Importance of Subsidiaries in Capital Market, Pune Stock Exchange (Finance)

7/29/2019 Importance of Subsidiaries in Capital Market, Pune Stock Exchange (Finance)

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Capital Market

Capital Market consists of two types:

a. Primary Marketb. Secondary Market

a. Primary Market:

The primary market provides the channel for sale of new securities. PrimaryMarket provides opportunity to issuers of securities; Government as well asCorporates, to raise resources to meet their requirements of investmentand /or discharge some obligation.

Most companies are usually started privately by their promoter(s). However,the promoters capital and the borrowings from banks and financialInstitutions may not be sufficient for setting up or running the business overa long term. So companies invite the public to contribute towards the equityand issue shares to individual investors. The way to invite share capital fromthe public is through a Public Issue. Simply stated, a public issue is an offerto the public to subscribe to the share capital of a company. Once this isdone, the company allots shares to the applicants as per the prescribedrules and regulations laid down by SEBI.

They may issue the securities at face value, or at a discount/premium andthese securities may take a variety of forms such as equity, debt etc. Theymay issue the securities in domestic market and/or international market.

Primarily, issues can be classified as a Public, Rights or Preferential issues(also known as private placements). While public and rights issues involve adetailed procedure, private placements or preferential issues are relativelysimpler. The classification of issues is illustrated below:

Initial Public Offering (IPO) is when an unlisted company makes either a

fresh issue of securities or an offer for sale of its existing securities or bothfor the first time to the public. This paves way for listing and trading of theissuers securities.


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A follow on public offering (Further Issue) is when an already listedcompany makes either a fresh issue of securities to the public or an offer for

sale to the public, through an offer document.

Rights Issue is when a listed company which proposes to issue freshsecurities to its existing shareholders as on a record date. The rights arenormally offered in a particular ratio to the number of securities held prior tothe issue. This route is best suited for companies who would like to raisecapital without diluting stake of its existing shareholders.

A Preferential issue is an issue of shares or of convertible securities bylisted companies to a select group of persons under Section 81 of theCompanies Act, 1956 which is neither a rights issue nor a public issue. This

is a faster way for a company to raise equity capital.

The price at which a company's shares are offered initially in the primarymarket is called as the Issue price. When they begin to be traded, themarket price may be above or below the issue price.


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b. Secondary Market:

Secondary market refers to a market where securities are traded after beinginitially offered to the public in the primary market and/or listed on theStock Exchange. Majority of the trading is done in the secondary market.Secondary market comprises of equity markets and the debt markets.

For the general investor, the secondary market provides an efficientplatform for trading of his securities. For the management of the company,Secondary equity markets serve as a monitoring and control conduitbyfacilitating value-enhancing control activities, enabling implementation ofincentive-based management contracts, and aggregating information (viaprice discovery) that guides management decisions.

In the primary market, securities are offered to public for subscription forthe purpose of raising capital or fund. Secondary market is an equity tradingvenue in which already existing/pre-issued securities are traded amonginvestors. Secondary market could be either auction or dealer market. Whilestock exchange is the part of an auction market, Over-the-Counter (OTC) isa part of the dealer market.

The stock exchanges in India, under the overall supervision of the regulatoryauthority, the Securities and Exchange Board of India (SEBI), provide atrading platform, where buyers and sellers can meet to transact in

securities. The trading platform provided by NSE is an electronic one andthere is no need for buyers and sellers to meet at a physical location totrade. They can trade through the computerized trading screens availablewith the NSE trading members or the internet based trading facility providedby the trading members of NSE.

An efficient capital market ensures protection of interest of the investors.Therefore stock exchanges in India now operate with due recognition fromsecurities and Exchange Board of India (SEBI) / the Government under theSEBI Act, 1992 and the securities Contracts (Regulation) Act, 1956respectively .To regulate the securities market, SEBI was initially

established in 1988 as an interim Board under control of the Ministry ofFinance, Government of India. In 1992, the SEBI Act was passed throughwhich the SEBI came into existence. Hence SEBI acquired statutory statusby passing an ordinance, which was subsequently converted into an Actpassed by the parliament. The main objectives of SEBI are to protect the


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interest of the investors, regulate and promote the capital market by creatingan environment. In 1992, Over The Counter Exchange Of India (OTCEI)

came into existence where equities of small companies are listed. In 1994,National Stock Exchange (NSE) came into existence, which brought an endto the open out- cry system of trading securities, which was in vogue for 150years, and introduced Screen Based Trading (SBT) system. BSEs On LineTrading System was launched on March 14, 1995. Now the trading insecurities is done using screen based trading method through dulyauthorized members of the exchange.

Following are the main financial products/instruments dealt in the Secondarymarket which may be divided broadly into Shares and Bonds:

Shares:Equity Shares: An equity share, commonly referred to as ordinaryshare, represents the form of fractional ownership in a businessventure.

Rights Issue/ Rights Shares: The issue of new securities to existingshareholders at a ratio to those already held, at a price. For e.g. a2:3 rights issue at Rs. 125, would entitle a shareholder to receive 2shares for every 3 shares held at a price of Rs. 125 per share.

Bonus Shares: Shares issued by the companies to their shareholders

free of cost based on the number of shares the shareholder owns.

Preference shares: Owners of these kind of shares are entitled to afixed dividend or dividend calculated at a fixed rate to be paidregularly before dividend can be paid in respect of equity share. Theyalso enjoy priority over the equity shareholders in payment ofsurplus. But in the event of liquidation, their claims rank below theclaims of the companys creditors, bondholders/debenture holders.

Cumulative Preference Shares:A type of preference shares on whichdividend accumulates if remained unpaid. All arrears of preference

dividend have to be paid out before paying dividend on equityshares.

Cumulative Convertible Preference Shares:A type of preferenceshares where the dividend payable on the same accumulates, if not


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paid. After a specified date, these shares will be converted intoequity capital of the company.

