“Working of Stock Exchange & Depositary Services”
STOCK EXCHANGE :
The stock exchange is the important segment of its capital market. If the
stock exchange is well-regulated function smoothly, then it is an indicator
of healthy capital market. If the state of the stock exchange is good, the
overall capital market will grow and otherwise it can suffer a great set
back which is not good for the country. The government at various stages
controls the stock market and the capitals market.
A capital market deals in financial assets, excluding coin and currency.
Banking accounts compromises the majority of financial assets. Pension and
provident funds insurance policies shares and securities.
Financial assets are claim of holders over issuer (business firms and
governments). They enter low different segment of financial market.
Those having short maturities that are non transferable like bank savings
and current accounts set the identification of the monetary financial
assets. This market is known as money market, Equity, Preferential shares
and bonds and debentures issued by companies and securities issued by the
government constitute the financial assets, which are traded in the capital
market.
“Money Market and Capital Market”
Both money market and capital market constitute the financial market.
Capital market generally known as stock exchange. This is a institution
around which every activity of national capital market revolves. Through
the medium stock exchange the investor gets on impetus and motivations to
invest in securities without which they would not be able to liquidate the
securities. If there would have been no stock exchange many of the savers
would have hold their saving either in cash i.e. idle or in bank with low
interest rate or low returns. the stock exchange provides the opportunity
to investors for the continuous trading in securities. It is continuously
engaged in the capital mobilization process.
Another consequence of non-existence of stock exchange would have been low
saving of the community, which means low investment and lower development
of the country.
S - Securities provide for investor.
T - Tax Benefits planning and exemption.
O - Optimum return on
investment.
C - Cautious Approach.
K - Knowledge of Market.
Ex - Exchange of Securities Transacted.
C - Cyclopedia of Listed Companies.
H - High Yield.
A - Authentic Information
N - New Entrepreneur encouraged.
G - Guidance of Investor & Company.
E - Equity
HISTORY OF STOCK EXCHANGE
The first stock exchange was established in London in the year 1773. just
after establishment of London stock exchange various countries like France,
Germany and USA also established their own stock exchange markets. In
India, the first exchange established in Bombay in the year 1875. later, in
year 1908, Calcutta stock exchange was established which was recognized in
the company in 1923. mean which in 1920 the madras stock exchange limited
in 1973. So far the government of India has recognized 22 stock exchange,
which was located at major business centers in different parts of country.
Till the mid fifties the stock exchange was
governed by their own bye laws and regulations with very little interface
by the government. In the year 1925, the government of Bombay promulgated
an act “securities contracts and control act, 1625 for regulation and the
stock exchange. During the world was second trading outside the stock
exchange flourished with adverse effect on investor’s confidence due to
base – less issues and higher rate of liquidation of companies. In 1956,
the center government passed contracts (regulation) act 1956, which came
into force through out the country on 20th Feb. 1957.
SEBI Act :
The government of India has
enacted an act (SEBI Act 1952), which provides for the establishment of a
board to protect the interest of investor in securities. The SEBI has
emerged as a monitoring institution of the country fir the development and
regulation of stock market, SEBI has issued from time to time guideline to
insider trading listing of securities, registration of intermediaries
mutual funds etc.
MANAGEMENT OF STOCK
EXCHANGE
Management of stock exchange is done an elected body of members. These
bodies are know by different names in different stock exchange for example,
the BOMBAY, INDORE and AHEMDABAD stock exchange are managed by a ‘governing
board’. ‘Council of management’ governs the MADRAS stock exchange. A
committee manages the CALCUTTA stock exchange. While the ’ board of
director’ manages stock exchange.
These governing bodies are powerful bodies enjoying extensive
administrative power of management and control over their respective stock
exchange the day-to-day function of the stock exchanges are executed by the
sub-committee like the ‘defaulters committee’ ‘listing committee’,
‘settlement committee’ etc.
STOCK BROKERS
SEBI registered stock - brokers interested in providing Internet based trading services will be required to apply to the respective stock exchange for a formal permission. The stock exchange
should grant approval or reject the application as the case may be, and
communicate its decision to the member within thirty calendar days of the
date of completed application submitted to the exchange.
