Chapter

INTRODUCTION TO SECURITIES MARKET- UNIT 1ST
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Indicators Role
Index  Give information about the price movements of products in the financial, commodities
or any other markets.
 Meant to capture the overall behavior of the equity markets
 Created by selecting a group of stocks that are representative of the whole market or a
specified sector or segment of the market.
 The blue chip index of NSE is CNX Nifty
Market capitalization = Closing price of share * Number of outstanding shares
 Value of all listed shares on the country‘s exchanges
 Computed on a daily basis.
Market capitalization ratio = Market Capitalisation / GDP
 Used as a measure of stock market size
Share turnover = Total number of shares of the company’s stock that were bought and sold * price
Use to measure liquidity of the stock
Share turnover Ratio = Turnover at Exchange / Market Capitalisation at Exchange
 Used as a measure of trading activity or liquidity in the stock markets
Market Segments and their Products

Market segment Year launch Instruments
1. Wholesale Debt Market (WDM) Segment June 1994 Debt securities State and Central Government
securities, T-Bills, PSU Bonds, Corporate
debentures, Commercial Papers, Certificate of
Deposits etc ( Money Market Instruments )
2. Capital Market (CM) Segment November 1994 Equity shares, warrants, debentures
3. Futures & Options (F&O) Segment June 2000 Index Futures, Index Options, Stock Options, And
Stock Futures
4. Currency Derivatives Segment (CDS) August 29, 2008 US Dollar-Indian Rupee
Segment Euro-INR, Pound S-INR , Japanese Yen-INR
Currency Derivatives Segment (CDS) February2010
Segment
Interest rate futures August 31, 2009
1. ASBA: Application Supported by Blocked Amount (ASBA)

 It enables investors to apply for IPOs / FPOs and rights issues without making a payment.
 Instead, the amount is blocked in investors ‘own account and only an amount proportionate to the shares allotted goes
out when allotment is finalized.
2. Launch of India VIX22:

 It measures the amount by which an underlying Index is expected to fluctuate in the near term, based on the order
book of the underlying index options.
 First volatility index, India VIX (based on the Nifty 50 Index Option prices) was launched by NSE in April 2008.
 VIX is a trademark of Chicago Board Options Exchange(CBOE) and Standard & Poor‘s has granted a license to
NSE, with permission from CBOE, to use such mark in the name of the India
3. Direct Market Access:

 In April 2008, SEBI allowed the direct market access (DMA) facility to the institutional investors.
 DMA allows brokers to offer their respective clients, direct access to the Exchange trading system through the
broker‘s infrastructure without manual intervention by the broker.
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FMM BY SANJEEV SIR- OPJMS HISAR – 98960-39846
Investor Protection Fund
1. Set up as a trust under Bombay Public Trust Act, 1950 under the name and administered by the Trustees. .
Purpose
a) The IPF is utilized to settle claims of such investors whose trading member has been declared a defaulter or
expelled by the Exchange.
b) Stock exchanges have been allowed to utilize interest income earned on IPF for Investor Protection Fund for
investor education, awareness and research.
c) The maximum amount of claim payable to the investor is Rs. 15 lakh
Investor Service cell

 Investor complaints received against the trading members / companies in respect of claims/ disputes for transactions
executed on the Exchange are handled by the Investor Service Cell (ISC).
 Complaints are forwarded to the trading members for resolution and seeking clarifications.
 ISC follows-up with the trading members and makes efforts to resolve the complaint immediately.
 In cases of conflicting claims made by the investor and trading member not possible to resolve the complaint,
investors are advised to take recourse to the arbitration mechanism prescribed by the Exchange.
Arbitration
 Is a quasi-judicial process, is an alternate dispute resolution mechanism prescribed under the Arbitration and
Conciliation Act, 1996.
 Aim: - Quicker resolution of the disputes when either of the parties is not satisfied with the complaint resolution
process or the complaint is not resolved amicably between parties.
 Governed by:- Arbitration framework at the Exchange is governed by Rules, Byelaws, Regulations & Circulars
issued by the Exchange and SEBI, from time to time
 Arbitration should be filed within six months from the date when the dispute arose excluding ISC time.
Categories of membership Observation

Trading member Execute trades on his own account as well as on account of his clients but for clearing
depend upon others clearing members
Trading cum self-clearing Execute trades and clear and settle the trades executed on his own account as well as on
member account of his clients.
Trading cum clearing Execute trades on his own account as well as on account of his clients and clear and
member settle trades executed by themselves as well as by other trading members
Professional clearing Do not trade but only clear and settle trades executed by other trading members (TMs).
member They are typically banks, custodians etc. who clear and settle trades executed for their
clients (individuals, institutions etc.)
Net worth and Other Deposit Requirements

