Stock Exchange:

By SCRA,1956: [Securities Contracts Regulation Act]

Any body of individuals whether incorporated or not,constructed for the purpose of
assisting, regulating and controlling the business of buying,selling or dealing in
securities.

 Min 51% of shareholding of stock exchange should be held by Public.

 World's oldest stock exchange: Amsterdam Stock Exchange (1602) in

Netherlands.
 Chronology of SE in India: BSE>Ahmedabad >Kolkata>NSE.

TOTAL=19 only
Association of Persons (when founded)=3 ( BSE, Ahmedabad SE, Madhya Pradesh
SE)
#Apart from NSE all were established as non-profit making organisations.

Demutualisation: segregation of ownership,management & trading Rights.

Conversion from 'mutual owned association' into a Corporate tax paying Entity.

#1 BSE: Native Share & Stock Brokers Association: Dalal Street

 Bombay Stock Exchange was established in 1875 (oldest in Asia)

 BOLT: BSE On-Line Trading System
 S&P BSE SENSEX: Sensitivity Index : 30 Scrips: Launched in 1986 with Base
Year as 1978-79 (as SENSEX=100 ) and represents weighted Average Free
Float Market Capitalisation of 30 scrips of Blue-chip Companies which are
selected by "Index Cell" of BSE by assigning them Free- Float Factor.
 When SENSEX falls by large margin then it is called as "Bloodbath" or
Bearhug.
 DOLLEX-30 : $ linked version of SENSEX
 BSE-National: 100 Scrips
 BSE 200
 BSE provides Depository Services through CDSL.
 BSE launched its IPO=shares listed on NSE
NSE in the process of IPO launching.

If Free-Float Market Cap. is 16% then Free-Float Factor is 0.2 (rounded off)
BLESS: Borrowing & Lending Securities scheme by BSE for lending/borrowing
securities at market determined rates: Banned by SEBI: Replaced by Rolling
Statement

#2 NSE: National Stock Exchange was established in 1992 by Banks like PNB,ICICI
etc. as profit making & Tax paying corporate entity=India's 1st demutualised &
Modern exchange

 S&P CNX Nifty 50 :50 scrips & launched in 1996 with base period Nov 1995
& it represents scrips of 13 sectors of our economy.
 S&P CNX Defty: $ denominated Nifty 50.
 IISL ( India Index Services & Products Limited): JV between NSE & CRISIL:
India's 1st specialized company focusing on Indices
 IISL owns & manages Nifty 50 which represents 65% of total market
capitalisation of scrips listed on NSE.
 It uses NSE-NEAT( National Exchange for Automated Trading) system and
operates through satellites by using VSAT i.e. Very Small Aperture Terminals,
being a geostationary satellite it does not work during solar flares & equinox.
 It uses SBTS=Screen Based Trading System.
 G-sec are traded on WDM segment of NSE i.e. Wholesale Debt Market: It
started its operations with WDM in 1994.
 NCDEX: National Commodity and Derivatives Exchange : pffers gold

NSCCL: National Securities Clearing Corporation Limited: 1st Clearing corporation

in India
wholly owned subsidiary of NSE which was founded in 1995
It undertakes clearing & settlement of NSE.
It clears settlement and guarantee settlement through SGF i.e. Settlement guarantee
fund & it assumes Counter party Risk.

 Clearing Members/Custodians: Funds to Clearing Banks & Securities to

Depositories
 Clearing Banks
 Depositories: Demat form
Margins:

 Mark-to-Market
 VaR Margin

 ALBM: Automated Lending & Borrowing Mechanism by NSE & NSCCL:

Similar to BLESS by BSE: Both Banned by SEBI

provide facility for lending/borrowing securities at market determined rates

 OTCEI: Over The Counter Exchange of India= Now De-Recognised by SEBI

launched in 1990 by ICICI,SBI,UTI,IDBI etc.

 ICSE: Inter Connected Stock Exchange

launched in 1998 by 15 Regional Stock Exchanges.

 MCX:Multi Commodity Exchange of India = India's 1st Listed Exchange

> started operations in 2003 which operates within framework of Forward Contracts
(Regulation) Act,1952
> It offers trade in Commodity Futures in Agri-commodities ,energy, metals (GOLD)
etc.

GOLD EXCHANGE:
> Gold exchange will be set up under supervision of SEBI to regulate gold trading in India.
Gold exchange is a special type of commodity market devoted only to Gold trading.
⇒ Budget-2021: We will undertake reforms in the regulation of gold exchange markets in India.
1) SEBI will be the regulator 2) Warehousing Development and Regulatory Authority (WDRA)
Statutory body under Dept of Food and Public Distribution) Will be responsible for
Warehousing/Vaulting, Assaying, Logistics of gold exchanges.

Electronic Gold Receipts (EGRs): stage1: Gold companies deposit their gold in the the vaults
authorized by Warehousing Development and Regulatory Authority (WDRA) → Electronic
Gold Receipts (EGRs) generated and listed on the SEBI regulated electronic gold exchanges. →
Buyer can purchase the gold electronically and be assured of the quality. Later he may even sell
this EGR to another investor. Such receipt will be in the multiples of 5 grams to 1 kilogram.
Benefits 1) Assured quality. 2) Tax evasion is difficult Due to online transactions monitored by
SEBI. 3) India is the second largest consumer of gold after China. Such EGRs and associated
gold index can help India to send price signals for global imports. [Similar to how Brent index in
crude oil].