The Exchange closely monitors
outstanding position of top buying member-brokers and top selling
member-brokers on a daily basis. For this purpose, it has developed various
market monitoring reports based on certain pre-set parameters. These
reports are scrutinized by officials of the Surveillance Dept. to ascertain
whether a member-broker has built up excessive purchase or sale position
compared to his normal level of business. Further, it is examined whether
purchases or sales are concentrated in one or more scrips, whether the
margin cover is adequate, whether transactions have been entered into on
behalf of institutional clients and even the quality of scrips, i.e.,
liquid or illiquid is looked into in order to assess the quality of
exposure. The Exchange also scrutinizes the pay-in position of the
member-brokers and the member-brokers having larger funds pay-in positions
are at times, at the discretion of the Exchange, required to make advance
pay-in on T+1 day instead of on T+2 day.
BASIC REQUIREMENTS FOR STOCK BROKERS
Trading will be on existing stock exchanges
through order routing system for execution of trades. Therefore,
stockbrokers are to comply with the following before the start of trade on
Internet.
-
The broker must have a net worth of Rs. 50 lakh if he
wants to avail the facility of Internet for his own.
-
Provision for maintenance of adequate back up system.
-
The software system to be used by him should be secured
and reliable.
-
To employ the qualified staff for this purpose.
-
To send order/trade confirmation to the client also
through e-mail.
-
The contract notes must be issued to the clients as per
existing regulation within 24 hours of the execution of trades.
-
The broker and his client should use authentication
technologies.
The above are some of the important pre-requisites for the stockbroker
should intend to take benefits of trading on Internet. However, detailed
guidelines issued by the SEBI for the stock exchange
KIND OF STOCK BROKERS
1. Commission Broker
Near about all the brokers buy and sell securities for earning a
commission for investor point of view he is the most important person and
responsibility is to buy and sell stoke for his customer. It means that he
acts as an agent of investor and earns commission for his services
rendered. The broker is also an independent dealer in securities. He
purchases and sell securities in his own name but he is not allowed to deal
with non-member.
2. Jobber
He is an professional speculator who works for a profit called ‘turn’ he
makes a continuous auction in the market in the stoke in which he
specialized. He trades in the market evens for small difference in the
prices and helps to maintain liquidity in the stoke exchange.
3. Floor Broker
The floor broker buy and sell shares for the other broker on the floor of
the exchange. He is an individual member owns his seat and receives his own
commission on the orders he execute. He helps other brokers when they are
buy and as compensation receives a portion the broker.
4. Odd lit dealer
For trading in stock exchange there a
certain number of share a fixed to be transacted in a lot, this is known as
round lat which is usually a, 100 share a. Any thing less than the round
lot are add lot. If a person is in possession of add lot of share i.e. 10,
20, 30, 40 etc. They he will has to look for the add lot dealer.
5. Budliwala
He is the person who finance or provide credit facilities to the market
for this service he charges a fees called contango or backwardation
charges. The budliwala gives a fully secured loan for period of 2 to 3
weeks.
6. Arbitrageur
A person who is specialist in dealing with securities in different stoke
exchange centers at the same time. He makes a profit by the difference in
the piece prevailing in different centers of the market activity. For
example the rte of a certain scrip is higher in some stoke exchange than
other on. In this case the broker will buy the scrip from the marked lower
price and will sell the scrip in the market at higher price. The profit of
the arbitrageur depends on the ability to get the prices from different
centers before trading in other stoke exchanges.
STOCK TRADING
OVERVIEW
The marketing of the securities on the
stock exchange can be done through member of the stock exchange. These
member can be either individuals or corporate bodies.
For the process of trading in stock exchange there is the basic need for a
transaction between an individual and the broker execute customer’s order
to buy or sell on the stock exchange trading ring. The exchange of scrip
between the member of the exchange in from of buying or selling is called
trading
Broker is the member of recognized stock exchange and help the customers in
buying or selling the securities for the brokerage that he receives.
Trading Method
Listing securities are traded on the floor
of recognized stock exchange where its member traded. An investor is not
permitted to enter the floor of stock exchange and he has trust the broker
to:
*.
Negotiate the best price for the trade.
*.
Settle the account, i.e. payment for securities sold on due date.
*. Take
delivery of securities purchase.
TYPES OF TRADING
Trading
in stock exchange is conducted in two ways:
Ø
Ready delivery contract.
Ø
Forward delivery contract.
