Over The Counter Exchange of India(OTCEI) was incorporated in October 1990 under Section 25 of the Companies Act, 1956 with the objective of setting up a national, ringless, screen-based, automated stock exchange. It is recognised as a stock exchange under Section 4 of the Securities Contracts (Regulations) Act, 1956. It was set up to provide investors with a convenient, efficient and transparent platform for dealing in shares and stocks; and to help enterprising promoters set up new projects or expand. their activities, by providing them an opportunity to raise capital from the capital market in a cost-effective manner. Trading in securities takes place through OTCEI’s network of members and dealers spanning the length and breadth of India. OTCEI was promoted by a consortium of financial institutions including :
- Unit Trust of India.
- Industrial Credit and Investment Corporation of India.
- Industrial Development Bank of India.
- Industrial Finance Corporation of India.
- Life Insurance Corporation of India.
- General Insurance Corporation and its subsidiaries.
- SBI Capital Markets Limited.
- Canbank Financial Services Ltd.
Salient Features of OTCEI:
- Ringless and Screen-based Trading: The OTCEI was the first stock exchange to introduce automated, screen-based trading in place of conventional trading ring found in other stock exchanges. The network of on-line computers provides all relevant information to the market participants on their computer screens. This allows them the luxury of executing their deals in the comfort of their own offices.
- Sponsorship: All the companies seeking listing on OTCE have to approach one of the members of the OTCEI for acting as the sponsor to the issue.
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The securities market has essentially three categories of participants, viz., the issuer of securities, investors in securities and the intermediaries. The issuers are the borrowers or deficit-units, who issue securities to raise funds for their business activities. The investors, who are surplus savers, deploy their savings by subscribing to these securities and issue funds for the business activities. The intermediaries are the agents who match the needs of users and suppliers of funds for a commission. The secondary market or the stock exchange system in India is represented by 23 stock exchanges including the National Stock Exchange of India(NSE), the Over The Counter Exchange of India, the Inter connected Stock Exchange of India and 20 other stock exchanges located at different places. However at present, trades take place only at NSE and BSE and other stock exchanges have become redundant. The operations of stock exchanges are regulated, supervised and controlled by the Securities and Exchange Board of India (SEBI). SEBI uses 3 types of controls in respect of stock exchanges as follows :
- It makes stock exchanges to impose minimum capital requirements on the members.
- It prohibits and checks the price of a security from rising or falling too fast. The prices are allowed to move within fixed limits over a day. The circuit-breakers are applied to cool down the volatility in prices of a particular share.
- It makes the stock exchanges to impose various types of margins on their members. The SEBI has imposed 6 types of margins on the transactions of the share brokers.
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The National Stock Exchange of India Limited (NSE) was incorporated in November 1992 by IDBI and other All-India Financial Institutions and became recognised stock exchange with effect from April 26, 1993 to provide nationwide stock trading facilities. The NSE has a fully automated screen-based trading system. It operates on the principles of an order-driven market. It was a part of the financial market sector reforms being undertaken in the economy. To identify the lacunae of the Indian stock market and to investigate what was wrong with the current system, a committee was constituted under the chairmanship of Sh. M. J. Pherwani, who mooted the idea of a National Stock Exchange. The basic idea of setting up of NSE was to facilitate computerised trading in debt market instruments. It provides a nationaly-integrated stock market system, facilitating an easy flow of transactions and resources on a cost-effective manner.
Promoters of NSE:
Following financial institutions were the promoters of National Stock Exchange :
- Industrial Development Bank of India(IDBI).
- Industrial Finance Corporation of India(IFCI).
- Industrial credit and Investment corporation of India(ICICI).
- Life Insurance Corporation of India(LIC).
- General Insurance Corporation of India(GIC).
- SBI Capital Markets Limited.
- Stock Holding Corporation of India Limited.
- Infrastructure Leasing and Financial services Limited.
Market Segments of NSE:
The NSE was intended to establish a viable and vibrant debt market which was in an under developed stage. Now, it provides the traditional retail market for securities and also operates a Wholesale Debt Market (which may be termed as money market segment). The NSE consists of three mutually exclusive segments :
- Wholesale debt market segment, started operations in June 1994.