INDOnext : joint venture of BSE and NSE which provide national level trading
platform for SMEs only:2005

Badla Mechanisam: {Banned by SEBI }: Betting on borrowed money

Carry Forward Mechanism = Max 70 or 72? days after which u r obliged to pay badla
financer
If A wants to buy shares of a company but he has not enough money.
B will buy shares on behalf of A or borrow money from B (Badla Financer) at interest
rate determined by SEBI.
A will buy shares from B at slightly higher price than at which B bought them or pay
interest and take shares.
@Ketan Parekh Scam

Dabba Trading (Bucketing): When deal is not executed by the broker on behalf of
client on the official software of Exchange instead he noted deal in his unofficial
ledger & speculation is carried out in this manner.

Rolling Statement: T+2 days i.e. Transaction is settled on 2nd working day.
Pay-In: Brokers made payments or delivery of securities to the exchange
Pay-out: Exchange made payments or delivery of securities to clients

TOD: Today i.e. settlement on same day T+0

TOM: Tomorrow i.e. settlement on next day T+1 day
Spot: T+2 days
Face to face Transactions: Within 24 Hours

Depository:An organization which holds the securities of an investor in electronic

form through a registered DP.
Set up under Depositories Act, 1996 for safekeeping & transfer of securities.
It is registered under companies Act & also with SEBI.

2 Types:

 Dematerialized: Paper certificates are totally eliminated

 Immobilized: Initial Papers are kept safe & further circulation is frozen.
  NSDL : National Securities Depository Limited

 It is 1st Depository in India which was formed in 1996 under Companies Act
by SBI,NSE,UTI,IDBI
 STeADY: Securities Trading Information Easy Access and Delivery:
Transaction through STP
 IDeAS: Internet based Demat Account Statement: to view their account
balance & statements.
 SPEED-e: Deal execution through internet

#NSDL got license for Payment Bank.

 CDSL : Central Depository Services Limited

 Founded in 1999 by BSE, SBI, HDFC, BoB, BoI

Depository Participant: These acts as agents of Depository with which investors can
open their account and held their securities i.e. Demat Shares.These have to be
registered with SEBI.
Types:
1) Banks
2) F.I.
3) SEBI registered trading members.

 Corporate entities are NOT allowed to become DPs or Depositories.

e.g. SHCIL ( Stock Holding Corporation of India Limited)=Founded in 1986 by

IDBI,UTI,ICICI etc: 1st DP in India
It acts as DP to both NSDL and CDSL.

[]Demat Shares do NOT have a Folio Number/Distinctive Number/Certificate

Number like a physical share.

Custodians: It keeps the scrips of its clients in custody & it collects dividends on
behalf of their clients.
SHCIL is the largest Custodian.

ISIN: International Securities Identification Number: unique Identification Number of

a security.

Penny Stocks:
In India: Upto Rs. 10 per share & of those companies which have very low market
Capitalization.
In USA it is < $1 per share.
These are used by scamsters to launder their black money.

Circuit Breaker:
Halt of trading of a particular scrip if there is an adverse movement in its price to
avoid scams such as Harshid Mehta & Khetan Parikh Scam & to deepen capital
market.
1 Hour Halt: 10% up/down
2 Hour Halt: 15% up/down
Whole day: 20% up/down

 Harshid Mehta Scam: 1992: 5k crore: Borrowing on based of Bank Receipts

 Khetan Parikh Scam

Market Makers: who gives 2 way quotes: Buy & Sell Quotes: to enhance Liquidity

DMA: Direct Market Access: To Mutual Funds & Insurance Companies thus
eliminating need of brokers

Bulk Deal: Total Quantity of shares bought/sold in one transaction is > 0.5% of total
no. of equity shares

Block Deal: A large single transaction without putting either the buyer or the seller in
a disadvantageous position.
Min 5 Lakh shares or min value of 5 crore.
Special window of 35 minutes.

Margin Trading:
It is a form of leveraged trading which allows trader to invest more money in excess
of his financial capacity by borrowing money from bank by pledging securities.
40% value as margin & rest 60% can be borrowed.
Margin call by bank if price of shares are reduced.

Turnover Ratio: Total value of domestic shares traded/Market Capitalization

Higher it is lower the transaction cost & higher active the market is.

Value Traded Ratio: Total value of domestic shares traded/GDP

Market Cap. Ratio: Market Cap/GDP

Transaction Cost:
Explicit:

 Brokerage
 Commission
 Stamp Duty
 Depository charges
 STT [Securities Transaction Tax]

Implicit:

 Clearing & Settlement Cost

 Impact Cost: Lower it is higher the liquidity of share

Example:
Bid Price: 99
Ask Price: 101
Ideal Price:100: (Bid+ Ask)/2
But if 1000 shares are purchased @102: Impact Cost is 2%
2000 shares are purchased @104: Impact cost is 4%

Market Impact Cost: It is the cost resulting from any change in market price due to
execution of a large order at any time.

STP: Straight Through Processing: It allows seamless capturing & processing of

transactions in one pass from point of 1st deal to final transaction.
> Algo Trading & Co-Location:
⇒ Algo-Trading = Some large brokers / companies use algorithmic trading computer
programmes to automatically buy / sell securities at a speed and frequency that is impossible for
a human trader. This can be misused for manipulating the share prices. While SEBI has not
banned it, but issued technical measures e.g. a single broker / investor can’t place more than 100
online orders per second.
⇒ Co-location = stock exchange allowing the share broker to install their office/computer
systems very close to Stock Exchange. Then broker's computers can monitor/buy/sell shares
quicker than a computer sitting 500 kilometres away: So, co-location gives added advantage, esp.
for the Algo- Traders.
⇒ 2021: SEBI fines National Stock Exchange (NSE) For violation of some norms related to
colocation.