 1895, the exchange acquired a premise in the street which was inaugurated in 1899.

Stock Exchanges In India

Bombay Stock Exchange (BSE)

National Stock Exchange (NSE)

Regional Stock Exchanges

Bombay Stock Exchange

The stock exchange, Bombay, popularly known as BSE was established in 1887 as The Native Share and Stock Brokers Association. It is the oldest one in Asia.

National Stock Exchange

Based on Pherwani Committees report submitted in June, 1991, the National Stock Exchange of India Limited (NSEIL) Was established to provide an efficient system.

Regional Stock Exchanges

Ahmedabad Stock Exchange Bangalore Stock Exchange Bhubaneshwar Stock Exchange Calcutta Stock Exchange Cochin Stock Exchange Coimbatore Stock Exchange Delhi Stock Exchange Guwahati Stock Exchange Hyderabad Stock Exchange To be cont..

To be cont
Jaipur Stock Exchange Madhya Pradesh Stock Exchange Madras Stock Exchange Magadh Stock Exchange Mangalore Store Exchange Ludhiana Stock Exchange Meerut Stock Exchange OTC Stock Exchange Pune Stock Exchange Uttar Pradesh Stock Exchange Vadodara Stock Exchange

Functions of Stock Exchange

Motivates individual to save and invest funds.

A safe and productive channels for investment of savings. Provides liquidity to the savings of the investors, by developing a secondary capital market. Meeting the large capital needs of organized industry, trade and business.

Investment in Stock Exchanges

Legal Frame Work

Securities Contracts (Regulation) Act, 1956

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 SEBI regulatory jurisdiction over (a) stock exchanges through a process of recognition and continued supervisions. (b) contracts in securities. (c) listing of securities on stock exchange.

Objectives of Securities Contracts (Regulation) Act, 1956

To provide for the regulation of stock exchanges. To provide for the regulation of transactions in securities. To prevent undesirable speculations in securities.

To regulate the buying and selling of securities outside the limits of stock exchanges.
To provide for ancillary matters.

Recognition of stock exchange (Section3 and 4)

1. Application to SEBI

Any stock exchange, which is desirous of being recognised, shall make an application to the SEBI. 2. Requisites of an application (a) Prescribed particulars (b) Bye laws (c) Rules

3. Grant of recognition to stock exchange (section 4) (a) Inquiry and obtaining further information. (b) Principles of natural justice to be observed.

(c) Recognition subject to satisfaction of SEBI.

(d) Recognition subject to conditions.

(e) Restriction on alteration of rules

4. Publication in Gazette
Every grant of recognition to a stock exchange shall be published in the Gazette of India and also in the Official Gazette of the State in Which the principal office of the stock exchange is situated. The recognition shall become effective from the date of its publication in the
Gazette of India.

Listing of securities (Sections 21 to 22F)

1. Conditions for listing (Section 21) 2. Right of appeal against refusal to list securities (Section 22A) (a) furnish the reason for refusal to the company.

(b) appeal to the Securities Appellate Tribunal (SAT) against refusal to list the securities,
(c) Time period(15 days) for filling the appeal is as under: (d) Vary or set aside the decision of the stock exchange by SAT

Listing of securities (Sections 21 to 22F) Cont

(e) send a copy of every order made by SAT to SEBI and parties to the appeal. (f) Where the Securities Appellate Tribunal sets aside the decision of the recognised stock exchange or grants the permission, the stock exchange shall act in conformity with the orders of the Securities Appellate Tribunal.

3.Appeal to Supreme Court (Section 22F)

(a) Appeal by aggrieved person (b) Time period (60 days) for filling appeal.

Listing of securities (Sections 21 to 22F) Cont

4. Procedure adopted by Securities Appellate Tribunal

(Section 22B)

(a) not be bound by the Code of Civil Procedure, 1908,

(b) guided by the principles of natural justice. (c) powers to regulate its own procedure

Listing of securities (Sections 21 to 22F) Cont

5. Powers of Securities Appellate Tribunal (Section 22B)
(a) Summoning and enforcing the attendance of any person and examining him on oath. (b) Requiring the discovery and production of documents. (c) Receiving evidence on affidavits. (d) Issuing commissions for the examination of witnesses or documents. (e) Examining its decisions.

Withdrawal of recognition of a stock exchange (Section 5)

(a)If, considering the interest of the trade or the public interest, the SEBI is of the opinion that the recognition granted to a stock exchange should be withdrawn, it shall serve a written notice on the governing body of the stock exchange. (b)The notice shall specify the reasons. (C)An opportunity of being heard to the governing body of the stock exchange. (d)Notification in the Official Gazette. (e)No withdrawal of recognition shall affect the validity of any contract entered into or made before the date of the notification.

