FUNCTIONS AND LEGAL FRAME

WORK OF
STOCK EXCHANGE
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 National Regional

Stock Stock Stock
Exchange Exchange Exchanges
(BSE) (NSE)
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.
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 to-
any 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