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� Meaning and working of stock exchange
� Functions of stock Exchange
� Different stock exchanges -NSE and BSE� Guidelines for Listing
� Safeguards and Right of Investors
� Difference between NSE and BSE� Regional Stock Exchanges of India
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A stock exchange is simply a market that is designed for
the sale and purchase of securities of corporations and
municipalities. This means that a stock exchange sells and buys
stocks, shares, and other such securities. In addition, the stockexchange sometimes buys and sells certificates representing
commodities of trade.
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� Stock exchanges were completely open. Anyone who wished to
buy or sell could do so at a stock exchange. Today,professionals who have a seat at the exchange are the people
who trade at the exchange.
� Stock markets affect the entire economy and encourage
investment. In the United States, larger cities including Boston,
New York, Philadelphia, Denver, Chicago, Los Angeles, and SanFrancisco all have stock exchanges. Major cities across the world
also have exchanges of their own.
� Not all stocks are listed on exchanges. Some are sold on the so-
called over-the-counter market, which means that they are soldand bought directly by brokers. This method of buying became
especially important during the early 1980s.
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� The buying and selling of stocks at the exchange is done on an
area which is called the floor.
� All over the floor are positions which are called posts.
� Each post has the names of the stocks traded at that specificpost.
� If a broker wants to buy shares of a specific company they will
go to the section of the post that has that stock.
� The broker sees at the price of the stock what the broker isauthorized to pay, a professional called the specialist may
receive an order.
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� The specialist will often act as between the seller and buyer.
What the specialist does is to enter the information from thebroker into a book.
� If the stock reaches the required price, the specialist will sell or
buy the stock according to the orders given to them by the
broker. The transaction is then reported to the investor.
� If a broker approaches a post and sees that the price of the
stock is what they are authorized to pay, the broker can
complete the transaction themselves.
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� As soon as a transaction occurs, the broker makes a
memorandum and reports it to the brokerage office bytelephone instantly.
� At the post, an exchange employee jots down on a special card
the details of the transaction including the stock symbol, the
number of shares, and the price of the stocks.
� The employee then puts the card into an optical reader. The
reader puts this information into a computer and transmits the
information of the buy or sell of the stock to the market.
� This means that information about the transaction is added to
the stock market and the transaction is counted on the manystock market tickers and information display devices that
investors rely on all over the world.
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� 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
� To provide liquidity to the investors. The investor can recuperate the
money invested when needed. For it, he has to go to the stock
exchange market to sell the securities previously acquired. This
function of the stock market is done on the secondary market.
� To guarantee the legal and economic security of the
agreed contracts.� To provide official information about the quantities that
are negotiated and of the quoted prices.
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Functions done by the stock exchange market in favor of the
investor:� It permits him the access to the profitable activities of the big
companies.
� It offers liquidity to the security investments, through a place in
which to sell or buy securities.
� It permits for the investor to have a political power in the
companies in which he invests its savings due that the acquisition
of ordinary shares gives him the right (among other things) to
vote in the general shareholders meetings of the company in
question.� It offers the possibility of diversifying your portfolio by
enlarging the field of strategy of investments due to alternative
options, as could be the derived market, the money market, etc
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Function done by the stock exchange market in favor of thecompanies:
� It supplies them with the obtaining of long-term funds thatpermits the company to make profitable activities or to dodetermine projects that otherwise wouldn·t be possible todevelop for lack of financing. Also, this funding signifies a
less cost than if obtained at other channels.� The securities quoted at the stock exchange market usually
have more fiscal purpose advantages for the companies.
� It offers to the company·s free publicity, which in other way
would suppose considerable expenses. The institution isobjecting of attention of the media (television, radio, etc.)in case any important change in its owners (the shareholders).
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(a) National Stock Exchange (NSE) of India
It is the largest stock exchange in India in terms of dailyturnover and number of trades, for both equities and derivativetrading.
