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EXECUTIVE SUMMARY
This report is an effort to study the whole system of securities trade andvarious regulatory bodies that govern the system.
The report brings to light the SEBI (Securities and Exchange Board of India)
act that governs the securities transactions and the working of the stock
exchanges. The SEBI board constituted under this act is the regulatory body
that enforces the act and periodically makes changes to the structure of the
system in the interest of the investor. The SAT (Securities Appetite Tribunal)
decides any case that may arise due to the rulings of the SEBI board.
Next we have the depository (NSDL, CSDL) which registers and governs the
depository participants (Stock Holding Corporation of India Ltd.). The
depositories are governed by the SEBI and must follow the rules and
regulation of the Depositories Act, 1996.
Then we would take a look of the various securities market. The history and
the present scenario of some of the major stock markets of India (BSE, NSE)
are introduced.
This makes the ground for the detailed study of the UPSE (Uttar Pradesh
Stock Exchange), one of the only functional regional stock market in the north
India other than NSE. The functioning of the departments is explained with
special emphasis on the margin department.
Hope this report will be able to enhance the knowledge of the investor about
the stock market.
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INTRODUCTION
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Introduction
Uttar Pradesh Stock Exchange Association Ltd. was inaugurated on 27th
August, 1982 and occupies one of the prominent place among the Stock Exchanges
in India . It plays an important role in the development of the capital market of
North India. Initially, it had only 350 members which has grown up to 540 at present.
The membership is open to companies even beyond the territories of Uttar Pradesh.
Currently, the exchange has 843 listed companies with a total capitalisation of
Rs.81184 crores.
UPSE Securities Ltd. is a 100% owned subsidiary of the U.P. Stock Exchange
Association Ltd. and was incorporated on 19th of April, 2000. Its main object is to
obtain membership of the big exchanges like BSE or CSE. It aims at providingtrading facilities on these bigger exchanges to the members of U.P. Stock Exchange
as a sub-brokers according to the policies/guidelines issued by SEBI.
The Company acquired the membership of Bombay Stock Exchange (BSE) and
commenced an online trading on BSE On-Line Trading System (BOLT) from 29th
of January, 2001. Currently, 43 members are trading on BSE through the Company,
96 have been registered with SEBI as sub-brokers and 153 have applied for
participation. The Company has also been admitted as member of CSE and further
steps are being taken in this regard.
Investor's Service Center / Library of UPSE
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R&D Wing of UPSE is in function since 1992 under the directions of SEBI and it
provides valuable services to the investors. Investor's Service Centre maintains a well
equipped library of Books, journals, periodicals and Newspapers on Financial
Markets.
They maintain the records of day to day quotations of major exchanges, the annual
reports,of companies, PRIME Directory , complete set of volumes of the Stock
Exchange, Mumbai Directories. Along with this it also maintains the news letters,
daily bulletin, books on Capital Markets, Investor Awareness, Budget, Taxation with
other relevant books.
The UPSE has been organising summer camps to give trainings to Company
Secretaries and MBAs from different institutes giving them complete data and
helping the student to know the practical day-to-day working of the exchanges.
Along with this it also organises Investor Awareness Shows.
The changing technology have helped the exchange to install a corporate database
of over 7000 companies. The rates of UPSE, BSE and NSE is displayed live for the
benefit of investors
Evaluation of function
Uttar Pradesh Stock Exchange Association Ltd are back foot in the stockmarket as compare of NSE and BSE due their bad functioning.
The best function are should happen in following way
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The functions of stock exchange are as following
1. Main activities:
To promote the savings and for them to be analyzed towards of carrying
through investment projects that otherwise wouldnt be possible you needthat the issuing institution of the securities to be admitted for quoting. The
negotiations will be done on the primary market.
To provide liquidity to the investors. The investor can recuperate the
money invested when needed. For it, he has to go to the stock exchange
market to sell the securities previously acquired. This function of the stock
market is done on the secondary market
.
2. Functions as an organization are:
To guarantee the legal and economic security of the agreed contracts.
To provide official information about the quantities that are negotiated and
of the quoted prices.
To fix the prices of the securities according to the fundamental law of the
offer and the demand.
Specifying a bit more and centering on the two main agents that intervene in the market,
investors and companies, we could do the following classification:
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3. Functions in favor of the investor:
It permits him the access to the profitable activities of the big companies.
It offers liquidity to the security investments, through a place in which to
sell or buy securities.
It permits for the investor to have a political power in the companies in
which he invests its savings due that the acquisition of ordinary shares
gives him the right (among other things) to vote in the generalshareholders meetings of the company in question.
It offers the possibility of diversifying your portfolio by enlarging the
field of strategy of investments due to alternative options, as could be the
derived market, the money market, etc.
4. Function in favor of the companies:
It supplies them with the obtaining of long-term funds that permits the
company to make profitable activities or to do determine projects that
otherwise wouldnt be possible to develop for lack of financing. Also, this
funding signifies a less cost than if obtained at other channels.
The securities quoted at the stock exchange market usually have more
fiscal purpose advantages for the companies.
It offers to the companys free publicity, which in other way would
suppose considerable expenses. The institution is objecting of attention of
the media (television, radio, etc.) in case any important change in its
owners (the share holders)
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MARKET INTERMEDIARIES REGULATION AND
SUPERVISION DEPARTMENT (MIRSD)
The Market Intermediaries Regulation and Supervision Department is responsible for
the registration, supervision, compliance monitoring and inspections of all market
intermediaries in respect of all segments of the markets viz. equity, equity
derivatives, debt and debt related derivatives. The Department also handles the work
related to action against the intermediaries for regulatory violations (As regards
action it is clarified that the current practice of issuing show cause notices,
appointment of Enquiry/Adjudication officers and consequential action up to serving
of Chairmans order and maintenance of database will be with the respective
Divisions). The following divisions will perform the functions of the department.
MARKET REGULATION DEPARTMENT (MRD)
The Market Regulation Department is responsible for supervising the functioningand operations (except relating to derivatives) of securities exchanges, their
subsidiaries, and market institutions such as Clearing and settlement organizations
and Depositories. (hereinafter collectively referred to as Market SROs) The
following Divisions will perform the functions of the Department.
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Division of Market supervision
The Division will hand the work related to conducting compliance, examinations and
inspections of Market SROs
Investor Complaints Cell
The cell would receive complaints relating to the market SROs from the Office of
Investor Assistance and Education (OIAE) and take follow up action and report back
to the OIAE. If regulatory action is required, the Cell shall inform the Division of
SRO Administration besides reporting to OIAE.
DERIVATIVES AND NEW PRODUCTS DEPARTMENT
(DNPD)
Division of Policy and Supervision
The Division is responsible for supervising the functioning and operations of
derivatives exchanges and related market organizations. In order to accomplish its
tasks, this division would be responsible for the following:
Derivatives market policy issues.
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Approval of new derivative products
Monitoring the functioning of derivatives exchanges including conducting
inspections and compliance exams.
Prescribing and Monitoring risk management and settlement practices in
derivatives exchanges
Developing the trading and settlement framework for new products.
Regulatory action was required. As regards action it is clarified that the current
practice of issuing show cause notices, appointment of
Enquiry/Adjudication officers and consequential action up to serving of
Chairmans order and maintenance of database will be with the Division.
CORPORATE FINANCE DEPARTMENT (CFD)
The Corporate Finance Department deals with matters relating to
i. Issuance and listing of securities, including initial and continuous listing
requirements
ii. corporate governance and accounting/auditing standards
iii. corporate restructuring through Takeovers / buy backs
iv. Delisting
The following divisions form part of this Corporation Finance Department:-
Division of Issues and Listing (DIL)
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The division of issues and listing handles works relating to the following:-
1. Policy pertaining to
I. primary market
II. disclosures (initial as well as continuous)III. listing
IV. corporate governance
V. Employee Stock Option
VI. Preferential issues
VII. Qualified Institutional Placement (QIP)
VIII. common electronic filing platforms viz. EDIFAR & CFDs
IX. listing conditions and
X. vanishing companies in consultation with Ministry of Corporate Affairs (MCA)
through the framework of Coordination and Monitoring Committee (CMC), set up by
Government of India.
