CAPITAL, COMMODITY AND MONEY MARKET - ICSI ??  i STUDY MATERIAL PROFESSIONAL PROGRAMME CAPITAL,...

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Transcript of CAPITAL, COMMODITY AND MONEY MARKET - ICSI ??  i STUDY MATERIAL PROFESSIONAL PROGRAMME CAPITAL,...

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    STUDY MATERIAL

    PROFESSIONAL PROGRAMME

    CAPITAL, COMMODITYAND

    MONEY MARKET

    MODULE 3ELECTIVE PAPER 9.2

    ICSI House, 22, Institutional Area, Lodi Road, New Delhi 110 003tel 011-4534 1000, 4150 4444 fax +91-11-2462 6727email info@icsi.edu website www.icsi.edu

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    THE INSTITUTE OF COMPANY SECRETARIES OF INDIA

    TIMING OF HEADQUARTERS

    Monday to Friday

    Office Timings 9.00 A.M. to 5.30 P.M.

    Public Dealing Timings

    Without financial transactions 9.30 A.M. to 5.00 P.M.

    With financial transactions 9.30 A.M. to 4.00 P.M.

    Phones

    41504444, 45341000

    Fax

    011-24626727

    Website

    www.icsi.edu

    E-mail

    info@icsi.edu

    Laser Typesetting by AArushi Graphics, Prashant Vihar, New Delhi, andPrinted at IPP/8000/March 2017

    ii

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    PROFESSIONAL PROGRAMME

    CAPITAL, COMMODITY AND MONEY MARKET

    Efficient financial systems are indispensable for speedy economic development. The financial system of acountry is a conglomeration of sub market, viz. capital, commodity and money market. The flow of funds in thesemarkets is multi directional depending upon liquidity, risk profile, yield pattern, interest rate differential or arbitrageopportunities, regulatory restrictions etc. As the Indian economy gets integrated with the global economyempowered by increasingly sophisticated information and technology systems, there is an acute need for trainedprofessionals to entrust important roles in all the spheres of the financial market activity. This study material hasbeen designed to provide expert knowledge and understanding of various capital market instruments, commoditymarket products, money market instruments, key features and participants in these markets, raising capital ininternational market by companies etc.

    This study material has been published to aid the students in preparing for the Capital, Commodity and MoneyMarket paper of the CS Professional Programme. It is part of the educational kit and takes the students step bystep through each phase of preparation stressing key concepts, pointers and procedures.

    Company Secretaryship being a professional course, the examination standards are set very high, with emphasison knowledge of concepts, applications, procedures, for which sole reliance on the contents of this study materialmay not be enough. Besides, as per the Company Secretaries Regulations, 1982, students are expected to beconversant with the amendments to the laws made upto six months preceding the date of examination. Thematerial may, therefore, be regarded as the basic material and must be read alongwith the original Bare Acts,Rules, Regulations, Academic Guidance etc.

    The subject of Capital, Commodity and Money Market is inherently complicated and is subject to constant refinementthrough, rules and regulations made thereunder. It is, therefore becomes necessary for every student to constantlyupdate himself with the various legislative changes made from time to time by referring to the Institutes journal e-bulletin Student Company Secretary, as well as other professional journals. In the event of any doubt, studentsmay write to the Directorate of Academics of the Institute for clarification at academics@icsi.edu.

    Although care has been taken in publishing this study material yet the possibility of errors, omissions and/ordiscrepancies cannot be ruled out. This publication is released with an understanding that the Institute shall notbe responsible for any errors, omissions and/or discrepancies or any action taken in that behalf. Should there beany discrepancy, error or omission noted in the study material, the Institute shall be obliged if the same isbrought to its notice.

    There is open book examination for this Elective Subject of Professional Programme. This is to inculcate anddevelop skills of creative thinking, problem solving and decision making amongst students of its professionalprogramme and to assess their analytical ability, real understanding of facts and concepts and mastery to apply,rather than to simply recall, replicate and reproduce concepts and principles in the examination.

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    SYLLABUS

    ELECTIVE PAPER 2: CAPITAL, COMMODITY & MONEY MARKET (100 Marks)

    Level of Knowledge:Expert Knowledge

    Objective: To acquire specialized knowledge of Capital, Commodity and Money Market

    Detailed Contents:

    1. Economic Framework

    Basic structure of Flow of funds in the economy;

    Capital Markets its Role in Capital formation, Functions of Liquidity, , Resource Allocation and TransactionCost-reduction

    2. Legal Framework

    Ministry of Finance (Capital Markets Division,Department of Economic Affairs)

    Ministry of Corporate Affairs

    Companies Act, 2013

    SEBI Act, 1992

    Securities Contracts (Regulation) Act, 1956 (SCRA)

    Depositories Act, 1996

    SEBI Regulations and Guidelines An Overview, SEBI (Prohibition of Insider Trdaing) Regulations,1992, SEBI (Substantial Acquisitions of Shares and Takeovers) Regulations, 2011 (SAST)