Bond: is a negotiable certificate evidencing indebtedness. It is normallyunsecured. A debt security is generally issued by a company, municipality orgovernment agency. A bond investor lends money to the issuer and inexchange, the issuer promises to repay the loan amount on a specifiedmaturity date. The issuer usually pays the bond holder periodic interestpayments over the life of the loan. The various types of Bonds are asfollows:

Zero Coupon Bond: Bond issued at a discount and repaid at a facevalue. No periodic interest is paid. The difference between the issue

price and redemption price represents the return to the holder. Thebuyer of these bonds receives only one payment, at the maturity ofthe bond.

Convertible Bond: A bond giving the investor the option to convertthe bond into equity at a fixed conversion price.

Treasury Bills: Short-term (up to one year) bearer discount securityissued by government as a means of financing their cashrequirements.


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STOCK EXCHANGE

Meaning of Stock Exchange

Section 4 of the Securities Contracts (Regulation) Act, 1956 (42 of1956) defines the term stock exchange as:

An association, organization or body of individuals, whether incorporatedor not, established for the purpose of assisting and controlling the businessof buying, selling and dealing in securities.

As per this definition it is clear that:a) A stock exchange is established by a group of individual.

b) It may be registered or may not be registered under the act.c) It is established for the purpose of

a. Providing assistance andb. Controlling the activities connected with buying, selling and

dealing in securities.In simple terms A stock Exchange is a market where stocks and shares arebought and sold It is a place where any individual wishing to buy or sell aparticular security can find a ready customer.

In essence, therefore, the stock exchange provide a convenient machinery

where by the investor not only gets an easy market for his shares, but alsothe services of the experts who have the ability to assess successfully boththe value and prospects of the shares which are being bought and sold. Itprovides a continuous an active market, where the almost ceaselesshaggling of many buyers and sellers helps to determine the prices of shareswith precision and certainty. It enables investors spread throughout thecountry to know at any moment of time what their investments are worth.

The stock exchange is thus a good e.g. of what the economist calls aperfect market. The authorities of the stock exchange also try to make themarket as nearly perfect as possible in the social and ethical sense by

ensuring a reasonable measure of safety and fair dealing.The Stock Market in India is more than a century old and it had functionedcontinuously through the medium of organized Stock Exchanges. Atpresent, there are twenty-two such Stock Exchanges in India recognized by


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Government under the Securities Contracts (Regulation) Act, 1956. Theyare at

1. Ahmedabad2. Bangalore3. Baroda4. Bhubaneswar5. Bombay6. Bombay (OTC)7. Calcutta8. Cochin9. Coimbatore10.Delhi

11.Gauhati12.Hyderabad13.Indore14.Jaipur15.Kanpur16.Ludhiana17.Madras18.Mangalore19.Meerut20.Patna21.Pune

22.Rajkot

These recognized Stock Exchanges operate under the Rules, Bye-laws andRegulations approved by Government and they constitute and organizedcapital market for securities issued by the Central and State Governments,Public Bodies and Joint Stock Companies.

The recognized Stock Exchanges at Bombay and Indore are voluntary non-profit-making associations, while the Calcutta, Delhi, Bangalore, Cochin,Ludhiana, Gauhati and Kanpur Stock Exchanges are joint stock companieslimited by shares and the Madras, Hyderabad and Pune Stock Exchanges

are approved by the Central Government, there is a board uniformity in theirorganization.

The Governing Body of a recognized Stock Exchange has widegovernmental and administrative powers. It has the power, subject to


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Government approval, to make, amend and suspend the operation of theRules, Bye-laws and Regulations of the Exchange. It also has complete

jurisdiction over all the members and in practice its powers of managementand control are almost absolute.Under the constitution, the governing body has the powers to admit andexpel members; to warn, censure, fine and suspend members and theirpartners, attorneys, remisiers, authorized clerks and employees; to approvethe formation and dissolution of partnerships and appointment of attorneys,remisiers and authorized clerks to enforce attendance and information,adjudication disputes and impose penalties; to determine the mode andconditions of stock exchange business and regulate stock exchange tradingin all its aspects; and generally to supervise, direct and control all mattersand activities affecting the Stock Exchange.

FUNCTIONS AND SERVICES OF STOCK EXCHANGE

In a capitalist economy, the stock exchange assumes a very important role.Without an efficient stock exchange, the savings of the community, whichare essential for economic progress and productive efficiently, would beused much less completely and much more wastefully. The economicservices which are securities market renders to a country with a largeprivate sector are thus of considerable importance.

a) In the first place, the security market provides an organized market

for the securities which ensures efficient marketability and pricecontinuity for shares so necessary for the needs of the investors.b) Secondly, it provides for a reasonable measure of safety and fair

dealing in the buying and the selling of the securities.c) Thirdly, though the interplay of the demand for and the supply of

securities, a properly organized stock exchange assists in reasonablycorrect evaluation of securities in terms of their real worth.

d) Lastly, through such evaluation of securities, the stock exchangehelps the orderly flow of distribution of savings as between thedifferent types of competitive investments.

Functions:

1. The provisions of the highly liquid and continuous market are one ofthe most useful functions of the stock exchange. Such a marketensures liquidity of the capital, i.e. it enables the conversion of a


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capital asset into cash quickly with a minimum of loss. This impliesthe existence of the broad and continuous market, i.e. a place where

there are frequent purchases and sales and where shares andsecurities could be bought and sold at comparatively small variationsfrom the last quoted price.

2. Another function of the stock exchange is the evaluation of securitiesat their true worth and through it the direction of the flow of savingsinto the most productive firms of investment. The existence of a stockexchange enables a constant and accurate formation and registrationof prices as they change in response to the varying forces of demandand supply.

3. They also facilitate direct placing of new capital by industrialenterprises. Thus, the companies whose shares are listed on an

organized stock exchange can sell their securities, better than thosewhich are not so listed; this facilitates new financing by industry. Thefact that a new security is to be listed on a stock exchange alsoimproves its sale prospects.

4. An organized stock exchange also ensures, through its regulationsand by-laws a reasonable degree of safety and fair dealings to theinvestors. The sanctity of contracts entered into on the stockexchange is strictly insisted upon a fraudulent practices eliminated.

5. A stock exchange also ensures that its members and brokers,through whom the public deals in securities on the exchange, aremen of means, integrity and technical skill so that the risk of default is

minimized.