2. Issue of observations on the draft offer documents of public and rights issues.
3. Operational matters pertaining to accounting standards, compliance with corporate
governance, guidance to Stock Exchanges on listing matters, vanishing companies
in consultation with respective Registrar of Companies, allegations of non-
compliance with listing agreement etc.
4. The following Committees of SEBI:-
Primary Market Advisory Committee (PMAC)- to advise SEBI on policy
issues pertaining to Primary Market.
SEBI Committee of Disclosures and Accounting (SCODA) - to advise SEBI
on disclosures and accounting related issues.
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5. Regulatory action where required(As regards action it is clarified that the current
practice of issuing show cause notices, appointment of Enquiry/Adjudication
officers and consequential action upto serving of Chairmans order and
maintenance of database will be with the Division).
Division of Corporate Restructuring
The Division will handle the work relating to:
Policy related to corporate restructuring
Substantial Acquisition and Takeovers
Buy back of securities
Delisting of Securities
Coordinating with the Takeover Panel
Regulatory action where required. (As regards action it is clarified that the
current practice of issuing show cause notices, appointment of
Enquiry/Adjudication officers and consequential action up to serving of
Chairmans order and maintenance of database will be with the Division).
Investor complaints relating to corporate restructuring.
INVESTMENT MANAGEMENT DEPARTMENT (IMD)
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The Investment Management department is responsible for registering and regulating
mutual funds, venture capital funds, foreign venture capital investors, collective
investment schemes, including plantation schemes, Foreign Institutional Investors,
Portfolio Managers and Custodians. The following Divisions will perform thefunctions of the Department;
The Divisions handle the following works related to their respective entities:
Registrations
Policy related issues
Inspections
Investor Complaints
. Regulatory actions.
Division of Foreign Institutional Investors and Custodian
The Division will handle all work related to:
FIIs
Custodians
Regulatory action wherever required.
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Division of Collective Investment Schemes:
This Division administers the SEBI (Collective Investment Schemes) Regulations
1999. It includes work relating to the following:
Existing CIS entities
Investigating complaints of purported CIS entities
Grant of provisional registration to existing CIS entities in terms of
regulation 73 of the Regulati
Taking action against the entities for non compliance with the regulations like,
prohibitory orders and launching prosecutions against errant entities and their
promoters/ directors and key management personnel.
Providing evidences in courts pertaining to prosecution proceedings.
Registration of Collective Investment Management Companies - CIMC
The above activities are also conducted at the regional offices of SEBI, wherever the
address of the CIS entity is located.
INTEGRATED SURVEILLANCE DEPARTMENT (ISD)
The integrated Surveillance department is responsible for monitoring market
activity through market systems, data from other departments and analytical
software. The department would be responsible for:
Developing, maintaining and operating an integrated market surveillance
system are including monitoring of all segments of the markets.
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Methodologies for capturing information from media review, public
complaints and tips, other agencies, exchanges, and direct solicitations;
assignment of staff to handle functions; method of logging and cataloguing
information; criteria for evaluating and distributing information; input intotracking and other systems.
Recognizing potentially illegal activities and referrals to Investigations,
Enforcement or other department
INVESTIGATIONS DEPARTMENT (IVD)
The Investigations department is responsible for:
Conducting investigations on potentially illegal market activities.
Providing referrals to the enforcement department.
assisting the enforcement department in enforcing SEBI action against
violators.
(As regards action, the current practice of issuing show cause notices,
appointment of Enquiry/Adjudication officers and consequential action up to
serving of Chairmans order and maintenance of database will be with the
Department).
ENFORCEMENT OF DEPARTMENT (EFD)
Enforcement Department is responsible for proceedings related to regulatory action
and obtaining redress for violations of securities laws and regulations against all
market participants, issuers and individuals and other entities that breach securities
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laws and regulations. The following Divisions will perform the functions of the
Department;
Division of Regulatory Action
The division shall enforce action against market misdemeanors through
SEBI administrative proceedings. The role of the Division shall commence
from the time the hearing before Chairman/Board is proposed. The Division
will assist the Chairman/Board in its proceedings, prepare the orders, handle
all matters relating to SAT, appeals against SAT orders and Court cases
relating to regulatory action. The Division will also frame the procedures
relating to the above matters.
Division of Prosecutions
The division shall handle work related to filing prosecution proceedings
through the courts and follow up to obtain conviction. The Division will also
frame procedures for cooperation with public prosecutors, other agencies and
for making referrals to prosecutors and other government agencies
.
LEGAL AFFAIRS DEPARTMENT (LAD)
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against alleged violators who are within SEBIs disciplinary jurisdiction. The
department would directly report to Chairman.
OFFICE OF INVESTOR ASSISTANCE AND EDUCATION
(OIAE)
The Office will support SEBIs operations by handling investor complaints centrally
and be the focal point of SEBIs investor education effort. The Office would be the
single point interface with investors and would receive complaints relating to all
departments, forward to the concerned departments, follow up and respond to
investors. The office shall set up necessary systems and procedures to handle his
function.
The Office will also receive complaints relating to issues, transfer of shares,
dividends, compliance with listing conditions, corporate governance issues under the
purview of the Corporation Finance department (Division of Issues and Listing) and
take follow up action.
GENERAL SERVICES DEPARTMENT (GSD)
This department would support all of the internal operations of SEBI. The
Department will have the following divisions.
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Human Resources Division
The Human Resources Division will perform all the functions in its role
as the principal personnel and human resources authority in SEBI.
Information Technology Division
This division would perform its role as the technical support group for SEBI
Treasury and Accounts Division
The Division will handle work related to:
Development of SEBIs internal budget and accounting systems
Presentation of reports and budgets to the SEBI Board
Maintaining internal accounting records, developing internal control
systems for collections and disbursements and other financial controls
Managing SEBIs investments
Facilities Management Division
The division will be responsible for the establishment and maintenance of the
physical facility housing the regulator and related needs.
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Official Language Division
The Division will handle the work related to compliance with Governments official
language policy and Translation of certain documents into the official language.
Office of the Secretary to the Board
The Office of the Secretary shall coordinate Board meetings, record and maintain
Board decisions.
Communications Division
The division would be responsible for all communications of SEBI. These include:
Media releases and other forms of communication including the
publication of SEBI materials.
News conferences and responding to inquiries from the press
Protocol and Security Division
The division will handle work related to:
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Protocol duties for visits/ meetings of senior officials of SEBI and
coordinating visits of dignitaries to SEBI,
Security and Fire fighting duties in the office and residential premises of
SEBI,
Functioning of mailing desk and reception,
General upkeep of the office premises and maintenance of SEBI buildings,
Verification of dead stock inventory for SEBI's offices and residential
premises
DEPARTMENT OF ECONOMIC AND POLICY ANALYSIS
(DEPA)
The Department will handle its functions through the following Divisions:
Division of Policy Analysis (DPA)
This division would look after the following:
a) Partnering/vetting of policy/concept papers.
b) Need based research
c) Regulatory Impact Assessment (RIA) and benchmarking of regulations.
d) Research Support to Committees and Working Groups set up by SEBI.
e) Development of Strategic Action Plan/Vision Statement.
f) Any other tasks that may be assigned.
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Division of Economic Analysis (DEA)
This division would look after the following:
a) Tracking and analysis of market developments.
b) Tracking and analysis of other economic developments.
c) Repository of data (and data analysis)
d) Preparation and publication of Annual Report.
e) Preparation and publication of SEBI Bulletin and Handbook of Statistics.
f) Conducting periodic Investor Survey.
g) History of Securities Market Project.
h) Any other tasks that may be assigned.
