SEBI

SEBI
is regulator to control Indian capital market. Since its establishment in 1992, it is doing hard
work for protecting the interests of Indian investors. SEBI gets education from past cheating with
naive investors of India. Now, SEBI is more strict with those who commit frauds in capital market.
The role of security exchange board of India (SEBI) in regulating Indian capital market is very
important because government of India can only open or take decision to open new stock exchange in
India after getting advice from SEBI.
If SEBI thinks that it will be against its rules and regulations, SEBI can ban on any stock exchange to
trade in shares and stocks.
Now, we explain role of SEBI in regulating Indian Capital Market more deeply with following points:
1. Power to make rules for controlling stock exchange :
SEBI has power to make new rules for controlling stock exchange in India. For example, SEBI fixed
the time of trading 9 AM and 5 PM in stock market.
2. To provide license to dealers and brokers :
SEBI has power to provide license to dealers and brokers of capital market. If SEBI sees that any
financial product is of capital nature, then SEBI can also control to that product and its dealers. One of
main example is ULIPs case. SEBI said, " It is just like mutual fundsand all banks and financial and
insurance companies who want to issue it, must take permission from SEBI."
3. To Stop fraud in Capital Market :
SEBI has many powers for stopping fraud in capital market.
It can ban on the trading of those brokers who are involved in fraudulent and unfair trade practices
relating to stock market.
It can impose the penalties on capital market intermediaries if they involve in insider trading.
4. To Control the Merge, Acquisition and Takeover the companies :
Many big companies in India want to create monopoly in capital market. So, these companies buy all
other companies or deal of merging. SEBI sees whether this merge or acquisition is for development
of business or to harm capital market.
5. To audit the performance of stock market :
SEBI uses his powers to audit the performance of different Indian stock exchange for bringing
transparency in the working of stock exchanges.
6. To make new rules on carry - forward transactions :
Share trading transactions carry forward can not exceed 25% of broker's total transactions.
90 day limit for carry forward.
7. To create relationship with ICAI :
ICAI is the authority for making new auditors of companies. SEBI creates good relationship with ICAI
for bringing more transparency in the auditing work of company accounts because audited financial
statements are mirror to see the real face of company and after this investors can decide to invest or
not to invest. Moreover, investors of India can easily trust on audited financial reports. After Satyam
Scam, SEBI is investigating with ICAI, whether CAs are doing their duty by ethical way or not.
8. Introduction of derivative contracts on Volatility Index :
For reducing the risk of investors, SEBI has now been decided to permit Stock Exchanges to introduce
derivative contracts on Volatility Index, subject to the condition that;
a. The underlying Volatility Index has a track record of at least one year.
b. The Exchange has in place the appropriate risk management framework for such derivative
contracts.
2. Before introduction of such contracts, the Stock Exchanges shall submit the following:
i. Contract specifications
ii. Position and Exercise Limits
iii. Margins
iv. The economic purpose it is intended to serve
v. Likely contribution to market development
vi. The safeguards and the risk protection mechanism adopted by the exchange to ensure market
integrity, protection of investors and smooth and orderly trading.
vii. The infrastructure of the exchange and the surveillance system to effectively monitor trading in
such contracts, and
viii. Details of settlement procedures & systems

ix. Details of back testing of the margin calculation for a period of one year considering a call and a
put option on the underlying with a delta of 0.25 & -0.25 respectively and actual value of the
underlying. Link
9. To Require report of Portfolio Management Activities :
SEBI has also power to require report of portfolio management to check the capital market
performance. Recently, SEBI sent the letter to all Registered Portfolio Managers of India for
demanding report.
10. To educate the investors :
Time to time, SEBI arranges scheduled workshops to educate the investors. On 22 may 2010 SEBI
imposed workshop. If you are investor, you can get education through SEBI leaders by getting update
information on this page.

SEBI

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SEBI

1. Power to make rules for controlling stock exchange :

2. To provide license to dealers and brokers :

3. To Stop fraud in Capital Market :

SEBI has many powers for stopping fraud in capital market.

4. To Control the Merge, Acquisition and Takeover the companies :

5. To audit the performance of stock market :

6. To make new rules on carry - forward transactions :

90 day limit for carry forward.

7. To create relationship with ICAI :

8. Introduction of derivative contracts on Volatility Index :

ii. Position and Exercise Limits

iv. The economic purpose it is intended to serve

v. Likely contribution to market development

viii. Details of settlement procedures & systems

9. To Require report of Portfolio Management Activities :

10. To educate the investors :

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