Market for securities new
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Transcript of Market for securities new
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MARKET FOR SECURITIES
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PROVIDE MONETARY SUPPORT MARKET IN WHICH MONEY AS WELL AS MONETARY
CLAIMS ARE TRADED IN COMPONENTS ARE: 1. MONEY MARKET – WHERE LIQUID FUNDS (CASH) AS
WELL AS HIGHLY LIQUID SECURITIES ARE TRADED FOR A VERY SHORT TERM PERIOD
PARTICIPANTS – MAINLY BANKS & FINANCIAL INSTITUTIONS; OTHERS – MFs, PF TRUSTS, INSURANCE CO, CORPORATE HOUSES, NBFCs AND RBI
2. CAPITAL MARKET
FINANCIAL MARKETS
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• MARKET WHERE COMPANIES RAISE FUNDS DIRECTLY FROM INVESTORS & O/S SECURITIES BOUGHT & SOLD
• UNDER SEBI
• SCRA, COMPANIES ACT, SEBI ACT, FEMA ETC
• TWO TYPES:
• PRIMARY MARKET
• SECONDARY MARKET (STOCK MARKET)
CAPITAL MARKET
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• MARKET PROVIDES PLATFORM FOR NEW & OLD COMPANIES TO RAISE FUNDS BY ISSUING SECURITIES (EQUITY SHARES, PREF SHARES, BONDS, DEBENTURES ETC) DIRECTLY TO THE INVESTORS
• BRIDGE BETWEEN SAVINGS AND INVESTMENTS
• ISSUED THRU FOLLOWING MECHANISMS:
PRIMARY MARKET
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ISSUE SYSTEM OF PUBLIC LTD CO
GENERAL PUBLIC SUBSCRIBE TOWARDS CAPITAL OF THE COMPANY
GEN PUBLIC – INDIVIDUALS, INSTITUTIONS, MFs, NRIs ETC
SHOULD BE LISTED WITHIN 10 WEEKS FROM CLOSE OF ISSUE & STOCK EXCHANGE NAME IN PROSPECTUS
AT PAR, PREMIUM OR DISCOUNT
ISSUE PRICE DECIDED BY CO
FORMALITIES OF SEBI TO BE COMPLETED
1. PUBLIC ISSUE
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• IF EXISTING CO WANTS TO ISSUE SHARES –SHUD BE ISSUED TO ITS EXISTING SHAREHOLDERS ON A PROPORTIONATE BASIS
• IF SUBSEQUENT TO ITS PUBLIC ISSUE
• ONLY IF SHAREHOLDERS DENY – ISSUED TO GENERAL PUBLIC – BUT AFTER PASSING RESOLUTIONS U/S 81 OF COMPANIES ACT
2. RIGHTS ISSUE
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• ISSUING COMPANY APPROACHES THE INVESTORS INDIVIDUALLY
• MODE USED BY PVT LTD COMPANIES (SINCE CANT GO FOR ADS FOR SUBSCRIPTION)
• SOMETIMES BY PUBLIC LTD CO ALSO
• CANT BE DONE ON A STOCK EXCHANGE
• BUT RULES ARE AMENDED
3. PRIVATE PLACEMENT
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SYSTEM OF ISSUING SHARES TO GENERAL PUBLIC
PRICING DONE BY INVITING BIDS FROM THE PUBLIC
FINAL PRICE DECISIONS, BIDS ACCEPTANCE & BOOK RUNNING – AS PER SEBI RULES
DIFFERENT INVESTORS – QIBs, NON-INDIVIDUAL BUYERS & INDIVIDUAL BUYERS
CUT OFF POINT – ONLY IF BID AT OR ABOVE CUT OFF POINT – ALLOTTED; OTHERWISE DISQUALIFIED & MONEY REFUNDED
LISTED ON A RECOGNISED STOCK EXCHANGE
4. PUBLIC ISSUE THROUGH BOOK BUILDING
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• THRU OTCEI
• COMPANY NEGOTIATES WITH ATLEAST ONE DEALER TO BUY ENTIRE ISSUE AT A SPECIFIED PRICE
• INTENTION IS DEALERS WILL SELL SHARES TO GENERAL PUBLIC IN FUTURE
• DEALER – NO CONTROL OVER MGMT
• DEALER SELLS – EITHER THRU STOCK EXCHANGE OR DIRECTLY TO PUBLIC
5. BUYOUT DEALS