OFFICE OF THE CHAIRMAN (OCH)
Office of the Executive Assistant to Chairman
The office will be responsible to provide such administrative and other support as the
Chairman may require. The functions would include strategic planning and
managing new initiatives.
Office of International Affairs
The office would perform the following:
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Implement information-sharing initiatives with international regulators
Participate in international regulatory organizations
Handle all matters related to Foreign assisted projects
Establish guidelines for interaction with foreign Government agencies
and foreign jurisdictions, including providing technical assistance.
THE REGIONAL OFFICES (ROs)
The Regional Office will handle work as per existing delegation and shall continue to
report to functional heads for specific departmental functions while reporting
administratively to SEBI Executive Directors.
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Objectives of the study
This research is an opportunity for me to develop my practical knowledge. It
provides me a valuable exposure to the corporate culture and also how to work is done in
stock exchange. There are few basic objectives of the study are as follows:-
Practical knowledge of the concepts.
To analyze the functioning of U.P.S.E
To determine reason or non listing so many companies.
To determine that how the changing trends affect investors behavior.
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Significance of the study
Study on functioning of stock exchange basically helps in determined the reason behind,
why it facing difficulties to none performing well in stock market and also in on line
trading of companies share in the primary and secondary market. The significance of
the study is as follows:-
To improve the performance in the market
To improve the functioning in the organization
To catch up more interaction of inverter in the market
To attract the companies for listing
To develop the technology advancement
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INDUSTRY PROFILE
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THE INDIAN CAPITAL MARKET
AN OVERVIEW
The Indian capital market is more than a century old. Its history goes back to 1875, when
22 brokers formed the Bombay Stock Exchange (BSE). Over the period, the Indian
securities market has evolved continuously to become one of the most dynamic, modern,
and efficient securities markets in Asia. Today,
Indian market confirms to best international practices and standards both in terms of
structure and in terms of operating efficiency .Indian securities markets are mainly
governed by a) The Companys Act1956, b) the Securities Contracts (Regulation) Act
1956 (SCRA Act), and c) the Securities and Exchange Board of India (SEBI) Act, 1992.
A brief background of these above regulations are given below
a) The Companies Act 1956 deals with issue, allotment and transfer of securities and
various aspects relating to company management. It provides norms for disclosures in
the public issues, regulations for underwriting, and the issues pertaining to use of
premium and discount on various issues.
b) SCRA provides regulations for direct and indirect control of stock exchanges with an
aim to prevent undesirable transactions in securities. It provides regulatory jurisdiction
to Central Government over stock exchanges, contracts in securities and listing of
securities on stock exchanges.
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c) The SEBI Act empowers SEBI to protect the interest of investors in the securities
market, to promote the development of securities market and to regulate the security
market.
The Indian securities market consists of primary (new issues) as well as secondary
(stock) market in both equity and debt. The primary market provides the channel for sale
of new securities, while the secondary market deals in trading of securities previously
issued. The issuers of securities issue (create and sell) new securities in the primary
market to raise funds for investment. They do so either through public issues or private
placement. There are two major types of issuers who issue securities. The corporate
entities issue mainly debt and equity instruments (shares, debentures, etc.), while the
governments (central and state governments) issue debt securities (dated securities,
treasury bills). The secondary market enables participants who hold securities to adjust
their holdings in response to changes in their assessment of risk and return. A variant of
secondary market is the forward market, where securities are traded for future delivery
and payment in the form of futures and options. The futures and options can be on
individual stocks or basket of stocks like index. Two exchanges, namely National Stock
Exchange (NSE) and the Stock Exchange, Mumbai (BSE) provide trading of derivativesin single stock futures, index futures, single stock options and index options. Derivatives
trading commenced in India in June 2000
Other leading cities in stock market operations
Ahmadabad gained importance next to Bombay with respect to cotton textile industry.After 1880, many mills originated from Ahmadabad and rapidly forged ahead. As new
mills were floated, the need for a Stock Exchange at Ahmadabad was realized and in
1894 the brokers formed "The Ahmadabad Share and Stock Brokers' Association".
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What the cotton textile industry was to Bombay and Ahmadabad, the jute industry was
to Calcutta. Also tea and coal industries were the other major industrial groups in
Calcutta. After the Share Mania in 1861-65, in the 1870's there was a sharp boom in jute
shares, which was followed by a boom in tea shares in the 1880's and 1890's; and a coal boom between 1904 and 1908. On June 1908, some leading brokers formed "The
Calcutta Stock Exchange Association".
In the beginning of the twentieth century, the industrial revolution was on the way in
India with the Swadeshi Movement; and with the inauguration of the Tata Iron and Steel
Company Limited in 1907, an important stage in industrial advancement under Indian
enterprise was reached.
Indian cotton and jute textiles, steel, sugar, paper and flour mills and all companies
generally enjoyed phenomenal prosperity, due to the First World War.
In 1920, the then demure city of Madras had the maiden thrill of a stock exchange
functioning in its midst, under the name and style of "The Madras Stock Exchange" with
100 members. However, when boom faded, the number of members stood reduced from
100 to 3, by 1923, and so it went out of existence.
In 1935, the stock market activity improved, especially in South India where there was a
rapid increase in the number of textile mills and many plantation companies were
floated. In 1937, a stock exchange was once again organized in Madras - Madras Stock
Exchange Association (Pvt.) Limited. (In 1957 the name was changed to Madras Stock
Exchange Limited).
Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged with
the Punjab Stock Exchange Limited, which was incorporated in 1936.
What are the SENSEX & the NIFTY?
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The Sensex is an "index". What is an index? An index is basically an indicator. It gives
you a general idea about whether most of the stocks have gone up or most of the stocks
have gone down. The Sensex is an indicator of all the major companies of the BSE. The
Nifty is an indicator of all the major companies of the NSE. If the Sensex goes up, itmeans that the prices of the stocks of most of the major companies on the BSE have
gone up. If the Sensex goes down, this tells you that the stock price of most of the major
stocks on the BSE have gone down. Just like the Sensex represents the top stocks of the
BSE, the Nifty represents the top stocks of the NSE. Just in case you are confused, the
BSE, is the Bombay Stock Exchange and the NSE is the National Stock Exchange. The
BSE is situated at Bombay and the NSE is situated at Delhi. These are the major stock
exchanges in the country. There are other stock exchanges like the Calcutta Stock
Exchange etc. but they are not as popular as the BSE and the NSE. Most of the stock
trading in the country is done though the BSE & the NSE. Besides Sensex and the Nifty
there are many other indexes. There is an index that gives you an idea about whether the
mid-cap stocks go up and down. This is called the BSE Mid-cap Index. There are
many other types of index. Unless stock markets provide professionalized service, small
investors and foreign investors will not be interested in capital market operations. And
capital market being one of the major sources of long-term finance for industrial
projects, India cannot afford to damage the capital market path. In this regard NSE gains
vital importance in the Indian capital market but if we see the Sensex & Nifty graph
there is a great variation.
HISTORICAL PERSPECTIVE
The history of Indian stock market is about 200 years old. Prior to this the Hundis and
bills of exchange were in use, specially in the medieval period, which can be considered
as a form of virtual stock trading but it was certainly not an organized stock trading. The
recorded stock trading can be traced only after the arrival of East India Company. The
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first organized stock market that was governed by the rules and regulations came into the
existence in the form of The Native Share and Stock Brokers' Association in 1875.
After gone through numerous changes this association is today better as Bombay Stock
Exchange, which remains the premier stock exchange since its inception. During thisperiod several other exchanges were launched and some of which were closed also.