WORKING OF STOCK EXCHANGE

For Membership in Stock ExchangeThe regulations governing the admission of members of the recognised

Sock Exchanges are uniform in terms of the provisions of the SecuritiesContracts (Regulations) Rules, 1957. These Statutory Rules provide that noperson shall be eligible to be elected as a member

1. if he is less than 21 years of age;2. or is not a citizen of India;

3. or has been adjudged bankrupt, insolvent or has compounded withhis creditors;4. or has been convicted of an offence involving fraud or dishonesty;5. or engaged as principal or employee in any exchange.


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1. OLD WORKING PATTERN OF STOCK EXCHANGE:

Transactions in shares were done on the floor of the exchange, which wasa place of great commotion and hectic activity. The floor used to be crowdedwith members and their assistants, since only members of the stockexchange were allowed to transact business on the floor of the exchange.

As soon as an order was received from the client, the broker noted it downin his order book. He then went to the floor himself or instructs hisauthorized clerk to put it through. The floor of the exchange was divided intoa number of separate booths, one for each particular security, where thebusiness in that scrip was transacted. Transactions on the floor of theexchange could be put through only in terms of the specified unit of tradingwhich may be in lots of 5, 10 or even 100 shares depending mainly on its

paid up value.

Transactions on the floor of the exchange were done by word of mouthand no contract was signed at the time the bargain was struck. Only thebroker notes down in a small pad the firms name, the membership number,the shares purchased or sold and the price. After the close of business, theauthorized clerk used to enter the days transactions in the booksmaintained in the office with all particulars, such as brokerage, name of theparty etc. The broker then prepared a Contract Note to the other broker orparty as the case may be and informed the client accordingly. On the nextday, the Contract Notes are compared by each broker and they are signed

by the opposite parties. The Contract Note is then sent to the client.As investor can buy shares either for cash or for the account. A cashtransaction was completed by payment of cash and delivery of cash eitherimmediately or within a short time.Settlement of cash transactions was affected by hand delivery between themembers themselves. The seller gave shares certificates to his broker alongwith the transfer form duly signed in favor of the buyer. The sellers brokerthen handed over the certificate, together with the transfer form, to thebuyers broker, and also recovered from him the price of the shares. He thepassed on the price of the shares to the seller after deducting his brokeragecharges.


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2. NEW WORKING PATTERN OF STOCK EXCHANGE:

The trading on stock exchanges in India used to take place through openoutcry without use of information technology for immediate matching orrecording of trades. This was time consuming and inefficient. This imposedlimits on trading volumes and efficiency. In order to provide efficiency,liquidity and transparency, NSE introduced a nationwide, on-line,fullyautomated screen based trading system (SBTS) where a member canpunch into the computer the quantities of a security and the price at whichhe would like to transact, and the transaction is executed as soon as amatching sale or buy order from a counter party is found.

NSE is the first exchange in the world to use satellite communication

technology for trading. Its trading system, called National Exchange forAutomated Trading (NEAT), is a state of-the-art client server basedapplication. At the server end all trading information is stored in aninmemory database to achieve minimum response time and maximumsystem availability for users. It has uptime record of 99.7%. For all tradesentered into NEAT system, there is uniform response time of less than onesecond.

The client may go to the brokers office or place an order on thephone/internet or as defined in the Model Agreement, which every clientneeds to enter into with his or her broker.

There are only 2 Stock Exchanges in India

NATIONAL STOCK EXCHANGE (NSE)

BOMBAY STOCK EXCHANGE (BSE)


NSE introduced for the first time in India, fully automated screen based

trading. It uses a modern, fully computerized trading system designed tooffer investors across the length and breadth of the country a safe and easyway to invest.

The NSE trading system called 'National Exchange for Automated Trading'


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(NEAT) is a fully automated screen based trading system, which adopts theprinciple of an order driven market.

The National Stock Exchange of India Limited has genesis in the report ofthe High Powered Study Group on Establishment of New Stock Exchanges,which recommended promotion of a National Stock Exchange by financialinstitutions (FIs) to provide access to investors from all across the countryon an equal footing. Based on the recommendations, NSE was promoted byleading Financial Institutions at the behest of the Government of India andwas incorporated in November 1992 as a tax-paying company unlike otherstock 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 theWholesale Debt Market (WDM) segment in June 1994. The Capital Market(Equities) segment commenced operations in November 1994 andoperations in Derivatives segment commenced in June 2000.

The National Stock Exchange (NSE) is India's leading stock exchange coveringvarious cities and towns across the country. NSE was set up by leadinginstitutions to provide a modern, fully automated screen-based trading systemwith national reach. The Exchange has brought about unparalleled transparency,speed & efficiency, safety and market integrity. It has set up facilities that serve asa model for the securities industry in terms of systems, practices and procedures.

NSE has played a catalytic role in reforming the Indian securities market in termsof microstructure, market practices and trading volumes. The market today usesstate-of-art information technology to provide an efficient and transparent trading,clearing and settlement mechanism, and has witnessed several innovations inproducts & services viz. demutualization of stock exchange governance, screenbased trading, compression of settlement cycles, dematerialization and electronictransfer of securities, securities lending and borrowing, professionalization oftrading members, fine-tuned risk management systems, emergence of clearingcorporations to assume counterparty risks, market of debt and derivativeinstruments and intensive use of information technology.


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Turnover on the Exchange -

The average daily turnover of the Exchange during the financial year2004-05 (April-March) was Rs.10,967.27 crores.

The average number of daily trades recorded during the above period was6,765 lakhs


The Stock Exchange, Mumbai, popularly known as "BSE" wasestablished in 1875 as "The Native Share and Stock Brokers

Association". It is the oldest one in Asia, even older than the Tokyo StockExchange, which was established in 1878. It is a voluntary non-profitmaking Association of Persons (AOP) and is currently engaged in theprocess of converting itself into demutualised and corporate entity. It hasevolved over the years into its present status as the premier StockExchange in the country. It is the first Stock Exchange in the Country tohave obtained permanent recognition in 1956 from the Govt. of Indiaunder the Securities Contracts (Regulation) Act, 1956.