 Net worth of the member includes Capital and free reserves less non allowable assets.
 Non allowable assets include fixed assets, pledged securities, member‘s card, non-allowable securities (unlisted
securities), bad deliveries, doubtful debts and advances, prepaid expenses, intangible assets.
Deposit requirements are of two types
1) Interest Free Security Deposit (IFSD):- to be in liquid Cash
 Cash component: - Cash, bank guarantees, fixed deposit receipts, units of money market mutual fund and gilt
funds and any other form of collateral as may be prescribed from time to time.
2) Collateral Security Deposit (CSD). Can be cash or non cash form
 Non-cash component: - Collateral deposits like deposit of approved list of DEMATS securities and units of the
other mutual funds and any other form of collateral
Admission Procedure for New Membership

Admission for new membership is a two way steps
1. Clearing the exam
 The dealers on CM segment are required to clear the Capital Market (Dealers) Module of NCFM;
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 Dealers on Futures & Options Segment are required to clear the Derivatives Market (Dealers) Module or
equivalent examination of NCFM
2. Interview with Membership Recommendation Committee
a) Application: - Required to submit application form, in the prescribed format along with other relevant documents.
 The MRC conducts interviews of to acquire information about their capability & commitment to carry on
stock broking activities, financial standing and integrity.
b) MRC recommends the names for admission of trading members to the Membership Selection Committee (MSC
c) Either approve or rejects:- The Board of Directors after taking into consideration the recommendations of the MRC
either approves or rejects the applications.
d) Registration from SEBI: - The documents of the member are then forwarded to SEBI for registration.
e) Allowing: - After satisfying itself as to compliance with respect to all the prescribed norms, SEBI grants a
Registration Certificate in the name of the applicant.
f) Other formalities: Trading member has to satisfy the Exchange and NSCCL regarding all the formalities and
requirements such as payment of fees/deposits and submission of relevant documents, for enablement.
g) NEAT working: - Trading Member is enabled to trade on the NEAT system.
Procedure of surrender of Trading Memberships

Trading members can apply for surrender of their trading membership. Details of the norms and procedures:-
1. Application: - Trading member is required to send its request in writing in the prescribed format.
2. Before submission of an application for surrender of membership, the trading member is required to comply with all
the pre-requisites for application of surrender in the prescribed format.
3. Certificate:- The application of surrender of trading membership is subject to fulfillment of certain conditions, such
as submission of original SEBI registration certificate(s) on all segments on which the trading member is registered
4. Dismantle: - The trading member should request the Exchange to dismantle and recover all the leased line(s)/
VSAT(s) and other equipment given to them at their dealing offices.
5. Exchange Notice to public by way of a public notification in newspapers
6. Further notice: - Letter is also sent to SEBI seeking pending dues, if any, from member.
Unique Client Code (UCC)

 SEBI has made it mandatory for all trading members/brokers to use unique client codes for all clients. .
 Brokers should verify the documents with respect to the unique code and retain a copy of the document.
 Brokers should Provide the PAN and UCC of their clients to the stock exchanges/clearing corporations
Consequences of Suspension
1) Trading members not to deal with expelled trading member: No trading member is allowed to transact business
with the expelled trading member except with the previous permission of the relevant authority.
2) Office vacated: The expulsion would create a vacancy in any office or position held by the expelled trading member.
3) Membership rights forfeited: Stock Exchange forfeits all right of trading membership and privileges as a trading
member of the Exchange.
4) Application of declaration of defaulter to follow: The provisions of pertaining to default and Protection Fund
mentioned in the byelaws become applicable to the trading member expelled from the Exchange as if such trading
member has been declared a defaulter.
5) Trading Rights of creditors unimpaired: The expulsion does not affect the rights of the trading members who are
creditors of the expelled trading member
6) Obligation to Fulfillment of contracts: The expelled trading members are bound to fulfill transactions outstanding at
the time of his expulsion and it may with the permission of the relevant authority.
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INTRODUCTION TO SECURITIES MARKET- UNIT 1ST

Market Segments and their Products

1. ASBA: Application Supported by Blocked Amount (ASBA)

2. Launch of India VIX22:

3. Direct Market Access:

Investor Service cell

Categories of membership Observation

Net worth and Other Deposit Requirements

Admission Procedure for New Membership

Procedure of surrender of Trading Memberships

Unique Client Code (UCC)

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