Presently, there are 19 recognized stock exchanges out of which four are national level
exchanges and the remaining are regional exchanges. National Stock Exchange,
established in 1992, was the last exchange. Although the regional level exchanges are in
existence the volume of trading in these exchanges is negligible. National Stock
Exchange and Bombay Stock Exchange are the leaders of Indian Securities Market in
terms of listing, trading and volumes. The last 15 years of the Indian securities market
can be considered as the most important part of the history where the market gone
through the post liberalization era of Indian economy and witnessed the formation of
Securities and Exchange Board of India (SEBI) which brought substantial transparency
in share market practices and thus managed to bring in trust of not only domestic
investors but also the international ones.
DEMAT ACCOUNT
Demat refers to a dematerialized account.
Though the company is under obligation to offer the securities in both physical and
demat mode, you have the choice to receive the securities in either mode.
If you wish to have securities in demat mode, you need to indicate the depository and
also of the depository participant with whom you have depository account in your
application.
It is, howeverdesirable that you hold securities in demat form as physical securities
carry the risk of being fake, forged or stolen.
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Just as you have to open an account with a bank if you want to save your money, make
cheque payments etc, Nowadays, you need to open a demat account if you want to buy
or sell stocks.
So it is just like a bank account where actual money is replaced by shares. You have to
approach the DPs (remember, they are like bank branches), to open your demat
account. Let's say your portfolio of shares looks like this: 150 of Infosys, 50 of Wipro,
200 of HLL and 100 of ACC. All these will show in yourdemat account. So you don't
have to possess any physical certificates showing that you own these shares. They are
all held electronically in your account. As you buy and sell the shares, they are
adjusted in your account. Just like a bank passbook or statement, the DP will provide
you with periodic statements of holdings and transactions.
The most important thing required to trade in share market is Demat account. Demat or
Dematerialized account is to store stocks in electronics form. It is just like opening a
bank account to store your money. Now nobody is interested to keep shares in physical
forms and going for electronic based filing of shares. This has changed the style of
operation in main Indian stock markets like BSE Sensex (Bombay Stock Exchange
Sensitive Index) and Nifty (National Stock Exchange of India) and its brokers.
How to Open a Demat Account
It is like opening a bank account. You have to approach a depository participant to open
an online trading or demat account. Most of the banks are DPs too.
Documents Required
You will have to submit few documents with the application form to open a demat
account. As per latest Govt. of India rule PAN (Personal Account Number) card is must
for opening a demat account. These are the documents required to open a demat account
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1. Photo Copy of PAN Card (Mandatory)
2. Two Passport size photos
3. Address Proof Ration Card/Passport/Driving License/Voters ID Card/BSNLTelephone/LIC Policy
4. Latest Bank Statement and photocopy of Bank Passbook.
SEBI
In 1988 the Securities and Exchange Board of India (SEBI) was established by the
Government of India through an executive resolution, and was subsequently upgraded as
a fully autonomous body (a statutory Board) in the year 1992 with the passing of the
Securities and Exchange Board of India Act (SEBI Act) on 30th January 1992. In place
of Government Control, a statutory and autonomous regulatory board with defined
responsibilities, to cover both development & regulation of the market, and independent
powers has been set up. Paradoxically this is a positive outcome of the Securities Scam
of 1990-91.
The basic objectives of the Board were identified as:
To protect the interests of investors in securities;
To promote the development of Securities Market;
To regulate the securities market and
For matters connected therewith or incidental thereto.
Since its inception SEBI has been working targeting the securities and is attending to the
fulfillment of its objectives with commendable zeal and dexterity. The improvements in
the securities markets like capitalization requirements, margining, establishment of
clearing corporations etc. reduced the risk of credit and also reduced the market.
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SEBI has introduced the comprehensive regulatory measures, prescribed registration
norms, the eligibility criteria, the code of obligations and the code of conduct for
different intermediaries like, bankers to issue, merchant bankers, brokers and sub-brokers, registrars, portfolio managers, credit rating agencies, underwriters and others. It
has framed bye-laws, risk identification and risk management systems for Clearing
houses of stock exchanges, surveillance system etc. which has made dealing in securities
both safe and transparent to the end investor
Another significant event is the approval of trading in stock indices (like S&P CNX
Nifty & Sensex) in 2000. A market Index is a convenient and effective product becauseof the following reasons:
It acts as a barometer for market behavior;
It is used to benchmark portfolio performance;
It is used in derivative instruments like index futures and index options;
It can be used for passive fund management as in case of Index Funds.
Functions and Responsibilities
SEBI has to be responsive to the needs of three groups, which constitute the market:
the issuers of securities
the investors
the market intermediaries.
SEBI has three functions rolled into one body quasi-legislative, quasi-judicial and quasi-
executive. It drafts regulations in its legislative capacity, it conducts investigation and
enforcement action in its executive function and it passes rulings and orders in its
judicial capacity. Though this makes it very powerful, there is an appeals process to
create accountability. There is a Securities Appellate Tribunal which is a three member
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tribunal and is presently headed by a former Chief Justice of a High court -Justice N.K.
Sodhi. A second appeal lies directly to the Supreme Court.
SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and
successively (e.g. the quick movement towards making the markets electronic and
paperless rolling settlement on T+2 basis). SEBI has been active in setting up the
regulations as required under law. It is regulating body.
BOMBAY STOCK EXCHANGE
Bombay Stock Exchange is the oldest stock exchange in Asia with a rich heritage, now
spanning three centuries in its 133 years of existence. What is now popularly known as
BSE was established as "The Native Share & Stock Brokers' Association" in 1875.
BSE is the first stock exchange in the country which obtained permanent recognition (in
1956) from the Government of India under the Securities Contracts (Regulation) Act
1956. BSE's pivotal and pre-eminent role in the development of the Indian capital
market is widely recognized. It migrated from the open outcry system to an online
screen-based order driven trading system in 1995. Earlier an Association of Persons
(AOP), BSE is now a corporatized and demutualised entity incorporated under the
provisions of the Companies Act, 1956, pursuant to the BSE (Corporatization and
Demutualization) Scheme, 2005 notified by the Securities and Exchange Board of India
(SEBI). With demutualization, BSE has two of world's best exchanges, Deutsche Borse
and Singapore Exchange, as its strategic partners.
Over the past 133 years, BSE has facilitated the growth of the Indian corporate sector by
providing it with an efficient access to resources. There is perhaps no major corporate in
India which has not sourced BSE's services in raising resources from the capital market.
Today, BSE is the world's number 1 exchange in terms of the number of listed
companies and the world's 5th in transaction numbers. The market capitalization as on
December 31, 2007 stood at USD 1.79 trillion. An investor can choose from more than
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4,700 listed companies, which for easy reference, are classified into A, B, S, T and Z
groups.
NATIONAL STOCK EXCHANGE
The National Stock Exchange (NSE), located in Bombay, is India's first debt
market. It was set up in 1993 to encourage stock exchange reform through
system modernization and competition. It opened for trading in mid-1994. It
was recently accorded recognition as a stock exchange by the Department of
Company Affairs. The instruments traded are, treasury bills, government
security and bonds issued by public sector companies.
The Organization
The National Stock Exchange of India Limited has genesis in the report of the High
Powered Study Group on Establishment of New Stock Exchanges, which recommended
promotion of a National Stock Exchange by financial institutions (FIs) to provide access
to investors from all across the country on an equal footing. Based on the
recommendations, NSE was promoted by leading Financial Institutions at the behest of
the Government of India and was incorporated in November 1992 as a tax-paying
company unlike other stock exchanges in the country.
On its recognition as a stock exchange under the Securities Contracts (Regulation) Act,
1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM)
segment in June 1994. The Capital Market (Equities) segment commenced operations in
November 1994 and operations in Derivatives segment commenced in June 2000.
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Depository
What is a Depository?