SEBI Act,1992
The SEBI Act, 1992 was enacted to empower SEBI with statutory powers for (a) protecting the interests of investors in securities, (b) promoting the development of the securities market (c) regulating the securities market.

SECURITIES AND EXCHANGE BOARD OF INDIA

(SEBI)

SEBI has been established as a body corporate having perpetual succession and a common seal. It has powers to acquire, hold and dispose of property, both movable and immovable, to contract and to sue or be sued.

Research

OBJECTIVE
SCOPE SAMPLE SIZE

SOURCE

ASSUMPTIONS
ANALYSIS

Questionnaire
Q.1 Do you invest in stock (Security) market? (a) Yes (b) No Q.2 In which stock exchange do you deal? (a) Bombay Stock Exchange (BSE) (b) National Stock Exchange (NSE) (c) Regional Stock Exchanges (d) More than One or all Q.3 what feature(s) of stock exchange attract you most? (a) Speed (b) Transparency (c) Protection from fraud and cheating (d) More than one or all

Questionnaire

Cont.

Q.4 What do you think about weakness of stock exchange(s)? (a) Very unsteady (b) Over confident over FIIs (c) Both (d) None of (a) & (b) Q.5 Do you feel safe not to be cheated by stock broker? (a) Yes (b) No Q.6 Are you satisfied with stock exchanges function? (a) Yes (b) No

Q.1 Do you invest in stock (security) market?

60 60 50 40 40 Yes 30 20 10 0 No

Q.2 In which stock exchange do you deal?

70 60 50 40 30 20 10 0 10 5 15 Regional Stock Exchange only More than one or all NSE only 70 BSE only

Q.3 What feature(s) of stock exchange attract you most?

60 50 40 30 20 10 0 20 15 10 55 Speed Only Transparency only Protection from cheating All of the above

Q.4 What do you think about weakness of stock exchange(s)?

60 50 40 30 20 15 15 10 10 0 None of these 60 Very unsteady Over confident Over FIIs Both

Q.5 Do you feel safe against not to be cheated by stock broker?

100 80 60 40 20 0

90

Yes No 10

Q.6 Are you satisfied with stock exchanges functions?

80 70 60 50 40 30 20 10 0 20 Yes No 80

Findings

Power of SEBI to issue direction (Section 12A)

The power of SEBI to issue directions to the stock exchange is explained as follows: 1. Conditions for issue of directions by SEBI SEBI may issue the direction if, after making an inquiry, it is satisfied that issue of directions is necessary(a) In the interest of investors, or orderly development of securities market: or (b) To prevent the affairs of any recognised stock exchange, or, clearing corporation, being conducted in a manner detrimental to the interests of investors or securities market:

2. Directions to whom? The directions can be given toany stock exchange or clearing corporation or any person or class or persons associated with the securities market: or (b) any company whose securities are listed or proposed to be listed in a recognised stock exchange as may be appropriate in the interests or investors in securities and the securities market

Power of SEBI to make or amend byelaws of recognised stock exchange (Section 10)
Section 10 empowers SEBI to make or direct any Stock Exchange to amend its bye- laws. These provisions are given hereunder; (a) A recognised stock exchange may make a request in writing to the SEBI to make the bye- laws of the exchange or make an amendment in its existing byelaws. (b) Before making the bye-laws or any amendment thereof, SEBI shall consult the governing body of the stock exchange.

(c) If SEBI is satisfied that it is necessary so to do, it may make the bye-laws for all or any of the matters specified in section 9 or amend any existing bye- laws. (d) The bye- laws so made or amended shall be published in the Gazette of India and also in the official Gazette of the State in which the principal office of the recognised stock exchange is situated. (e) However, if in any case, the SEBI is satisfied that in the interest of the trade or in the public interest any bye- laws should be made immediately, it may, by order in writing specifying the reasons therefore, provides with the condition of previous publication.

RESEARCH METHODOLOGY :
Research Design EXPLORATORY RESEARCH Type of Sampling Convenience Sampling

Sample Size
Universe Data Collection Tool Data Collection Technique Pilot Study

60
Jaipur City Schedule Observation & Personal Interview For developing of schedule.
42

(f) Where SEBI makes or amends the bye- laws of a stock exchange on its own motion, the governing body may object to it within 2 moths of its publication in the Gazette of India. . It may apply to SEBI for revision thereof SEBI may, after giving an opportunity of being heard to the governing body, revise the byelaws so made or amended. (g) On the publication of bye- laws in the Gazette of India, the bye- laws so made or amended shall have effect as if they had been made or amended by the recognised stock exchange concerned.