The Exchange, while providing an efficient and transparent market fortrading in securities, debt and derivatives upholds the interests of the

investors and ensures redressal of their grievances whether against thecompanies or its own member-brokers. It also strives to educate andenlighten the investors by conducting investor education programmesand making available to them necessary informative inputs.

A Governing Board having 20 directors is the apex body, which decidesthe policies and regulates the affairs of the Exchange. The GoverningBoard consists of 9 elected directors, who are from the brokingcommunity (one third of them retire ever year by rotation), three SEBInominees, six public representatives and an Executive Director & ChiefExecutive Officer and a Chief Operating Officer.


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Turnover on the Exchange -

The average daily turnover of the Exchange during the financial year2003-2004 and 2004-05 (April-March) was Rs. 1978.81 corers andRs. 2050.26 corers respectively.

The average number of daily trades recorded during the above periodwas 7.98 lacs and 9.38 lacs respectively.

REASONS FOR NON - TRADING IN INDIAN STOCK EXCHANGE

There are certain serious defects in the working of our stock exchanges,particularly the major exchanges such as Bombay Stock Exchange (BSE).

Lack of integration There was no proper integration between all the stock exchanges with too much variation in prices of shares in the different markets.

Specified and non-specified shares Major Stock Exchanges follow the peculiar practice of classifyinglisted shares into specified group and unspecified group. Theshares in the specified group are provided certain special facilities

like settlement period, carry forward and clearing to promotespeculation. There is absolutely no economic justification for thiscategorization and for granting artificial encouragement to a handfulof companies. At present, market liquidity is limited to thesespeculative shares only, whereas investors would prefer liquidity forall the shares, across a broad front.

Margins The margins levied by Indian Stock Exchanges on speculativetransactions are wholly of discretionary character, varying from shareto share and from day to day, ranging from zero to 40 per cent.

Higher margins are ingeniously avoided. There is a strong incentiveto collude for the buyer and seller for the purpose of avoiding marginpayments. Despite a whole array of daily, carry forward and ad hocmargins, numerous defaults take place in several Stock Exchanges,


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wherever the market crashed. Besides, the margin system has notprovided reasonable guarantee of the markets financial integrity.

The system of settlement and carry forward (badla):The settlement system varies from one stock exchange to anotherbut BSE has a fortnightly system. This is responsible for high pricefluctuations and high risk exposure to market participants. It is oftenresponsible for excessive speculation.

Investors interest The trading activity in our exchanges have been designed andevolved to benefit only the brokers and interests of the genuineinvestors are generally ignored. The investors confidence in market

machinery is weak, as most of them have a suspicion that they arealways cheated on price by the brokers. They do not feel assured thatthey will get a fair deal when transacting.

IMPACT OF STOCK EXCHANGES IN INDIA:

Following are the changes due to the existence of Stock Exchange:

1. Mobilization of savings

The savings of the individuals are easily mobilized invarious types of industries. Therefore the amount ofinvestments in the stock exchange increases.

2. Increase in rate of return on investment

The investors get more rate of return i.e. the market rateand not the normal bank rate which is much lower.

3. Availability of funds for growth of industries.

The amount of funds required for the growth of theindustries are easily available whereas there wasalways shortage of capital.

4. Diversification of industries


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Due to the availability of funds the industry becomes

financially strong and have scope or diversification dueto which more strong in the market.

5. Increase in employment

Growth and diversification of industries leads toincrease in the amount of work and thus increase jobopportunities for the unemployed.

6. Increase in standard of living

The increased job opportunities and the availability ofgoods of higher quality has increased the standard ofliving of people.

7. Increase in GDP.

Increase in business in overall all industries hasautomatically lead to the rise in GDP of the country andthus its prosperity.

8. Decrease in Trade Deficit.

Due to growth in industries the country is becoming self-sufficient leading to decrease in trade deficit.


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THE SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

ORIGIN OF SEBI

A fair and efficient securities market plays an important role in acountrys efforts towards industrialization. It directly affects mobilization andefficient channelising of savings of the household sector into productiveenterprises. By offering attractive rewards in the form of returns and capitalappreciation, the securities market encourages thrift and risk taking andfinally, it helps enterprises to raise money in a cost effective manner.

Though India has along history of stock exchanges with Bombay StockExchange having set up as early as in 1887, the securities market really

emerged from the periphery into the main stream of the countrys financialsystem only since the beginning of the decade of 1880s. Indeed the growthof the securities market has been one of the significant economic processesof the decade in the country.By the end of the decade, the securities market in India witnessed aspectacular growth, both in terms of its ability to mobilise resources and toallocate it with some efficiency. The corporate sector began to relay on thesecurities market increasingly to finance its long term requirements of fundsand it completed almost on equal terms with the term lending institutionswhich were hitherto the sole purveyors of long term finance.

Simultaneously, there was also a growth in the awareness of and interest ininvestment opportunities available in the securities available in the securitiesmarket among the savers. To help to sustain this growth, and crystalise theawareness and interest into a committed, discerning and growing pool ofinvestors, investors rights must be fully protected; trading malpractices mustbe prevented and structural inadequacies of the market removed. Thegovernment therefore felt the need of setting up a statutory apex broad topromote orderly and healthy growth of the securities market and for investorprotection.


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OBJECTIVES OF SEBI

SEBI seeks to create an environment which would facilitate mobilization ofadequate resources through the securities market and its efficient allocation.This environment which would include rules and regulations, institutions,and their inter-relationships, instruments, practices, infrastructure within anappropriate policy framework, should have an overall air of fairness. Themarket must inspire confidence all around.

In accomplishing these objectives, SEBI would be responsive to the needsof the three groups which basically constitute the market:

The Issuers of securities

The investors, and

The market intermediaries.

To the issuers, it should afford a market place in the market place in whichthey can confidently look forward to raising all the finance they need in aneasy, fair and efficient manner.

To the investors, it should provide a high degree of protection of their rightsand interests, through adequate, accurate and authentic information anddisclosure of such information on a continuous basis. The market should beefficient, but above all fair to the investors.