NSE has a market capitalization ofaround 7,262,507 crore (US$1,575.96 billion) (October 2010)
and was expected to become the biggest stock exchange in Indiain terms of market capitalization by 2009 end, although this hasnot yet occurred.
Though a number of other exchanges exist, NSE and the BombayStock Exchange are the two most significant stock exchanges in
India, and between them are responsible for the vast majority ofshare transactions.
The NSE's key index is the S&P CNX Nifty, known as theNSE NIFTY (National Stock Exchange Fifty), an index of fiftymajor stocks weighted by market capitalisation.
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� NSE is mutually-owned by a set of leading financial institutions,
banks, insurance companies and other financial intermediaries in
India but its ownership and management operate as separateentities.
� There are at least 2 foreign investors NYSE Euronext and
Goldman Sachs who have taken a stake in the NSE.[
� As of 2006, the NSE VSAT terminals, 2799 in total, cover morethan 1500 cities across India.
� In October 2007, the equity market capitalization of the
companies listed on the NSE was US$ 1.46 trillion, making it the
second largest stock exchange in South Asia.
� NSE is the third largest Stock Exchange in the world in terms of
the number of trades in equities.
� It is the second fastest growing stock exchange in the world with
a recorded growth of 16.6%.
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� In April 1993, it was recognized as a stock exchange under
the Securities Contracts (Regulation) Act, 1956. NSE commenced
operations in the Wholesale Debt Market (WDM) segment in June
1994.
� Listing on NSE provides qualifying companies with the broadest
access to investors, the greatest market depth and liquidity, cost-
effective access to capital, the highest visibility, the fairest pricing,
and investor benefits.
� NSE introduced for the first time in India, fully automated screen
based trading. It uses a modern, fully computerised trading system
designed to offer investors across the length and breadth of the
country a safe and easy way to invest.
� The NSE trading system called 'National Exchange for AutomatedTrading' (NEAT) is a fully automated screen based trading system,
which adopts the principle of an order driven market.
� Being the first and the only exchange to trade GOLD ETFs
(exchange traded funds) in India.
�
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Initial Public Offerings (IPO)
A corporate may raise capital in the primary market by
way of an initial public offer, rights issue or private placement. An
Initial Public Offer (IPO) is the selling of securities to the public inthe primary market. It is the largest source of funds with long or
indefinite maturity for the company.
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(b) Bombay Stock Exchange (BSE) of India
� It was originally named as ´The Native Share & Stock Brokers·
Associationµ, was established in 1875. This makes BSE the oldeststock exchange in the Asian economic region.
� It is also the biggest South Asian stock exchange in terms of
market capitalization (NSE is the second largest!), and the 11th
largest on a global level (A
ugust 2009).� When the government passed the Securities Contracts
(Regulation) Act in 1956, the BSE was the first stock exchange in
India to be recognized under the Act.
� Originally mooted as an AOP (Association of Persons), BSE was
demutualised and corporatized in 2005, and now functions as
a company.
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� BSE is the world's number 1 exchange in the world in terms ofthe number of listed companies (over 4900).
� It is in the top ten of global exchanges in terms of the marketcapitalization of its listed companies (as of December 31,2009). The companies listed on BSE command a total marketcapitalization of USD Trillion 1.28 as of Feb, 2010.
� BSE is the first exchange in India and the second in the world toobtain an ISO 9001:2000 certification.
� It is also the first Exchange in the country and second in theworld to receive Information Security Management SystemStandard BS 7799-2-2002 certification for its BSE On-Linetrading System (BOLT).
� The BSE Index, SENSEX, is India's first and most popular Stock
Market benchmark index. Exchange traded funds (ETF) onSENSEX, are listed on BSE and in Hong Kong. Futures andoptions on the index are also traded at BSE.