    Prevention of Money Laundering Act, 2002

    Grievance Redressal Mechanism: Stock Exchange (Investor Protection Fund), SEBI, SecuritiesAppellate Tribunal (SAT), Supreme Court

    Enforcement: Economic Offences Wing, Financial Intelligence Unit, Central Bureau of Investigation,Financial Action Task Force (FATF)

    3. Financial Intermediaries Framework

    Framework of Market Infrastructure Institutions (MII), Stock Exchanges Clearing Corporations,Custodians,

    Depositories, Depository Participants, Registrars and Transfer Agents (RTA), Bankers to issue

    Merchant Bankers, Underwriters, , Investment Advisors, Portfolio Managers, Self Certified SyndicateBanks,

    Brokers, Sub-brokers, Market-makers

    Credit Rating Agencies

    4. Primary Markets

    IPO, FPO, Offer for Sale, Private Placement, Preferential Allotment, Institutional Placement Procedures(IPP), Qualified Institutional Placement (QIP), Rights Issue, Bonus Issue

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    Prospectus, DRHP, Shelf Prospectus, Red Herring prospectus

    Private Investment in Public Equity (PIPE)

    SEBI (Issue of Capital & Disclosure Requirements) Regulations, 2009

    Lead Manager (Pre & Post Issue Activities)

    Due Diligence Review

    Underwriting obligations

    Basis of Allotment

    Book-building

    Pre-issue and Post-issue activities,

    Green-shoe Option

    Pre-listing and Post-listing activities, Listing Agreement

    5. Secondary Markets

    Opening day (listing)

    Continuing compliance obligations and disclosures: Post-listing activities, Corporate Actions

    Requirements for Continuing Listing

    Corporate Governance Norms

    Disclosures as per Listing Agreement: Price Sensitive Information, Material Changes, Quarterly results

    Functioning of an Exchange: Margining, Trading, Clearing and Settlement, Trade Guarantee Fund,Trading Software, Arbitration Mechanism

    Stock Market Indices

    6. Capital Market Investment Institutions

    Domestic Financial Institutions (DFI) , Qualified Institutional Buyers (QIB), Foreign Institutional Investors(FII) , Private Equity (PE), Angel Funds, HNIs, Venture Capital (VC), Qualified Foreign Investors (QFI),Mutual Funds, Alternative Investment Funds (AIF), Hedge Funds, Pension Funds

    7. Capital Market Instruments

    Equities

    Preference Shares, Shares with Differential Voting Rights (DVR)

    Corporate Debt :Non Convertible Debentures (NCD), Partly-and Fully-Convertible Debentures (PCD,FCD)

    NCDs with or without Call and Put Features

    Bonds, Foreign Currency Convertible Bonds (FCCB)

    Indian Depository Receipts (IDR)

    Derivatives: Single Stock Futures, Single Stock Options, Index futures (SENSEX, NIFTY), Index Options,Interest Rate Futures, Currency futures

    Exchange Traded Funds (ETF)

    Warrants

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    8. Resource Mobilization through International Markets

    Global Depository Receipt (GDR)

    American Depository Receipt (ADR)

    Listing on the London Alternative Investment Market (AIM), NASDAQ, NYSE

    9. Landmark Studies and Report of Committees on Capital Markets

    10. Economics of Commodities Marketing

    (a) Economic Rationale for Commodities Trading Place and store value

    (b) Perishables and non-perishables

    (c) Tangibles and Intangibles (Weather , Freight)

    (d) How resources can be optimized through price hedges

    11. Commodities Market Operations

    Origin of Commodity Market in India

    Products, Participants and Functions

    Evolution of Commodity Exchanges; Regulatory Framework

    Structure Of Commodity exchanges, membership, Risk Management, Clearing and Settlement System,Commodities Traded on Stock Exchanges Platform-NCDEX, MCX SX

    Instruments available for Trading

    Using commodity exchanges for Hedging, Speculation and Arbitrage

    12. Introduction to Money Market

    Nature & Deployment of Surplus Funds and Raising of Short-term funds, Characteristics of MoneyMarket

    Regulatory framework of RBI, FIMMDA (Fixed Income, Money Market and Derivatives Association)and Foreign Exchange Dealers Association of India (FEDAI) Call Money Market-Players, Utility, Moneymarket Instruments: Commercial Paper, Certificates of Deposits, Bills of Exchange, Treasury Bills (T-Bills), Bill Discounting, Factoring, Letter of Credit, Money Market Mutual Funds, Fixed Maturity Plans

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    LIST OF RECOMMENDED BOOKSMODULE 3

    PAPER 9.2 : CAPITAL, COMMODITY AND MONEY MARKET

    The students may refer to the given books and websites for further knowledge and study of the subject :

    READINGS

    1. M.