To the intermediaries, it should offer a competitive, professionalized andexpanding market with adequate and efficient infrastructure so that they areable to render better and responsible services to the investors and theissuers.

All investors carry certain risk and it is for the investor to take risk andchoose his investments. SEBI cannot eliminate risk or its consequences.The existence of SEBI does not remove the need on the part of the investorto carefully consider where he wants to invest his money or the possibilitythat his investment decision may go wrong.


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JOB ENTRUSTED TO SEBI

1. SEBI shall create a proper and conductive atmosphere (i.e. itincludes the rules and regulations, trade practices, customs andrelations among institutes, brokers investors and companies)required for raising money from the capital market. It shallendeavour to restore the trust of investors and particularlysafeguard the interest of the small investors. This can be achievedby meeting the needs of the persons connected with securitiesmarket and establishing proper co-ordination among the three maingroups i.e. investors, corporate sectors and intermediaries which isdirectly connected with its operations.

2. SEBI shall educate investors and make them aware of their rights in

clear and specific terms. It shall provide investors with formationand see that the market maintains liquidity, safety and profitability ofthe securities.

3. SEBI shall create proper investment climate to enable corporatesector to raise industrial securities easily, efficiently and ataffordable minimum cost.

4. SEBI shall develop a proper infrastructure so that marketautomatically facilitates expansion and growth of businessmiddlemen like brokers, jobbers, commercial banks, mutual fundsetc. which will ensure that they provide efficient services to theirconstituents i.e. investors and corporate sector at competitive price.

5. SEBI shall make more effective the laws in the existing status as faras they relate to the industrial securities, mutual funds, investmentsin units, LIC saving plan, chit fund companies and securities issuedby housing/ industrial societies and corporation with purpose ofmaking investment in housing/industries projects etc.

6. SEBI shall create the framework for more open, orderly andunprejudiced conduct in relation to takeover and mergers in thecorporate sectors to ensure fair and equal treatment to all thesecurity holder and to facilitate such takeovers and mergers in theinterest of efficiency by prescribing a mechanism for more orderlyconduct.


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ROLE OF THE SEBI

To achieve its objectives, the SEBI shall play a dual role by working as acontrolling authority and a development institution. The role of SEBI in briefis as under:

1. It shall devise laws with unified set of objectives, singleadministrative authority and an integrated framework to deal with allthe aspects of the securities market.

2. It shall introduce a system of two-stage disclosure at the time ofinitial issue and make compulsory of the companies to providedetailed information to all the stock exchange, journalists andinvestors on their demand.

3. It will examine the feasibility of introducing a dealers network bywhich securities can be brought and sold over the counter like in aretail shop which will smoothen liquidity and investmentopportunities.

4. It will see to that the intermediaries are financially sound andequipped with professional and competent manpower.

5. It shall make law-making and observance flexible enough to suit theprevailing market conditions and circumstances and will also ensurethat the rules are versatile and non-rigid to provide automatic andself regulatory growth.

6. It shall establish an effective inspection machinery which is

expected to act like an umpire which will provide to its players timelyguidance, encouragement and incentives and impose upon them aself discipline to observe the rules of the game.

7. It shall operate a Security Compensation Fund in order to protectinvestors who suffer financial loss arising from the failure of a stockbroker to meet his contractual obligations.

8. It shall strive to prohibit the malpractices prevailing in market suchas insider trading, kerb trading, shares cornering, unreasonabledelay in effecting share transfer by companies by specificallyproviding the statute for prohibiting and banning these practices.The Board shall work as an authority to execute such provision and

it will be responsible to ensure that they really work effectively.


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SEBI (Stock Brokers & Sub- Brokers) Rules, 1992

Rule 2(e), Stock-broker means a member of a stock exchange.Rule 2(f), Sub-broker means any person not being a member of a stockexchange who acts on a behalf of a stock- broker as an agent or otherwisefor assisting in buying, selling, dealing in securities through such stockbroker. A stock-broker or sub-broker shall not buy, sell, and deal insecurities, unless he holds a certificate granted by SEBI (Rule 3).

Capital Adequacy Norms for Brokers:

Each stock broker is subject to capital adequacy requirements consisting oftwo components:

1. Basic minimum capital, and2. Additional or optional capital related to volume of business.

The amount of base minimum capital varies from exchange to exchange.The form in which the base minimum capital has to be maintained is alsostipulated by SEBI.Exchange may stipulate higher levels of base minimum capital at theirdiscretion.

Conditions for grant of certificate to Stock-broker (Rule 4)

SEBI may grant a certificate to a stock- broker subject to the followingconditions namely:

a. He holds membership of any stock exchange,b. He shall abide by the rules, regulations and bye-laws of the stock

exchange or stock exchanges of which he is a member of;c. in case of any change in the status and constitution, the stock broker

shall obtain prior permission of SEBI to continue to buy, sell or deal insecurities in any stock exchange.

d. He shall take adequate steps for redressal of grievances of theinvestors within one month of the date of the receipt of the complaintand keep SEBI informed about the number, nature and otherparticulars of the complaints received from such investors.

Conditions of grant of certificate to sub-broker (Rule 5)

SEBI may grant a certificate to a sub-broker subject to the followingconditions, namely:


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a. he shall pay the fees in the manner provided in the regulations,b. he shall take adequate steps for redressal of grievances of the

investors within one month of the date of the receipt of the complaintand keep SEBI informed about the number, nature and otherparticulars of the complaints received,

c. in case of any change in the status and constitution, the sub-brokershall obtain prior permission of SEBI to continue to buy, sell or deal insecurities in any stock exchange, and

d. he is authorized in writing by a stock-broker being a member of astock exchange for affiliating himself n buying, selling or dealing insecurities.

SEBI (Stock Brokers & Sub-brokers) Regulations,

1992.

In terms of regulation 1(g), small investor means any investor buying andselling securities on a cash transaction for a market value not exceedingrupees fifty thousand in aggregate on any day as shown in a contract noteissued by the stock-broker.