A depository holds shares and other securities of investors in electronic form. Through
Depository Participants (DPs), it also provides services related to transactions in
securities. Its structure and functioning are similar to the Bank. Presently in India, there
are two depository viz. National Securities Depository Limited (NSDL) and Central
Depository Services (I) Limited (CDSL). Both of them are registered with SEBI.
What is a DP?
DP is a member of a Depository who offers its services to hold securities of Investors
(Beneficial Owners) in dematerialized form. DP is like a Bank branch. It is an agent of
the depository. DP works as an interface between Depository and Investors. DPs are
required to be registered with SEBI. If an investor wants to avail the services offered by
Depository, he has to open a Demat account with DP similar to opening of a bank
account with a branch of the bank.
Depository is responsible for keeping stocks of investors in electronics form. There are
two depositories in India, NSDL (National Securities Depository Ltd) and CDSL
(Central Depository Services Ltd).
CSDL (Central Securities Depository Ltd.)
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CSDL was promoted by Bombay Stock Exchange Limited (BSE) jointly with leading
banks such as State Bank of India, Bank of India, Bank of Baroda, HDFC Bank,
Standard Chartered Bank, Union Bank of India and Centurion Bank.
CSDL was set up with the objective of providing convenient, dependable and secure
depository services at affordable cost to all market participants.
CSDL received the certificate of commencement of business from SEBI in February,
1999.
Honorable Union Finance Minister, Shri Yashwant Sinha flagged off the operations of
CSDL on July 15, 1999.
Settlement of trades in the demat mode through BOI Shareholding Limited, the clearing
house of BSE, started in July 1999.
All leading stock exchanges like the National Stock Exchange, Calcutta Stock
Exchange, Delhi Stock Exchange, The Stock Exchange, Ahmadabad, etc have
established connectivity with CDSL.
As at the end of Dec 2007, over 5000 issuers have admitted their securities (equities,
bonds, debentures, and commercial papers), units of mutual funds, certificate of deposits
etc. into the CSDL system.
About NSDL
Although India had a vibrant capital market which is more than a century old, the paper-
based settlement of trades caused substantial problems like bad delivery and delayed
transfer of title till recently. The enactment of Depositories Act in August 1996 paved
the way for establishment ofNational Securities Depository Limited (NSDL), the first
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depository in India. This depository promoted by institutions of national stature
responsible for economic development of the country has since established a national
infrastructure of international standards that handles most of the securities held and
settled in dematerialized form in the Indian capital market.
Using innovative and flexible technology systems, NSDL works to support the investors
and brokers in the capital market of the country. NSDL aims at ensuring the safety and
soundness of Indian marketplaces by developing settlement solutions that increase
efficiency, minimize risk and reduce costs. At NSDL, we play a quiet but central role in
developing products and services that will continue to nurture the growing needs of the
financial services industry.
In the depository system, securities are held in depository accounts, which is more or
less similar to holding funds in bank accounts. Transfer of ownership of securities is
done through simple account transfers. This method does away with all the risks and
hassles normally associated with paperwork. Consequently, the cost of transacting in a
depository environment is considerably lower as compared to transacting in certificates
Promoters / Shareholders
NSDL is promoted by Industrial Development Bank of India Limited (IDBI) - the
largest development bank of India, Unit Trust of India (UTI) - the largest mutual fund in
India and National Stock Exchange of India Limited (NSE) - the largest stock exchange
in India. Some of the prominent banks in the country have taken a stake in NSDL.
NSDL Facts & Figures
As on December 31, 2008
Number of certificates eliminated (Approx.) : 550 Crore
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investors. Any dividends or capital gains collected from the underlying securities go
back to the investors. According to an expert group constituted by the finance ministry
in India, in August 2004, participatory notes constituted about 46 % of the cumulative
net investments in equities by FIIs.
Any entity investing in participatory notes is not required to register with SEBI
(Securities and Exchange Board of India), whereas all FIIs have to compulsorily get
registered. Trading through participatory notes is easy because participatory notes are
like contract notes transferable by endorsement and delivery. Secondly, some of the
entities route their investment through participatory notes to take advantage of the tax
laws of certain preferred countries. Thirdly, participatory notes are popular because they
provide a high degree of anonymity, which enables large hedge funds to carry out their
operations without disclosing their identity.
Participatory notes in brief are as follows:
What are participatory notes or PNs? Participatory notes are instruments used by foreign
funds which are not registered to trade in domestic Indian Capital Markets. PNs are
derivative instruments issued against an underlying security permitting holders to get a
share in the income from the security.
How does it work? Investors who buy PNs deposit their funds in US or European
operations of Foreign Institutional Investors (FII) operating in India. The FII uses its
proprietary account to buy stocks.
Why do investors use PNs? Reason for using PNs is to keep investor name anonymous,
some investors have used them to save transaction and overhead costs.
Tax officials fear that PNs are becoming a favourite with a host of Indian money
launderers who use them to first take funds out of country through Hawala and then get
it back using PNs.
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COMPANY PROFILE
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Uttar Pradesh Stock Exchange Association Ltd.
The UP Stock Exchange association limited, Kanpur is situated at a very
important place. It holds a very important position among other existing stock
exchanges in India. The exchange was inaugurated on 27th august 1982 by the
then finance minister Shri Pranab Mukharjee. from the very first day it has
been playing role in the development of the capital market of north India.
Incorporation in 15th NOV 1979 and Commencement of business on 5th
May 1982 has made a long way through the time.
The UP Stock Exchange association limited, Kanpur occupies a very
prominent place among the existing Stock Exchanges in India. The exchange
was inaugurated on 27th august 1982 by the then finance minister Shri Pranab
Mukharjee. Right from its inception it has been playing a very prominent role
in the development of capital market of northern India. UPSE is the only.
Initially it had 350 members which have now increased to 540 members
belonging to almost all important cities of the country. Members living
outside Kanpur have contributed a lot by creating the equity cult in whole of
the Uttar Pradesh. Not only these members are highly qualified and
professional and devoted to the cause of capital formulation in the country.
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The Exchange was initially started in the rented building but with the
efforts of our members, a new complex was constructed and was inaugurated
by his Excellency Shri R. Venkatraman the then President of India on 8 th
February, 1989.
At present we have 843 companies listed with the total capitalization of
Rs. 81184 Crores. The annual turnovers of this Exchange for the last three
years are: 1998-99: 18429 Crores, 1999-2000: 23876 Crores and 2000-01:
25112 Crores. Thus every year we have increased our turnover creating more
and more awareness among the people of Northern India.
This stock Exchange is wedded to the investors protection and investors
education as we have firm conviction that any investor protection cannot be
achieved without proper awareness and education of investors. Thus the
Exchange has a very active investor service Cell and also a very equipped
Research and Development Wing is functioning. We have also a very
effective system of readdressing the investors complaints.
The Exchange has one of the best developed Exchanges of the country so
far its infrastructure is concerned. The Ex-Finance Minister Dr. Manmohan
Singh, Ex-Commerce Minister Shri Pranab Mukharjee, other central Ministers
and Chief Ministers Uttar Pradesh have visited this Exchange and appreciated
its efforts in maintaining the transparency and the integrity of the market. To
keep pace of changing technology the Exchange has embarked upon the
Project of Screen Based Trading. The On-Line Trading based on VECTOR
Software supplied by CMC has commenced on UPSE from 11th November
1997.
To increase the further business and to facilitate the On-Line trading
facility to about 22 members at Lucknow an additional trading Floor has been
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established at Lucknow. At present at the additional trading at Lucknow 22
Lucknow based members have been allotted Computer Terminals which have
been connected with UPSE main server via VSAT.
As per recent decision of SEBI for the revival of the smaller Stock
Exchanges in the country, they can obtain the membership of big Stock
Exchanges like, BSE, NSE, and CSE etc. through forming a subsidiary
company of the Exchange and in turn the members of the Exchange can trade
through the said subsidiary as sub-broker(s).
