WORKING OF BOMBAY STOCK STOCK EXCHANGE

– PHD PRESENTATION

WHAT IS STOCK EXCHANGE

Stock exchange is that place where trading of shares is done in terms of sale and

purchase.

INTRODUCTION :

• There are 23 stock exchanges in the India. Mumbai's (earlier known as Bombay), Bombay Stock Exchange is the largest, with over 6,000 stocks listed. The BSE accounts for over two thirds of the total trading volume in the country. Established in 1875, the exchange is also the oldest in Asia. Among the twenty-two Stock Exchanges recognised by the Government of India under the Securities Contracts (Regulation) Act, 1956, it was the first one to be recognised and it is the only one that had the privilege of getting permanent recognition ab-initio.

STRATEGIC PARTNERS

• PERMANENT RECOGNITION

• EARLIER OPEN OUTCRY SYETEM NOW BOLTS

• T+1 = TRANSACTION + 1 DAY

• EARLIER AOP NOW LTD COMPANY

(CORPORAISATION AND DEMUTUALISATION)

INTRODUCTION TO ONLINE TRADING SYSTEM

The trading on stock exchange in INDIA used to take place through open outcry method without use of information technology for immediate matching or recording of trades.

This was time consuming and inefficient. This imposed limits on trading volumes and efficiency. In order to provide efficiency, liquidity, and transparency BSE introduced nation wide online fully automated “SCREEN BASED TRADING SYSTEM”

SCREEN BASED TRADING

• BSE’S screen based trading is known as BOLT-

Bombay online trading.

Ticker window

MECHANISM OF ONLINE TRADING

BSE has main computer which is connected through “VERY SMALL APERTURE TERMINAL”(VSAT) installed at its office.

THE main computer runs on a fault tolerant “STRATUS” mainframe computer at the exchange. Brokers have terminals installed at their premises which are connected through VSATS.

Screen Based Trading System (SBTS)

LOGGING ON

On starting application, the logon screen appears with the following details.

USER ID TRADING MEMBER IDPASSWORD

HOW TO PLACE ORDER

An investor informs broker to place an order on his behalf. The broker enters the order through his PC, which runs under windows NT and sends signal to the satellite via VSAT. The signal is directed to mainframe computer at BSE via VSAT at BSE’s office. A message relating to the order activity is broad casted to respective member.

To enter a buy order

BASIS OF OPERATION

The online trading operates on the strict basis of

PRICE PRIORITY and

TIME PRIORITY

HOW TO ENTER SELL ORDER

Same as the process involved in the placing of the buy order.

To enter a Sell order

TERMINOLOGIES OF ONLINE TRADING

Snap quote:- feature available to get instantaneous market information on a desired security.

Active and Passive orders:- when any order enters the trading system, it is an active order. It tries to find a match on the other side of books. If it finds a match trade is generated, if does not finds match it turns to passive order which is stored in order book.

Market By Price

Ord Book- Pending traded canceled

Order Book

Trade Book

CAUSES OF PRICE FLUCTUATION

• 1.DEMAND AND SUPPLY• 2.BANK RATE• 3.SPECULATIVE PRESSURE• 4.ACTIONS OF UNDERWRITERS AND

OTHER FINANCIAL INSTITUTIONS• 5.CHANGE IN COMPANY’S BOARD OF

DIRECTORS• 6.FINANCIAL POSITION OF THE COMPANY

CONT……..• 7.TRADE CYCLE• 8.POLITICAL FACTORS• 9.SYMPATHETIC FLUCTUATIONS• 10.OTHER FACTORS:• A.EXPECTED MONSOON• B.PERSONAL HEALTH OF HEAD OF

GOVERNMENT OR CHAIRMAN OF THE COMPANY

• C.OIL PRICES IN THE INTERNATIONAL MARKET.

CONT…….

• D.CHANGES IN EXCHANGE RATE• E.BORDER TENSION• F.STOCK BROKERS SCAM LIKE HARSHAD

MEHTA AND KETHAN PAREKH• G.STRIKES AND LOCK-OUT OF THE

COMPANY.• H.NEW BUDGET PROPOSALS• I.LIBERLIZATION AND PRIVATIZATION OF

THE COMPANY.

CIRCUIT BREAKERS

• Circuit breakers:- Started implementing compulsorily from July 02, 2001. The circuit breakers will be operated at the three stages of INDEX movement, either way viz at 10%, 15%, 20%.

MOVEMENT TIME FREEZED

10% PRIOR 1pmAFTER 1pm

1 HOUR½ HOUR

15% PRIOR 1pmAFTER 1pm-2pmAFTER 2pm

2 hours1 hour

Freezed for the day

20% ANY TIME FREEZED FOR THE DAY

Securities and Exchange Board of India

SECURITIES AND EXCHANGE BOARD OF INDIA SEBI

• It was constituted and made a statutory body by SEBI act 1992.With the coming into effect of SEBI, some of the powers and function exercised by the central government,in respect of regulation of stock exchanges were transferred to the SEBI.

OBJECTIVES OF SEBI

• 1.Registring and regulating the working of stock brokers,sub-brokers,share transfer agents,underwriters……….who may be associated securities market in any manner.

• 2.Registering and regulating the working of collective investment scheme including mutual funds.

• 3.Prohibiting insider trading in securities.• 4.Regulating substantial acquisition of shares and

takeovers of companies.

Cont……

• 5.Calling for information from,undertaking inspection,conducting inquiries and audits of stock exchanges and intermediaries and self regulatory organizations in the securities market.

• 6.Performing such function and exercising such powers under the provisins of the capital issues(control) act 1947 and SCRA 1956,as may be delegated to it by the central government.

• 7.Performing such other functions as may be prescribed.