Registration of Stock Broker

A stock broker applies in the prescribed format for grant of a certificatethrough the stock exchange or stock exchanges, as the case may be, ofwhich he is admitted as a member (Regulation 3). The stock exchangesforwards the application form to SEBI as early as possible as but not laterthan thirty days from the date of its receipt.SEBI takes into account for considering the grant of a certificate all mattersrelating to buying, selling, or dealing in securities and in particular thefollowing, namely, whether the stock broker:

a. is eligible to be admitted as a member of a stock exchange.b. Has the necessary infrastructure like adequate office space,

equipped and man power to effectively discharge his activities,c. Has any past experience in the business of buying, selling or dealing

in securities,

d. Is subjected to disciplinary proceedings under the rules, regulationsand bye-laws of a stock exchange with respect to his business as astock broker involving either himself or any of his partners, directorsor employees and

e. Is a fit and proper person.


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SEBI on being satisfied that the stock-broker is eligible, grants acertificate to the stock-broker and sends intimation to that effect to the

exchange or stock exchanges, as the case maybe. Where an applicationfor a grant of a certificate does not fill the requirements, SEBI may rejectthe application after giving reasonable opportunity of being heard.

Fees by Stock BrokersEvery applicant eligible for grant of a certificate shall pay such fees andin such manner as specified in Schedule III. Provided that the SEBI mayon sufficient cause being shown permit the stock-broker to pay such feesat any time before the expiry of six months from the date for which feesbecome due( Regulation 10). Where a stock-broker fails to pay the fees,SEBI may suspend the registration certificate , whereupon the stock

broker shall cease to buy, sell or deal in securities as a stock-broker.

Appointment of Compliance Officer:Every stock broker shall appoint a compliance officer who shall beresponsible for monitoring the compliance of the Act, rules andregulations, notifications, guidelines, instructions etc. issued by SEBI orthe central govt. and for redressal of investors grievances. Thecompliance officer shall immediately and independently report to SEBIany non-compliance observed by him.(Regulation 18A)

SEBIs Rule of Direct Billing to the End Client-2004

In this rule, the sub broker will stop dealing with the broker on behalfof the clients. There will be direct communication; the brokers will makebills and reports for the clients. Also the funds and shares transfer will beonly between the broker and the client. In this case, the sub broker willget out of this cycle and will act as a branch of the broker.

For this purpose of direct billing the client has to be registered withthe broker. He has to enter in a tri-party agreement i.e. with the broker,sub broker and the client himself. He has to comply with various detailsto facilitate trading like Address, Identity proof, bank proof, DP detailsproof , pan card proof etc. With the help of these details the client

registers himself with the brokers.This SEBI rule was brought in because there was misuse of fundsand shares of the clients. They were mislead and there was scope forthe sub broker to do scams.


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In order to increase the trade, make the stock market stronger andsecure, it needs to achieve the confidence of the investors. This can be

gained by bringing about transparency in dealings and transactions ofevery client.


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IMPORTANCE OF SUBSIDIARIES

Subsidiaries is a company whose 50% or more shares are held byanother company and hence its management is controlled by the ParentCompany. Rhe Parent Company is called the Holding Company.

The Subsidiary company can be acquired by purchasing its sharesand getting control over it or brought into existence for doing a particularkind of business separate from the parent company.

The Stock Exchanges established its subsidiaries because accordingto the SEBI rule one exchange cannot trade or deal in another. Therefore inorder to increase business they established a subsidiary of their own anddeal in other exchanges.

The main exchanges in India are NSE and BSE. The total number ofexchanges in India are 24 but since the amount of trading and listing ofcompanies in these exchanges is less they need to trade in other exchangesthrough a subsidiary.

Hence, the subsidiaries formed acts as a broker, makes its own subbrokers and clients.

As a broker, the subsidiary takes membership of various exchanges it wantsto trade in or deal in. He further makes its sub brokers who further makeshis clients and registers himself for trading purpose.

In the subsidiary company it has various Depts. Like AccountingDept, Systems Dept, Custody Dept, Surveillance Dept., etc. The sub brokertrade on their bolts and it is further processed at the broker level. Transfer offunds and securities is through this intermediary.

They also provide depository services to the sub brokers and theirclients. Proper training sessions are also conducted for the sub brokers tohelp them in trading.

Importance of Subsidiaries:

1. They can be easily set up by the Stock Exchange.

2. Are more well set up than the normal brokers.

3. Investors feel safe in big hands and hence they get confidence totrade.


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4. Increase in trade leads to increase in income of the exchange andhence helps the economy in return.

5. They can easily set up their branches in various locations.

6. Training the sub brokers and investors is easier for them.

7. Sometimes if the stock exchange is comparatively small and thetransactions are not much in it then the subsidiary helps it to survive.

8. Due to the emergence of the subsidiary the trade has increased inthe capital market.


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INTRODUCTION OF PSE SECURITIES

Pune Stock Exchange Ltd. is a company limited by guarantee. TheExchange was established on 2nd Sept. 1982 to cater to the needs of thegrowing investor community in the city.

Starting small, with 35 members and a few lac rupees business initially, theexchange has grown tremendously to over 185 members and about 15-20crores of business daily. Much of the work is computerised with a smoothsettlement system. Over 310 companies are listed with the Stock Exchange.

The Exchange, while providing an efficient market also upholds investorsinterests and ensures redressal of their grievances. It also strives to educateand enlighten investors by making available necessary information inputs.

Pune Stock Exchange opted for the on-line screen based trading in 1995.The Exchange has been successfully using a screen based Trading System,based on VECTOR (Versatile Engine for Centralised Trading and On-lineReporting) and developed and implemented by CMC Ltd, for more thanthree years now. The present operations cover 183 broker members and 9workstations for administration, Market Operations and Surveillanceactivities of PSE.

Pune Stock Exchange has been looking into the possibilities of widening itsactivities to different parts of Pune city and to other cities like Satara, Sangli,Solapur, Kolhapur, Ahmednagar, Aurangabad, Nashik and Mumbai.

PSE ranks 7th in the country & here are the Highlights for 2005.

The income of the Stock Exchange from Listing Fees, Interest and Dividenddecreased marginally, compared to last year due to the overall drop in theinterest rates of the Bank deposits and bonds.