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Under the Securities and Exchange Board of India (SEBI) Guidelines, the securities can be offered for sale in the primary market in different ways. Each method of issue has got its procedure and mechanism. The methods of issues of securities are :
1. Public Issue through Prospectus:
This method is the most common and popular method of issue of securities. The securities are offered to the investors through a detailed statement of terms and conditions known as prospectus. The prospectus is also known as the offer document. The contents of a prospectus are as per the requirements given in the Chapter VI of the SEBI Guidelines, 2000. These requirements are in respect of Name of the Company; Board of Directors; Existing and Proposed activities of the issuer; Authorised, Issued and Paid-up Capital; Names of the Merchant Bankers, Lead Manager, Advisors, Registrar, Bankers, Underwriters; Minimum Subscription; Different Disclaimer Clauses; Terms of the Present Issue: Utilisation of Issue Proceeds; Analysis of Financial Conditions and Result of Operations; Financial Information of Group Companies; Issues Price and basis for that; Risk Factors; Other general and financial information. The issue by prospectus method is adopted when the company wants to issue fixed number of securities at a fixed price (which may be equal to, less than or more than the face value). The application forms together with the copy of prospectus are distributed among the public investors who offer to the company to buy a specific number of securities. In case of over-subscription, the securities are allotted to the investors, in consultation with the stock exchange where the securities are proposed to be listed.… Read the rest
Securities and Exchange Board of India (SEBI) has a primary responsibility of regulating and supervising the capital market. It has introduced a number of reforms for the control and supervision of capital market and investors protection.
Primary Market Reforms by the SEBI:
The Securities and Exchange Board of India (SEBI) has introduced various guidelines and regulatory measures for capital issues for healthy and efficient functioning of capital market in India. The issuing companies are required to make material disclosure about the risk factors, in their offer documents and also to get their debt instruments rated. Steps have been taken to ensure that continuous disclosures are made by firms so as to enable to investors to make a comparison between promises and performance. The merchant bankers now have greater degree of accountability in the offer document and the issue process. The due diligence certificate by the lead manager regarding disclosure made in the offer document, has been made a part of the offer document itself for better accountability and transparency on the part of the lead managers.
New reforms by SEBI, in the primary market, include improved disclosure standards. introduction of prudential norms and simplifications of issue procedures. Companies are now required to disclose all material facts and specific risk factors associated with their projects while making public issues. SEBI has also introduced a code for advertisement for public issues for ensuring fair and true picture. In order to reduce the cost of issue, the underwriting of issues has been made optional subject to the conditions that if the subscription is less than 90% f the amount offered, the entire amount collected would be refunded to the investors.… Read the rest
Securities and Exchange Board of India (SEBI) is the nodal agency to regulate the capital market and other related issues in India. It was established in 1988 as an administrative body and was given statutory recognition in January 1992 under the SEBI Act 1992 which came into force on January 30, 1992. Before that, the Capital Issues(Control) Act, 1947 was repealed. SEBI has been constituted on the lines of Securities and Exchange Commission of USA. SEBI is consisting of the Chairman and 8 Members (one member representing the Reserve Bank of India, two members from the officials of Central Government and five other public representatives to be appointed by the Central Government from different fields). SEBI has been playing an active role in the Indian Capital Market to achieve the objectives enshrined in the SEBI Act, 1992.
The major objective of the SEBI may be summarised as follows:
- To provide a degree of protection to the investors and safeguard their rights and to ensure that there is a steady flow of funds in the market.
- To promote fair dealings by the issuer of securities and ensure a market where they can raise funds at a relatively low cost.
- To regulate and develop a code of conduct for the financial intermediaries and to make them competitive and professional.
- To provide for the matters connecting with or incidental to the above.
Section 11 of the SEBI Act deals with the powers and functions of the SEBI as follows :
- It shall be the duty of Board to protect the interests of the investors in securities and to promote the development of and to regulate the securities market by measures as deemed frt.
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