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• MARKET WHERE O/S SECURITIES OF COMPANIES ARE TRADED
• AS PER SCRA ALL TRANSACTIONS IN SECURITIES OTHER THAN SPOT TRANSACTIONS MUST BE DONE IN A RECOGNISED STOCK EXCHANGE
• STOCK EXCHANGE – SECONDARY MARKET
SECONDARY MARKET
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REGULATED MARKET PLACE – WHERE LISTED SECURITIES – BOUGHT & SOLD
THRU MEMBERS OF SE (BROKERS), BY TWO-WAY QUOTATION, TRADE SETTLEMENT AS PER BYE-LAWS OF SE
MUST HAVE RECOGNITION OF CENT GOVT UNDER SEC 4 OF SCRA, 1956
AT PRESENT 23 SE IN INDIA (MAJOR TRANSACTIONS IN BSE & NSE)
ALL TRADES ON THE FLOOR OF SE BECOME LEGAL & VALID & NO DEFAULT RISK – BCOS SE ASSUMES AS A COUNTER PARTY
STOCK EXCHANGE
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BOMBAY STOCK EXCHANGE (BSE):
FROM 1861 TO 1875 – UNDER BANYAN TREE – SHARES BOUGHT & SOLD THRU OUTCRY
ASSOCIATION OF THESE INDIVIDUALS IN 1875 – NATIVE SHARE AND STOCK BROKERS ASSOCIATION
VOLUNTARY & NON-PROFIT ORGN
REGD AS BSE IN 1887 – AS SE – THE STOCK EXCHANGE, MUMBAI
TILL 1995 – 96 TRADING AS OUTCRY IN TRADING HALL (TRADING RING)
HISTORY OF STOCK EXCHANGE
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ONLY REPS INSIDE RING MEMBERS GIVEN CABINS AROUND RING SHOUT FOR QUOTATION – IF NEGOTIATION OVER – ORDER
INTO A TRADE TELECOM FACILITIES & ONLINE FACILITIES COUNTERS FOR PROMINENT SHARES MEMBERS INFORM TRADE TO SE OFFICIALS – FOR SHARE
PRICE DISSEMINATION DISPLAY OF PRICES ON PTI SCREEN REPORTING TO SE OFFICIALS AT THE END OF TRADING
SESSION SETTLEMENT THRU CLEARING HOUSES
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• NO PHYSICAL PRESENCE IN RING• SYSTEM, NET CONNECTIVITY & SOFTWARES• EVERY MEMBER HAS COMPUTER SOFTWARE –
TRADERS WORK STATION• ORDERS ON OPEN DISPLAY• COMPUTERS MATCH ORDERS W.R.TO PRICE &
TIME DISPLAY• IMMEDIATE CONFIRMATION• CLEARING HOUSES – DO NETTING FOR TRADE
SETTLEMENTS
NEW SYSTEM OF ONLINE TRADING
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• AHMEDABAD STOCK EXCHANGE (1894)
• CALCUTTA STOCK EXCHANGE (1908)
• MADRAS STOCK EXCHANGE (1921)
• HYDERABAD STOCK EXCHANGE
• DELHI STOCK EXCHANGE (1947)
• AND OTHERS
• ALL GIVEN TEMP RECOGNITION FOR FIRST 5 YRS EXCEPT BSE
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• INDIA – DIFFERENT ORGN SET-UPS LIKE:
• VOLUNTARY NON-PROFIT ORGN – BSE & ASE
• PVT LTD CO – LTD WITH GUARANTEE – MSE & HSE
• JOINT STOCK CO – CSE, DSE, BANGALORE SE
• BUT NOW SEBI – CORPORATISATION OF SE IE., ALL IN CO FORM
• SEBI – DEMUTILISATION OF SE – IE., MERGING SE – LOSS MAKING WITH PROFIT MAKING
ORGANISATION OF SE
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• TRADING THRU MEMBERS / BROKERS –ELIGIBILITY – NET WORTH, INITIAL SECURITY, COLLATERAL SECURITY AND ANNUAL SUBSCRIPTION
• INITIAL SECURITY DIFFERS – FOR CAPITAL MARKET, FUTURES AND OPTIONS, WHOLE DEBT MARKET ETC
• ATLEAST 2 YEARS OF EXPERIENCE IN DEALING SECURITIES
FEATURES OF SE
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• LISTING REQUIREMENTS:
• CO – MIN ISSUED & PAID UP CAPITAL OF 3 CR (BSE – 10 CR)