We could achieve a target whereby we have invested almost 90 to 95% ofour invisible amount in the long-term form.

Efforts are being made to prepare the quarterly financial results of theExchange from the coming year.


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The Exchange took several steps to reduce the expenditure wherever it waspossible, by implementing the proverb of "A penny saved is a penny

earned".

During the year under review, we arrived at a revised salary agreement withour staff union where we have agreed to give a 25% rise while seeking acommitment for 3 years.

A new Panel of Auditors has been formed for a period of three years. It willcarry out quarterly inspection of accounts books of members / brokers.

Our Stock Exchange has undertaken a time bound programme to getourselves prepared to face 'Y2K' problems of computers.

The Exchange had planned to organize various Training Programmes forthe investors,

The Exchange recorded a turnover of Rs. 4,824.06 crores this year ascompared to the last year's turnover of Rs. 8,624.47 crores.

The Exchange Completed all the 51 settlements exactly as per thesettlement calendar.

The Exchange has received an in-principle approval from SEBI for the Trade

Guarantee Fund. The initial corpus of the fund is about Rs. 4.80 crores.

The Exchange has shifted the administrative office to Shivleela Chambers,Sadashiv Peth, Kumthekar Marg, Pune.

PSE Securities Ltd. was incorporated as a Pvt. Ltd. Company on 9 th Dec1999, with its main object of carrying out business as stockbrokers throughits authorized branches. The Company is a subsidiary of Pune StockExchange. The Company was converted into a Public Ltd. Company on 13 th

April 2000.The Registered Office of the company is situated at ShivleelaChambers, 752, Sadashiv Peth, R.B.Kumthekar Marg, Pune - 411030.

The Company is a member of National Stock Exchange and the StockExchange, Mumbai. The Company does not carry out any business of stockbroking by itself but only through its authorized branches of Pune Stock


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Exchange. Apart from stock broking business, the company also providesDepository services as Depository Participant of CDSL.

PSE Securities Ltd. is a member broker of both BSE and NSE. Due to lackof business on regional stock exchange, SEBI established a subsidiary ofPune Stock Exchange Ltd. in 1999. PSE Securities Ltd. is a non-profitmaking company. All the brokers of Pune Stock Exchange Ltd. have nowregistered with PSE Securities Ltd. as sub brokers. The main businessactivity of this company is broking and depository. It is a depositoryparticipant of Central Depositories Services (India) Ltd. (CDSL). TheCompany has BSE and NSE operations and respectively department.

1. Trading

2. Surveillance and Risk Management3. Settlement (Intra & Inter)4. Depositories Participant of CDSL5. Billing and Accounts

PSE Securities are divided into Four departments under eachSegment:



CENTRAL DEPOSITORY SERVICES INDIA LIMITED(CDSL)

SURVELLIANCE

INFORMATION TECHNOLOGY (I.T.)

BILLING & ACCOUNTS DEPARTMENT

PSESLSUB-BROKER

INDIVIDUAL

INVESTOR


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a) Central Depository Services India Limited (CDSL)

Introduction to CDSL: -

The Central Depository Services India Limited (CDSL) was established in1999 and is the second depository in India. Its objectives are to provideconvenient, dependable, and secure depository services, and facilitate

holding of Demats (securities in the electronic form). Its network covers 100cities and offers always on connectivity to around 500 centersnationwide .The company has handled Demat for over 8000 millionsecurities settlements .The number is still growing and will continue sincethe government plans to phase out physical trading of shares.

PSE SECURITIES

NSE

DEPARTMENT

BSE

DEPARMENT

CDSL

DEPARTMENT

SURVELLIANCE

DEPARTMENT

SYSTEMS

DEPARTMENT

CDSL

DEPARTMENT

SURVELLIANCE

DEPARTMENT

SYSTEMS

DEPARTMENT

BILLING & ACCOUNT

DEPARTMENT

BILLING &

ACCOUNT

DEPARTMENT


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CDSL connects to 172 Depository Participants (DPs) nationwide through its

network, which supports 149,832 investor accounts and spans 355branches. Every branch has access to the companys online database.

CDSL, firstly, encouraged the system of settlement from a Paper format toa T+ 3 mode (pure electronic format) .It also pioneered online inter-depository transfers, where movement of stocks between the depositoriestake place throughout the business days. The Indian Finance Ministry hasannounced the destination days for the Indian Capital Market to move to aT+2 settlement regime by April 2003. CDSL achieved the target, given byIndian Finance Ministry, well within the deadlines.CDSL received the certificate of commencement of business from SEBI on

February 1999. All the leading stock exchange like the NSE, Calcutta stockexchange, Delhi stock exchange. The stock exchange Ahmedabad etc haveestablished connectivity with CDSL.

At the end of December, 2004 over 4900 issuers have admitted theirsecurities (equities, bonds, debentures, commercial papers (CPs), units ofmutual funds, certificate of deposits (CDs) etc.) into the CDSL system.


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Depository Participant (DP):

A depository facilitates holding of securities in the electronic form andenables securities transactions to be processed by book entry by aDepository Participant ,who as an agent of the depository , offers depositoryservices to investors.

According to SEBI guidelines, Financial institutions, Banks, Custodians,Stock brokers etc. are eligible to act as DPs.The investor who is known asbeneficial owner (BO) has to open a Demat Account through any DP forDematerialization of his holdings and transferring securities .

The balances in the investors Account, recorded and maintained with CDSL

can be obtained through the DP. The DP is required to provide eachinvestor (who is client of that DP), at regular intervals (like weekly, monthly,quarterly, etc.) A statement of account, which gives the details of securitiesholdings and transactions.CDSL received the certificate of commencement of business form SEBI inFebruary 1999. All leading stock exchanges like the National StockExchange (NSE), Calcutta Stock Exchange, Delhi Stock Exchange, and theStock Exchange- Ahmedabad, etc have established connectivity with CDSL.