Accordingly we have incorporated a wholly owned subsidiary namely
UPSE Securities Ltd. and obtained the membership of BSE to enable the
members of UPSE on BOLT.
Main objective of UPSE
1. To organize and carry on the stock exchange and regulate
the business of exchange and stock and share, debentures and
debenture stocks. Government securities, bonds and equities of any
description and with a view to establish and conduct stock exchange in
Kanpur.
2. To acquire the membership of any other recognized
exchange in India and abroad including membership of OCTEL, broad
base the operations of the stock exchange for the benefit of the general
public and investor.
3. To promote one or more subsidiary whether wholly or
partly owned, with object to promote the trade in share and stocks,
debenture bond and other securities of any description issued by
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companies statutory corporation, government of state or union
government, financial institution.
4. Provides quotation for shares/stock for fascinating and
marketability.5. Extends liquidity (conversion in to cash) to such stock as
they are easily marketable and traded.
6. Provides an orderly regulated market for securities whose
prices are determined by the free market forces of supply and demand.
7. Promotes savings and investments in the economy by
attracting funds for investment in corporate share and securities.
Location and other communication details:
THE UTTAR PRADESH STOCK EXCHANGE ASSOCIATION LTD.
Padam Towers, 14/113, Civil Lines, Kanpur-208001
Telephone No: 2338115, 2338074
Fax No: 0512-2338175/2338220
Email Address: [email protected],
Website: upse-india.com
DEPARTMENTS
1. R & D department
2. Membership Inspection / Grievances / Complain / Audit
3. Listing
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4. Market operation department (Margin)
5. Secretarial Department
6. Surveillance Department
7. EDP (Computer)
1. R & D, Library and Investor service department
Research and development wing of the Uttar Pradesh Stock Exchange
Association Limited has been functioning eve since 1992 under SEBI
direction and providing valuable services to the investors. The wing presently
names investor service center has a well maintained, library comprising of
books, journals, periodicals, and newspapers on financial market, annual
reports of companies, prime directory etc.
They maintain the records of day to day quotations of major exchanges,
the annual reports of companies, PRIME directory, complete set of volumes
of the Stock Exchange, Mumbai Directories. Along with this it also maintains
the news letters, daily bulletin, books on Capital Markets, Investor awareness,
Budget Taxation with other relevant books.
The UPSE has been organizing summer camps to give trainings to
Company Securities and MBAs different institutes giving those complete data
and helping the student to know the practical day-to-day working of the
exchanges. Along with this it also organizes Investor Awareness Shows.
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The changing technology has helped the exchange to install a corporate
database of over 7000 companies. The rates of UPSE, BSE, and NSE are
displayed live for the benefit of investors.
There are three main function of this department
To render investor services
To maintain library
To conduct research and development
All the above facilities are provided free of cost to one and all any query is
mandatory attended by the help desk situated in the investor service center,
headed by a responsible official of the exchange.
2. Membership and Grievances
There are two types of membership
1. Shareholder
2. Trading member
Eligibility for membership
To have the membership of the stock exchange one has to satisfy the
following criteria
1. He has to be the citizen of India.
2. Experience of 2 year in the securities department.
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3. Capital of 10 lakh (individual) and 20 lakh (company).
4. He must submit 4 lakh as Base Minimum Capital (BMC). This
becomes operational in the stock market.
a) The BMC must comprise of at least of 50% of cash or cashequivalents (FDR, bank guarantee, etc)
b) Other 50% can comprise of the following type of assets (shares-
valued on the daily basis)
5. He must submit extra money as Margin, to trade in shares of the stock
exchange.
a) The margin again has to be of 50% of cash or cash equivalents
(FDR, bank guarantee, etc.)
b) Other 50% can comprise of the following type of assets (shares-
valued on the daily basis)
6. No association with defaulter member, i.e. the member has to provide
an undertaking of not being involved with defaulting broker.
Procedure to get membership
Application screening committee (UPSE) Board approval (UPSE)
SEBI approval
Grievances and problems
There are of two types of problem between the investor and the following
parties
1. Companies
2. Broker
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It can invite investor claim by advertising in the newspapers.
The assets of the defaulting party are disbursed to the lenders and the
surplus goes to the investor protection fund (IPF).
If the asset of the defaulting party falls the lenders demand, 1 lakh(maximum) can be released from the IPF, condition being it is per person
case.
Disciplinary committee
The department takes care of the imaginaries that occur that during the
regular conduct of the business of the stock exchange.
It can penalize the party involved in the earlier mentioned acts with
following
1. Financial fines
2. Expulsion
Investor grievance with the broker or vic e versa goes to the Investor Service
Committee (ISC).
Investor having complained against any company then the case goes to the
Arbitration committee.
Here the investor only has to deposit arbitration fees but no security.
Whereas the brokers has to deposit 100% of the award, given against him by
the ISC.
The legal path for complaints of the investor is as follows:
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ISC Arbitration committee District judge High court Supreme
Court
The various measures that court can take on the litigation of this type are asfollows:
1. Set aside
2. Confirm
3. Reprimand (send back the order to the lower court)
3. LISTING
Recruitment with respect to the listing of securities on a recognized
stock exchange
A public company as defined under the act 1956, desirous of getting its
securities listed on a recognized stock exchange, shall apply for the purpose to
the stock exchange and forward alone with its application the following
documents and particulars:
a) Memorandum and article of association and in case of a debenture issue, a
copy of the trust deed.
b) Copies of all prospectuses or statement in lieu of prospectuses issued by the
company at any time.
c) Copies of offer for the sale and circulars or advertisements offering any
securities for subscription or sale during the last five years.
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d) Copies of balance sheet and audited accounts for the last five years, or in the
case of new companies, for such shorter period for which account have been
made up.
e) A statement showing-
i. Dividend and cash bonuses, if any, paid during the last ten years (or
such shorter period as the company has been in existence, whether as
a private or public company).
ii. Dividend or interest in arrear, if any.
f) Certified copy of agreement or other documents
relating to arrangements with or between:-
i. Vendors and /or promoters
ii. Underwriters and sub-underwriters.
iii. Broker and sub-broker.
g) Certified copies of agreement with
i. Managing agents and secretaries and treasures.
ii. Selling agents
iii. Managing directors and technical directors
iv. General Manager, sales manager, manager or secretary.
h) Certified copy of every letter, report, balance sheet, valuation,
contract, court order or other document, or other document, part of
which is referred to in any prospectus, offer for sale, circular or
advertisement offering securities for subscription or sale, during the
last five years.
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i) A statement containing particulars of the date of, and parties to
all material contracts, agreements (including agreement for technical
advice and collaboration) concessions and similar other documents
(except those entered into in the ordinary courses of business carriedon or intended to be carried on by the company) together with a brief
description of the terms, subject matter and general nature of the
documents.
j) A brief history of the company since its incorporation giving
details of its activities including any reorganization, reconstruction or
amalgamation, changes in its capital structure (authorized, issued and
subscribed) and debenture borrowings if any.
k) Particulars of shares and debentures issued
i. For consideration other than cash, whether in whole or part,
ii. At a premium or discount or,
iii. In pursuance of an opinion.
l) A statement containing particulars of any commission, brokerage,
discount or other special terms including an opinion for the issue of
any kind of the securities granted to any person.
m) Certified copies of
i. Acknowledgement card or the receipt of filling offer document
with the securities and exchange board of India.
ii. Agreement, if any, with the industrial finance corporation,
industrial credit and Investment Corporation and similar bodies.
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Particulars of shares forfeited.
A list of highest ten holder of each class or kind of securities of the
company as on the date of application along with the particulars asto the number of shares or debentures held by and the address of
each such holders.