• OUT OF ISSUED CAPITAL – ATLEAST 25% TO GENERAL PUBLIC; NO SINGLE SHAREHOLDER SHUD HOLD MORE THAN 0.5% OF PAID-UP CAPITAL
• CO SHUD DEPOSIT 1% OF ISSUE AMOUNT WITH REGIONAL SE AS SECURITY DEPOSIT (REGIONAL SE – NEAREST & REGD)
TRADING IN LISTED SECURITIES ONLY
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• INITIAL & ANNUAL LISTING FEE TO BE PAID
• TO FINALISE ALLOTMENT WITHIN 30 DAYS FROM ISSUE CLOSURE
• PROVIDE DIRECTORS’ & SHAREHOLDERS’ MEETING INFO IF HELD
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• PREVIOUSLY RATES GIVEN BY OPEN OUTCRY
• NOW ONLINE TRADING SYSTEM
• OPEN SYSTEM – TO PROVIDE COMPETITIVE RATE TO BUYERS AND SELLERS
OPEN SYSTEM OF QUOTATION
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COMPLETELY REGULATED
• ALL TRANSACTIONS TO BE REPORTED TO SE & SETTLED ACCORDING TO THE RULES OF THE EXCHANGE
• SE REGULATES TRADE TIMINGS, TYPES OF TRADES, ORDER AND TRADE SYSTEM, SETTLEMENT PROCEDURE, MARGIN SYSTEM AND ACTIVITIES OF MEMBER BROKERS
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SETTLEMENT THROUGH SE
• EVERY SE HAS A DEPT CALLED ‘CLEARING HOUSE’ – RESPONSIBLE FOR CARRYING OUT SETTLEMENT OF TRADES
• SETTLEMENT – EXCHANGE OF MONEY VALUE AND SECURITIES BETWEEN BROKERS
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FUNCTIONS OF THE SE
• ENROLMENT OF MEMBERS – QUALIFICATION, INITIAL DEPOSIT, ANNUAL MEMBERSHIP FEE
• MAKE BYE-LAWS OF THE SE: FOR LISTING & DE-LISTING, MEMBERSHIP, TRADING RULES & PROCEDURES, RULES FOR MARGINS, SETTLEMENT RULES FOR CLEARING HOUSE, ARBITRATION RULES, CHECK FOR GOOD-BAD DELIVERIES, MISCELLANEOUS
• PROVIDE FOR LISTING OF SECURITIES – MIN ISSUE SIZE, MIN PUBLIC OFFER, MANNER OF ALLOTMENT ETC
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• PROVIDE FACILITIES FOR TRADING – EVERY SE HAS OBJECTIVES TO PROVIDE FOR TRADING
• PROVIDE CLEARING SERVICES – ALL TRADES TAKEN PLACE ON THE FLOOR OF SE TO BE SETTLED THRU INTERVENTION OF SE
– SE ASSUMES AS COUNTER PARTY – SO THAT NONE OF THE PARTY SUFFER LOSS DUE TO DEFAULT
– THRU DEPT – CLEARING HOUSE – DO NETTING OF TRADES
• PUBLICATION OF INFO – DISSEMINATION TO HELP MEMBERS & INVESTORS TO TAKE EFFECTIVE DECISION; INFO LIKE:
– DAILY RATE LIST, CORP ACTION INFO, LISTING RULES, TRADING RULES, MEMBERSHIP RULES, CO INFO RECEIVED (MERGER, MEETING, BOOK CLOSURE), INDEX, GUIDELINES FOR GOOD-BAD DELIVERIES AND OTHER EXCHANGE-SPECIFIC INFO
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• ARBITRATION – SEPARATE CELL FOR DISPUTER SETTLEMENT B/W MEMBERS OR B/W MEMBERS AND INVESTORS/CLIENTS – CELL FINAL DECISION & BINDING ON MEMBERS
• INVESTOR EDUCATION AND INVESTOR PROTECTION – CLASSES OR PUBLISH INFO IN NEWSPAPERS TO EDUCATE & FOR INVESTOR PROTECTION; ‘INVESTOR PROTECTION FUND’ BY ALL SE – PROVIDE FOR LOSS OF BROKERS’ DEFAULT
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TOPICS FOR SEMINAR
• MARKET MECHANISM• FUNCTIONAL SPECIALISATION OF BROKERS• CAPITAL MARKET REGULATOR
– CCI– SEBI
• DEPOSITORY SYSTEM – RECENT DEVELOPMENT IN THE STOCK MARKET
• DEPOSITORIES IN INDIA• OTCEI• FOREIGN STOCK EXCHANGES