BASKET TRADING SYSTEM
The Basket Trading System provides the
arbitrageurs an opportunity to take advantage of price differences in the
underlying Sensex and Futures on the Sensex by simultaneous buying and
selling of baskets comprising the Sensex scrips in the Cash Segment and
Sensex Futures. This is expected to provide balancing impact on the prices
in both cash and futures markets.
The Exchange has commenced
trading in the Derivatives Segment with effect from June 9, 2000 to enable
the investors to, inter-alias, hedge their risks. Initially, the facility
of trading in the Derivatives Segment was confined to Index Futures.
Subsequently, the Exchange has introduced the Index Options and Options &
Futures in select individual stocks. The investors in cash market had felt
a need to limit their risk exposure in the market to movement in Sensex.
To participate in this system, the
member-brokers need to indicate number of Sensex basket(s) to be bought or
sold, where the value of one Sensex basket is arrived at by the system by
multiplying Rs.50 to prevailing Sensex. For e.g., if the Sensex is 4000,
then value of one basket of Sensex would be 4000 x 50= i.e., Rs.
2,00,000/-. The investors can also place orders by entering value of Sensex
portfolio to be brought or sold with a minimum value of Rs. 50,000/- for
each order.
PROCEDURE OF TRADING
1.Select
of broker
The first step is buying or selling of share is to select a broker for
transaction business on behalf of the investor. The trading of securities
on the stock exchange can be done through members of the exchange.
-
An
investor prefers to select a broker who shall.
-
Act
with due skill. Care and diligence in the conduct of all his business.
-
Not
create false market either singly or in concert with other.
2.Opening An Account With The Broker
The next step to open account with the
broker. It helps the investor to provide his credit worthiness, if the
clients were not to do margin money with the broker.
3.Selection
Of Securities
This is application for buying securities.
The investor may be consulted with broker and take advise for selection of
securities.
4.Selection Of Time For Trading
This is important to get the best advantage from buying or selling the
securities.
5.
Placing An Order
Various method of placing an order with the
broker has been evolved to give the broker leverage when he is on the floor
of the stock exchange.
6.
Preparation Of Contract Note
SEBI circular of 4th Feb. 1991 requires that all member of the
recognized stock exchange issue contract note to the investors on the
execution of trade. Brokers, therefore issue contract note to the client,
which gives the name of the company, price of trade, brokerage, time of
execution, provision regarding arbitration etc. in term of the bye-laws of
stock exchange, this is statutory requirement and mandatory.
7.
Settlement
The settlement is the process where by payment is made by brokers who have
made purchase and share delivery by those brokers who have made sales.
QUESTIONNAIRE
DATE…………..
NAME………………………………
ADDRESS…………………………..
CONTACT NO……………………..
Q1. Which current broker
are you trading?
Religare (
) Karvy ( )
Indiabulls
( ) Reliancemoney ( )
Others…………………………..
Q2. Who would provide
better service?
Broker ( ) Sub
broker ( )
Q3. In which segment do
you deal?
Equity
( ) Commodity ( )
Mutual
fund ( ) Others (
)
Q4. Do u have a pan card.
Yes ( )
No ( )
Q5. Do you know about
stock exchange?
Yes ( ) No
( )
Q6. Do you ever invest
money in share market?
Yes ( )
No ( )
Q7. Are you a long term
investor or short term investor?
Long term (
) Short term ( )
Q8.Do you know about NSE
and BSE?
Yes ( )
No ( )
Q9. How is your experience
in share market?
Good ( )
Bad ( )
Q10. Do you know that
whose control on stock exchange?
SEBI ( ) IRDA
( )
Q11. Do you know about
Depositary services?
Yes ( )
No ( )
Q12. Do you know about
whose control over depositary services?
NSDL ( ) CDSL
( )
BOTH…………….
Q13.How much charges do
you pay for Dmat a/c?
Less than 500 ( ) More than 500 (
)
Q14. how much brokerage do
you pay?
Intraday…………………. Delivary……………….
Q15. Are you satisfied
with the service of the company, with which you are dealing?
Yes ( )
No ( )
Q16 . Are you satisfied
with the current research (tips,sms)?
Yes ( )
No ( )
Project Description :
Category : MBA Project Report
Title : Working of Stock Exchange &
Depositary Services
Pages : 100
This project is our paid category, its cost
is Rs. 2499/- only without Synopsis and Rs. 2999/- only with synopsis. If you need this
project, mail us at this id :
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