Listing of securities at the stock exchange:
Securities can be traded at a stock exchange only if it is listed at that stock exchange or any other stock exchange. The listing is a procedure under which the issuing company has to enter into an agreement, called the Listing Agreement (which has been prescribed by the SEBI) with a stock exchange and has to thereby abide by various clauses of the ‘Listing Agreement’ regarding disclosure of information, payment of listing fees, redressal of investors grievances, etc. There are 51 clauses and several annexure’s in the Listing Agreement (as prescribed by the SEBI). Once, listed at any stock exchange, the security can then be traded at other stock exchanges also. The SEBI guidelines for the issue of securities require that the security must be listed on at least one regional stock exchange.
The principal objective of listing is to provide liquidity and marketability to listed securities and to ensure effective monitoring of trading for the benefits of all participants in the market. A company desiring to get listing at a stock exchange has to enter into a listing agreement and is required to pay the specified listing fees. Thereafter, the company is required to comply with all clauses of the listing agreement and to send details of book closure, record dates, copy of annual report, half-year reports and cash flow statement, etc. The securities of an entity may be listed at any of the following stages :
- At the time of public issue of shares/debentures
- At the time of right issue of shares/debentures
- At the time of bonus issue
- Shares issued on amalgamations/merger
BSE Ltd.… Read the rest
In 1997, the market governing body of India, Securities and Exchange Board of India (SEBI) granted approval to the proposal of the ICSE to set up a national level stock exchange promoted by 14 regional stock exchanges. Inter-Connected Stock Exchange(ICSE) has set up an Inter-connected Market System (ICMS) which provides its trading members a facility to trade on the national market in addition to the trading facility at the regional stock exchanges. The trading members of the ICSE, who are already the members of the 14 stock exchanges (which are the constituents of the ICSE), satisfy the capital adequacy requirements of the ICSE separately and in addition to the capital adequacy requirements of the regional stock exchange. The ICSE has set up a separate clearing house for settlement of the trades at the national market. The ICSE has also made arrangement to appoint a clearing bank for on-line transfer of funds from regional centres to national centre. The ICSE has an adequate risk management system for safety, integrity of the market and also to protect the interest of the investors. The participating exchanges of ICSE have about 4,500 members and a large number of listed securities. It is a stock exchange of stock exchanges, members of the stock exchanges being traders on the ICSE. The ICSE has provided a highly automated trading system to the traders of the participating regional stock exchanges with direct access to the national level trading platform on an equal footing regardless of the location of the particular stock exchanges.… Read the rest
Recommended Reading: Over The Counter Exchange of India(OTCEI)
Trading on OTCEI:
Trading on OTCEI is the first of its kind in India. It is fully computerised set-up where trading takes place through a network of computers at the member/dealer end which in turn are connected to a central computer at OTCEI, Mumbai.
- Initial Allotment: The tradable document on OTCEI is the Initial/Permanent Counter receipt. The investor who has been allotted a share on OTCEI would be receiving an Initial Counter Receipt.
- Buying Process in the Secondary Market: An investor desiring to purchase shares listed on OTCEI in the Secondary market would have to first get himself registered at any of the counters if he has not already registered himself. Then he can approach any of the counters of OTCEI situated in any part of the country and specifies the scrip name and the quantity that he desires to purchase. The investor can specify the price range for the scrip he wishes to purchase. When the transaction takes place, the investor is given a Permanent Counter Receipt (PCR).
- Selling Process in the Secondary Market: An investor, who has been allotted securities or who has purchased securities in the secondary market, can approach any of the counters situated in the country and fill in a Order Request From specifying the scrip name and the quantity that he desires to sell. The investor has to surrender the PCR + Transfer Deed (TD) to the counter. In case, the PCR is a non-transferred PCR, then the investor has only the PCR to surrender.
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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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