Particulars of shares or debentures for which permission to deal is
applied for:
Provided that a recognized stock exchange may either generally by its
buy laws or in any particular case call for such further particulars of
documents, as it deems proper.
An initial listing fee for a company to get listed with the Uttar Pradesh Stock
Exchange is 10500.
The Annual listing fees structure is as follows:
Capital (in crore) Fees
Up to 1 6000
1.5 9000
5.10 14000
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10.20 28000
Each additional 1 crore over 20 crore onwards in the capital will attract Rs
4600 more in addition to 28000.If other company from different state listed with BSE or NSE the company
will be charged 50% of the above fees.
One day free run for the stock is provided to estimate the value of the
stock. That is, there is no circuit limits to the stock for the first day of the
trading of a stock.
Indian primary market ushered in an era of free pricing in 1992. Following
this, the guidelines have provided that the issuer in consultation with
Merchant Banker shall decide the price. There is no price formula stipulated
by SEBI. SEBI does not play any role in price fixation. The company and
merchant banker are however required to give full disclosures of the
parameters, which they had considered while deciding the issue price. There
are two types of issues one where company and LM fix a price (called fixed
price) and other, where the company and LM stipulate a floor price or a price
band and leave it to market forces to determine the final price (price discovery
through book building process).
To have voluntary delisting, company must be listed in BSE and NSE.
For compulsory delisting, the stock exchange takes action against the
company. If there is violation of the listing clauses, the company can be listed.
4. MARGIN DEPARTMENT
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New scheme for margin is implemented from the date 30 June.
In the new system of margin there is the concept of Upfront Margin.The upfront margins consist of the following types of margins VAT
(Value at Risk) and ELM (Extreme Loss Margin).
The VAR and ELM is fixed for the different scripts.
The Z group of shares can attract VAR and ELM of 100%, where as for
the B and A group share could attract lesser percentage.
Marked to Market is a special type of margin.
Further details please refer to the specialization portion of the report.
5. SECRETARIAL
Governing Board
According to the article of association of the exchange governing board
comprises of
1. Six director elected under the provision of the article of association of the
exchange.
2. Person not exceeding two is nominated by SEBI as director
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3. Four people from public as public representatives nominated by the governing
board of the exchange subject to SEBI approval.
4. One executive director appointed by the governing board subject to prior
approval of SEBI.
However w.e.f. 12-07-2002 SEBI has suspended the governing board of
the exchange and appointed an administrator to perform the power and
function of the governing board, under section 11 of SCRA, 1956.
According to the new regulation every stock exchange will now have a
board of director.
Power to Frame and Amend Regulations
Subject to the provisions of these Bye-laws and the Rules of The
Exchange, the Governing Board or the Committee appointed by the
Governing Board shall have exclusive powers to frame Regulations from time
to time for efficient functioning and operations of the Exchange and to
regulate the functioning and activities of the trading members of the
Exchange, sub-brokers, remises, authorized persons, approved users, Clearing
House or Clearing Corporation, Clearing Banks, company or issuer and all
other persons operating under or through them or dealing with them both
inter-se and in relation to the Exchange and to regulate Listing of Securities
by an issuer, including providing for arbitration between an issuer or a
company and an investor or any affected person. The Governing Board or the
Committee may, from time to time, amend, add to, alter, modify, delete or
repeal any of the provisions of the Regulations, as may be deemed necessary
or appropriate or if so desired or directed by SEBI. The Regulations shall
provide for necessary authorization for effect. Any amendments, additions or
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alterations to any Regulations made by the Governing Board or the
Committee in pursuance of the powers conferred by the Rules of the
Exchange and these Bye-laws, together with the reference to the Bye-law or
Bye-laws to which such Regulations relate to, shall be communicated toSEBI. The Regulations brought into force by a direction of SEBI may be
amended, added, or altered by the Governing Board or the Committee, subject
to the condition that such amendments, additions or alterations shall come into
force only after the prior approval of SEBI; except those amendments,
additions or alterations
Which are stricter in its nature than those directed by SEBI.
Without prejudice to the generality of the foregoing, the Governing Board
or the Committee may time to time prescribe the Regulations with a view to
organize, facilitate, maintain, manage, control and regulate the operations,
functions and supervision of the exchange and to regulate the activities and
functioning of the trading members, clearing members, custodians, sub-
brokers, remisiers, authorized persons, approved users and issuers of
securities, as may be necessary or expedient, and provide for necessary
authorization wherever requirements are operational in its nature and such
requirements need to be enforced with immediate effect in the following
matters:
3.1.1 Listing of Securities
3.1.2 Trading on the exchange
3.1.3 Transaction in Securities Subject to Risk Management &
Surveillance
3.1.4 Clearing and Settlement of Transactions
3.1.5 Conciliation and Arbitration
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3.1.6 Setting-up of Settlement Guarantee Fund, Investors Protection
Fund and Other Funds
Subject to the provisions of SCRA, the SEBI Act and the Rules andRegulations framed there under and the directives issued there under, the
Governing Board shall have power to vary, amend, add to, alter, modify,
delete or repeal any of the provisions of the Rules and/or Bye-laws of the
exchange framed by it, as may be deemed necessary for the effective and
efficient management of the Exchange and to achieve its objects. Such
changes in the Rules and/or Bye-laws referred to above shall come into force
only after prior approval of SEBI. Such changes provided in the Bye-laws
shall be subject to the requirement of the previous publications in the Gazette
of India and the official Gazette of the State in which the principal office of
the stock exchange is situate, and shall come into force only after prior
approval of SEBI> the Exchange shall place on its website any changes that
amy be required to be carried out in its Bye-laws for public comments
simultaneously while publishing them in the Gazette of India and the official
Gazette of the State as required.
6. Surveillance
This department was established in 1995 under the requirement of the
SEBI. The main objective of the surveillance function of the exchange is
to manage risk by taking necessary action timely. All instruments traded in
the market come under the surveillance umbrella of UPSE.
Purpose of the surveillance
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Purpose of surveillance is to prevent risk which may arise due to-
a. Carry forward trade
b. Trade away from market price
c. Price manipulationd. Insider trading
e. Circular trading
f. Creation of false market
In order to detect abnormal behavior/movement, it is necessary to
know the normal market behavior. The necessary actions are initiated like
imposition of special margin, suspensions; deactivation of terminals, etc. to
control abnormal behavior, the department carries out investigation. If necessary,
based on the preliminary examination/analysis and suitable action are taken
against members involved based on investigation. The detailed explanations of
the various surveillance activities are as follows:
On-line surveillance
One of the most important tools of the surveillance is the on-line real time
surveillance system with main objective of detecting potential market abuses at a
necessary stage to reduce the ability of the market participants. To unduly
influence the price and volume of the scripts traded at the exchange, improve the
risk management system and strengthen the self regulatory mechanism at the
exchange the system has a facility to generate the alters on-line based on certain
preset parameters like price and volume variation in scripts; members crossing
intraday limit or gross exposure limit.
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Off-line surveillance
The of-line surveillance system comprises of the various reports based on
different parameters and securities, thereof.1) High-low difference in price
2) Percentage change in price over a week/fortnight/month.
3) Top scripts by turnover
4) Scripts hitting new high/low, etc.
The surveillance action or investigations are initiated in the scripts
identified in the scripts identified from the above-stated reports.
It takes finds the irregularities and ensures the proper working of the stock
exchange. Surveillance ensures risks arising of the daily trading are managed
efficiently, by enabling proper collection of the margins.
Settlement guarantee fund is made for the payment of the Clint of a
defaulting broker.
Various Forms of errors practices are as follows
1. Insider tradingis utilization of the internal
information of a company to manipulate the price of the share of the company,
before that information is made public. To avoid such irregularities, the
surveillance department keep track of the people insider to the companies and
their trading
2. Price rigging it is way by which a company
tries to manipulate the prices of the shares in the stock market.