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Listing means admission of securities to dealings on arecognised stock exchange. The securities may be of any public
limited company, Central or State Government, quasi
governmental and other financial institutions/corporations,
municipalities, etc.The objectives of listing are mainly to :
-Provide liquidity to securities
-mobilize savings for economic development
-protect interest of investors by ensuring full disclosures
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A company intending to have its securities listed on BSE has to
comply with the listing requirements prescribed by it. Some of the
requirements are as under :
Minimum Listing Requirements for New Companies
Minimum Listing Requirements for Companies already Listed on other Stock
Exchanges
Minimum Requirements for Companies Delisted by BSE seeking relisting on BSEPermission to Use the Name of BSE in an Issuer Company's Prospectus
Submission of Letter of Application
Allotment of Securities
Trading PermissionRequirement of 1% Security
Payment of Listing Fees
Compliance with the Listing Agreement
Cash Management Services (CMS) - Collection of Listing Fees
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SCHEDULE OF LISTING FEES FOR THE YEAR 2010-11
Securities *other than Privately Placed Debt Securities Sr.No. Particulars Amount
(Rs.) 1 Initial Listing Fees 20,000.00 2 Annual Listing Fees
(i) Companies with listed capital* upto Rs. 5 crore
(ii) Above Rs. 5 crore and upto Rs. 10 crore
(iii)Above Rs. 10 crore and upto Rs. 20 crore
Companies which have a listed capital* of more than Rs. 20 crore are required
to pay an additionalfee @ Rs. 750 for every additional Rs. 1 crore or part thereof.
10,000.00
15,000.00
30,000.00
NOTE: In case of debenture capital (not convertible into equity shares) , th
fees will be25% of the above fees.
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Privately Placed Debt Securities Sl.No. Particulars Amount (Rs.) 1 Initial Listing Fees NIL
2
Annual Listing Fees(i) Issue size up to Rs.5 crore
(ii) Above Rs.5 crore and up toRs.10 crore
(iii) Above Rs.10 crore and up toRs.20 crore
Above Rs.20 crore
Rs.2,500.00
Rs.3,750.00
Rs.7,500.00
Additional fee of Rs.200.00 for every additional Rs.1crore or part thereof
Subject to a maximum of Rs.30,000.00 per instrument. The cap on the annual listing fee of debt instruments per issuer is Rs.5,00,000.00 per annum.
Mutual Funds Sr. No Particulars Amount (Rs.)
1 Initial listing fee NIL
2 Annual Listing Fee for tenure of the scheme : 6months or part thereof
Issue size up to Rs.100 Crores Rs. 16,000
Above Rs.100 Crores and up to Rs.300 Crores. Rs. 29,000
Above Rs.300 Crores and up to Rs.500 Crores. Rs. 47,000
Above Rs.500 Crores and up to Rs. 1000 Crores Rs. 78,000
Above 1000 Crores Rs. 1,25,000
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� Protecting the interest of the investors dealing in securities is oneof the main objectives of BSE.Department of Investor ' Serviceswas set up in 1986 .
� The grievances of investors against listed companies and BSETrading Members are redressed by BSE. BSE also assists in the
arbitration process both, between Trading Members inter-seand between Trading Members and non - Trading Members.
� The capital market can grow only when investors find it safe forthem to invest and they are assured that the rules governing themarket are fair and just to all the players.
� These procedures are duly embodied in the Rules, Bye-laws andRegulations of BSE, which have been duly approved by theGovernment of India / Securities and Exchange Board of India(SEBI)
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Selecting a Broker/ Sub - Broker
-Deal only with a SEBI registered Broker / Sub - broker after duediligence.
Entering into an Agreement
-Fill in a Client registration form with the Broker / Sub ² broker
-Enter into Broker / Sub - broker - Client Agreement.
Transacting
-Specify to the Broker / Sub - broker, the exchange through which yourtrade is to be executed and maintain separate account for each
exchange.-Obtain a valid Contract Note from the Broker / Sub-broker within 24hours of the execution of the trade.
