chapter 4 secondary market

7/23/2019 Chapter 4 Secondary Market

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Secondary Market

A market for outstanding securities

Facilitates liquidity, marketability, and

valuation of securities

Helps in price discovery


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Stock Market Scenario

The Bombay stock exchange (BSE)

The National Stock Exchange (NSE)

Regional stock exchanges

Inter-connected Stock Exchange

MC stock exchange

!nited Stock exchange


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Regulated by the central governmentunder the Securities Contracts Regulation!Act "#$%& provides for the recognition of stock

exchanges, supervision and control of recognisedstock exchanges, listing of securities etc.

S'() * to protect investors interest in securities

and promote and regulate the securities market

Regulation of Stock'+changes


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(rokerBrokers are the members of stock exchange

They enter trades either on their own account or on behalf of

clientsThey get registered with SEBI after paying a registration fee

Bring buyers and sellers together

Three classes of brokers- proprietary, partnership and corporate

Brokerage aries from broker to broker

!aximum brokerage that can be leied is "#$ per cent of the

contract price


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emutualisation of Stock'+changes

A process by which a member owned organisationbecome a shareholder owned company

Separation of ownership rights and trading rights

Become a prot making and tax paying company Safeguards the interest of investors reater transparency in the functioning of stock

exchange


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A company can seek listing on more than onestock exchange

A company can seek listing if at least !" #shares are o$ered to public

Basic norms for listing are uniform

%ompanies to pay listing fees annually

%ompulsory disclosures &uarterly and half yearly

%entral 'isting Authority (%'A) to ensurecompliance of listing re&uirements

-isting of Securities


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ematerialisation ofsecurities

An electronic book entry form of holding andtransferring securities.

*wo depositories+S-'+ ational Securities -epository 'imited

%-S'+ %entral -epository Service 'imited


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.radingnline screen based electronic trading system

*wo types of systems+ rder driven system and /uote driven

system

*wo types of orders+ 'imit orders and market orders

0argin system+ brokers are levied various margins

1ntra+day trading

%ircuit breakershalt 2suspension in trading to contain volatility in pricesdont halt trading but no order is permitted if it falls out

of the specied price range1ndex +wide circuit breakers

Brokers provide -irect 0arket Access (-0A) to institutionalinvestors

*rading and settlement+ rolling settlement


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Stock Market )nde+

A leading economic indicator.

Serves as barometer of the e&uity market

A good market index incorporates a set of scrips which havehigh market capitalisation and high li&uidity.

%alculated as the percentage of the aggregate market value ofthe set of scrips incorporated in the index to the average market

value of the same scrips during the base period.


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Methodologies for Calculating the

)nde+0arket capitali5ation weighted index

6ull market capitalisation method+S78 %9 ifty in 1ndia and S78 :"" 1ndex in

;SA

6ree+


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/lobal Stock Market )ndiceso0 1ones )ndustrial Average

2asdaq Composite )nde+& all stocks listed

2asdaq "33 )nde+& largest computer, software 7telecom stocks

S 4 5 $33 inde+& :"" biggest mkt cap companies

F.S' "33& largest market value companies

MSC) 0orld inde+& 4> developed country market

indices


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Ma6or )ndices in )ndia(S' Sense+

Comprises 73 shares(ase year is "#89&8# and base value

is "33

S 4 5 C2: 2iftyComprises $3 shares(ase year is "##$ and base value is

"333

chapter 4 secondary market

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