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3. Punching errors that occur while operator
types the order on the computer terminal.
4. Humors are another threat to the proper working
of the stock exchanges. These are false stories that are made up to manipulate
the prices of the share. Humor verifications another function of the stock
exchange and specially the surveillance department.
7. EDP (Computer Department)
Stock trading has evolved tremendously. Since the very first Initial
Public Offering (IPO) in the 13th century, owning shares of a company has been a
very attractive incentive.
Even though the origins or stock trading go back to the 13th century, the
market as we know now today did not catch on strongly until the late 1800s.
Cooperation between technology and society has led the push for effective and
efficient way of trading. Technology has allowed the stock market to grow
tremendously, and all the while society has encouraged the growth. Within
seconds of an order of a stock, the transaction can now take the place. Most of the
recent advancements with the trading have been due to Internet. The interest has
allowed online trading. In contrast to the past where only those who could afford
the expensive stock brokers could trade, but now anyone who wishes to be active
in the stock market can do so at a very low cost per transaction. Trading can even
be done through computer-mediated communication (CMC) using mobile devices
such as handheld computers and cellular phones. These advances in technology
have made day trading possible.
The stock market has now grown so that some argue that it represents a
countrys economy. This growth has been enjoyed largely to the credibility and
reputation that the stock market has earned.
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In the screen-based systems, the trading ring is replaced by the computer
screen and distant participants can trade the shares with each other through the
computer network. The screen-based trading system, enhance the information
efficiency of the marker as more participants trade at a faster speed. A largenumber of participants, geographically separated, can trade simultaneously at
high speed.
FINANCIAL ANALYSIS
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The annual turnovers of this exchange for past three years are:
Year Total Turnover
(Single Sided)
(Rs. In Crores)
Delivery
turnover
% of turnover
to Delivery
2006-07 806.50 0.28 0.03
2007-08 476.39 0.98 0.21
2008-09(upto
31.10.2008)
170.60 0.05 0.03
This stock exchange is wedded to the investors protection and investors education as
UPSE has firm conviction that any investor protection cannot be achieved without
proper awareness and education of investors. Thus, the exchange has a very active
investor service cell and also a very equipped research and development wing in
functioning. UPSE has also very effective system of readdressing of the investors
complaints.
RISK MANAGEMENT
1. The deposits of the sub brokers, viz Base Minimum Capital, additional capital and
margin advance is being treated as capital deposits for the purpose of computation and
adjustment / collection of the margins.
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2. The one third of the capital deposits of the respective sub-brokers is blocked as
upfront margins and the rest two-third is available for trading.
3. At the end of the day, the total margin obligation for the day of the respective sub
brokers are deducted from total capital deposits of the sub broker.4.The remaining capital deposits of the respective sub brokers , after such deduction ,is
treated as available in the same manner, as stated above for the next day trading of the
sub broker .
5. The margin obligations for the day, so deducted, if released after pay in of relevant
settlement and the same is added back to the capital deposits of the sub brokers,
available for the subsequent trading.
6. The minimum capital required to trade as a sub broker in the company is Rs 150,000
and the additional capital may be deposited in the multiples of Rs 50,000 /- for
enhancing the trading limits.
Some other basic information about the company are:
UPSEC will open equivalent number of bank accounts for each sub brokers in the
name and style of UPSEC securities ltd. These banks accounts will be opened
either with Standard Chartered Bank ,
M.G road, Kanpur or with UTI bank LTD, Mall Road, Kanpur as per the choice
of the sub broker concerned.
It will be the responsibility of the sub brokers to clear all the dues / pay in of
their clients within time as per the schedule of the UPSEC i.e. T+1 basis.
The shortfall in the pay in of the fund, if met by the sub broker from their own
account, shall be credited to the contingency deposit account of the sub brokers.
UPSEC will not pay any interest on this deposit.
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Every client of the sub- broker will have to clear his / her debit balance in respect
of the transactions undertaken latest by T +4 days.
UPSEC will issue the contract notes to all the clients of the sub- brokers on the
regular basis.
Brokerage will be charged from the clients of the sub brokers as per the
instructions filled up in the client registration forms received through the sub-
brokers or any written modification authorized by the clients and the sub brokers
thereafter.
The share of brokerage of UPSEC from the total brokerage charged to the clients
of the sub-brokers shall be 0.009% subject to minimum of 1 paisa per share.
UPSEC shall refund the excess brokerage to its sub brokers weekly.
All other statutory and legal charges such as stock exchange turnover charges,
stamp duty, STT, service tax etc as applicable will be levied separately in the
contract notes issued to the clients of the sub brokers.
Sub- brokers who are interested in second, third trading terminal are allowed to
have them by allotting them separate ID on the following terms and conditions:
- Sub broker will have to pay a sum of Rs 5000 for each such trading
terminal.
- Separate monthly charges such as TWS charges, VSAT support charges etc as
applicable from time to time will have to be paid by the sub broker for each
such terminal.
- Each such terminal shall be subject to fulfillment of margin and other
applicable business rules.
- Presently BSE has allowed trading only in cash segment.
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TRADING ON BSE STARTED ON -- 29-11-2001
NUMBER OF REGISTERED SUB-BROKER -- 113
NUMBER OF ACTIVE MEMBERS -- 70
CURRENT NUMBER OF CLIENTS -- 8000(APPROX)
TURNOVERS (IN CRORES)2000-01( FROM 29-01-2001) -- 67.99
2001-02 -- 981.88
2002-03 -- 1907.64
2003-04 -- 2334.55
2004-05 -- 2493.73
2005-06 -- 1813.24
2006-07 -- 2164.10
2007-08 -- 3124.08
ROFIT / LOSS OF THE COMPANY
YEARS PROFIT/LOSS AMT IN Rs
2000-01 LOSS 3,99,241.91
2001-02 LOSS 10,67,493.51
2002-03 PROFIT 7,84,000
2003-04 PROFIT 18,20,000
2004-05 PROFIT 12,93,000
2005-06 PROFIT 7,98,0002006-07 PROFIT 6,36,000
2007-08 LOSS 21,964
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Thus , the scope of UPSEC is indeed very wide and in future periods it will surely
further expand the levels of business leading to the lucrative gains to the corporate
,investors and finally its members.
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Research Methodology
Problem Definition
The problem that this study focuses on is to find out the reson about non better
performance of utter Pradesh stock exchange in the stock market due to the there bad
function and activities .
The problem can be defined under the following heads:
Unit of Analysis
Keeping the objectives of the study in view, and since the study was conducted at
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This project is based on a partially descriptive and a partially exploratory design. The
reason for using two different designs is that firstly, since we want to find out the
employees views about the training programs, the descriptive design has been used.
Secondly, since the objective of the project is also to find out the effectiveness of thetraining programs and which methodology is better, the exploratory design has also been
used.
The descriptive design technique that is used is the cross-sectional technique. This is a
one-shot research study at a given point of time, and consists of a sample of the
population of interest. The reason for using this technique is that it gives a good overall
picture of the position at a given time. It can cover many variables of interest, and is not
affected by the movement of elements in the sample.
Data Requirement
We have used both primary and secondary data in our survey. Primary data provides
first hand, reliable and current information as compared to secondary data. It involves
collecting information specifically for the study on hand, from actual sources, in this
case the source are the candidates visiting UPSE and the department heads we
personally interviewed. Secondary data has been collected through management books,
newspapers, journals and the internet.
Sample SizeA sample size of 50 respondents has been taken as directed by our project guide.
Sampling Technique
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There are two main types of sampling techniques Probability and Non-Probability.
The technique used for this project is convenience sampling, which is a non-probability
technique. This technique was selected for the survey since it involves picking any
available set of respondents convenient for the researcher to use.
Data Collection Tool and Method
The data collection tool used is personal interviews. This tools have been used since it
e