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Settlement
� Ensure delivery of securities /payment of money to the broker
immediately upon getting the Contract Note for sale / purchase but inany case, before the prescribed pay-in-day.
� Member should pay the money or securities to the investor within 24 hours
of the payout.
� Open a demat account.
� Opt for buying and selling shares in demat form.
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� To receive all benefits/ material information declared for the
investors by the Company.
� Prompt services from the Company such as transfers, Sub-
divisions and consolidation of holdings in the Company.
� As an equity holder have a right to subscribe to further issue of
capital by the Company.� Brokerage not to exceed 2.5% of the contract price.
� Receipt of the Contract Note from the broker in the specified
format showing transaction price, brokerage, Service Tax and
STT, separately.� Expect delivery of shares purchased/value of shares sold within
24 hours from pay-out.
� Approach concerned Regional Arbitration Centres of BSE , by
confirming geographical jurisdiction .
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Brokerage & Stamp Duty
BSE has not prescribed any minimum brokerage, and hence the
same is negotiable. Though the maximum brokerage allowed is
2.5% percent of the contract price, the brokerage generally
charged by the Members is much lower.
The present duty for equity shares transfer is 25paise for every
Rs.100 or part thereof, on the amount of consideration while the
duty for transfer of debentures varies from state to state,
applicable on the basis of the location of the registered office ofthe concerned issuing company.
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NSE Stands for National Stock Exchange. It has more than 2000stocks from different sectors listed with it. It is fully automatedelectronic order processing exchange. Nifty is major index of NSEand it comprise of 50 scripts from different sectors.
BSE Stand for Bombay Stock Exchange. It is India's Oldest StockExchange with listing of over 4000 scripts with it. This not fullyautomated yet but progress towards full automation is underway.SENSEX is major index of BSE and it comprise of 30 scripts from
different sectors.The initial joining fee for a member at BSE is Rs. 90 Lakhswhile that for an NSE member is between 100 to 300 Lakhdepending on the kind of membership one chooses.
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BSE NSE
Main Index: BSE Sensex S & P CNX Nifty
Full Name: Bombay Stock Exchange
Limited
National Stock
Exchange of India
Limited
Key Person: Mr. Madhu Kannan (MD &
CEO)
Mr. Ravi Narain
(Managing Director)
Claim to fame: Oldest stock exchange in Asia.
Largest stock exchange
in India in terms of daily turnover andnumber of trades.
What is it?: Indian Stock exchange Indian Stock exchangeLocation: Mumbai, India Mumbai, India
Established in: 1875 1992
Name: Bombay Stock ExchangeNational Stock Exchange
Market capitalization of listed
companies: Rs. 4,670,227 crore Rs. 3,367,350 crore.
Number of members: 951 (Oct 2007)1,009 as on March
2007
Number of listed companies (June
2010): 6000+ 1,810
Geographical spread: Presence in 417 cities Presence in 1,486 cities
Website: www.bseindia.com www.nseindia.com
Index value (June 2010): 17,757 5,322
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(c) Regional Stock Exchanges (RSE) of
IndiaThe Regional Stock Exchanges in India
started spreading its business operation from 1894. The
first RSE to start its functioning in India was Ahmedabad
Stock Exchange (ASE) followed by Calcutta StockExchange (CSE) in 1908.
The stock exchange in India witnessed a
flourishing phase in 1980s with the incorporation of
many exchanges under it
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Catalog of Regional Stock Exchanges in India
� 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
� Jaipur Stock Exchange� Ludhiana Stock Exchange
� Madhya Pradesh Stock Exchange� Madras Stock Exchange
� Magadh Stock Exchange� Mangalore Stock Exchange
� Meerut Stock Exchange� OTC Exchange Of India
� Pune Stock Exchange� Saurashtra Kutch Stock Exchange
� Uttar Pradesh Stock Exchange
� Vadodara Stock Exchange
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� http://www.nseindia.com
� http://www.bseindia.com
� www.google.coin
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