PSESL started its CDSL operations in Dec. 2003. As a DP, PSESL isproviding the facilities on behalf of its depository: -

Dematerialization & Re-materialization: -

PSESL on behalf of its depository provides facilities of dematerialization andre-materialization of shares certificates. Dematerialization is the processunder which an investor submits the physical shares certificates with aDematerialization Request Form (DRF) to its DP in order to convert theirphysical shares into an electronic form. Re-materialization is the reverseprocess of the dematerialization i.e. converting back the shares from theelectronic form to physical certificates.

Maintaining the investors holdings: -PSESL maintains the record of holding of their sub-broker in the electronicform and provides a record at the end of month.

Settlement of securities: -


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It affects all the settlements of the securities traded in the BSE through itsCDSL department. It also carries out settlement of trades not done in the

stock exchange. These trades are known as off market trades. It alsotransfers the securities to its clients account for such traded securities.

Pledging and Hypothecation: -It also carries out pledging and hypothecation of dematerialized securitieson behalf of CDSL. An investor (called pledgor) who is willing to pledge hisdematerialized securities, requests his DP by submitting the Pledge RequestForm (PRF) for pledging his dematerialized securities. The pledgor receivesthe cash against these securities from the pledgee (the one who acceptsthe pledgors holding and forwards money for his acceptance). The pledgee

accepts the securities and forwards the cash towards the pledgor throughhis DP. However, the ownership continues to remain with the pledgor.

Receipts of non cash corporate benefits: -

PSESL, as a DP, receives all non-cash corporate benefits like bonus issue,etc. in electronic form on behalf of the investors and credit the same to theinvestors account accordingly.

Stock lending and borrowing:-

The company is also providing stock lending and borrowing facilities to itsclients under the CDSL operations. An investor, (called lender) who is willingto lend his dematerialized securities, requests his DP to lend thosesecurities and receives cash once his securities are accepted by the anotherparty (the party who accepts the securities is called the borrower


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Business rules for trading on NSE through PSE Securities Ltd.1. Only Members of PSE duly registered by SEBI would be allowed to beregistered as sub-brokers of PSES. Only such registered sub-brokers ofPSES, who are termed, as Sub-brokers hereafter would be allowed to trade& operate on the NSE segment through PSES.2. PSES would neither trade for investors directly nor for its own.

Except for to rectify mistakes arising out of Operational issues.

3. PSES sub-brokers would be allowed to trade in Capital market segment& only in those securities, where SEBI has made delivery in DEMAT formcompulsory for all categories.4. All sub-brokers would be given maximum three login Ids either on LAN&/Or WAN(s) at the same time. One login ID gives access to both NSE andother segment (if provided by SDG) on one terminal. If Sub-brokers wantseparate NSE and other segment on different terminals then two login Idsare consumed.

Additional I.D.s can be obtained by payment of Charges/fees as decided by

PSES.

5. All sub-brokers would be the authorized users for the SDGs CTCLconnectivity & trading system through PSES. Sub-brokers may attachadditional authorized users as required, to trade & operate on NSE segmentfor which the sub-brokers would be responsible for the obligations createdby them in the market & also the legal issues attached. Each such userwould be given a login ID for the purpose of trading on the NSE segmentand other segments. (Approval for authorized user reqd. format attachedalong with.)

6. Deposits: Each sub-broker would be required to give initial deposit of Rs.25,000/- in the form of cash. This may further be increased in the form ofadditional deposit in multiple of Rs. 10,000/- in the proportion 30% cash (onwhich interest would be payable considering issues related to taxation) and70% Bank Guarantee (validity for the BG should be a minimum of 1 year


35/51

with a three month claim period from the expiry of the aforesaid BG). (Thisadditional deposit should be placed for a minimum period of 91 days placed

with NSE by PSES to avail interest facility.)If additional capital is placed for less than 3 months, no interest will be paid.

An interest would be paid after considering T.D.S., other I.TAX & Legalfactors. Sub-broker has to inform PSES to keep F.D. of this A.B.C.

7. Trading limits:

Sub-broker would be given limits as under:

Turnover limits 30.00 times the total depositMaintained with PSESGross Exposure Limits Margins Applicable in Rs.Slabs (Rs.)1) 00 to 40 lacs Nil Margin2) 40 to 70 lacs 05% above 40 lacs3) 70 to 100 lacs 01.50 lacs + 10% of above 70 lacs4) Above 100 lacs 04.50 lacs + 30% of above 100 lacsIt is pointed out that the deposit maintained with PSES, as initial deposit and

additional deposit will be considered for the purpose of trading limits, viz.intraday turnover limit ,Gross Exposure Limits and other margins. Actualmargin computed by PSES would be deducted from the above capital &accordingly trading limits will be given on T+1 basis. Members can avail thefacility of early Payin of both funds & Securities & accordingly limits will bereplenished. A request letter to that effect has to be sent in the prescribedformat to PSE Securities. & will be subject to receipt of funds/deliveries toPSE Securities account.Members may please take a note of revised provisions with respect tomargins based on VAR:

Method of computing Gross Exposure for exposure limits and VAR Margin:Gross exposure for a member, across all securities in rolling settlements,shall be computed as absolute (buy value + sell value), across all opensettlements. Open settlements shall be all those settlements for which


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trading has commenced and for which settlement payin is not yetcompleted. The total gross exposure for a member on any given day shall

be the sum total of the gross exposure computed across all the securities inwhich a member has an open position. This gross exposure shall be usedfor the purpose of exposure limits and for imposing VAR margin. For thepurpose of gross exposure limits, sum of exposure in account periodsettlement and open positions in rolling settlement, which are yet to besettled, shall be considered.Daily margin for rolling settlements:

1. AR based margin:VAR margin shall be applicable for all securities in rolling settlement.

VAR margin rate file for each security shall be disseminated at the end ofeach trading day and the same shall be applicable on the positions at end ofnext trading day. The same will be made available in the FTP server by 7.00pm at the end of each trading day.

VAR margin rate shall constitute of the following:1.1 Value at Risk (VAR) based margin, which shall be the higher of

the security VAR or index VAR, the index being NIFTY, subject to aminimum of 5%.

1.2 Additional VAR Margin: 12% as specified by SEBI.

1.3 Security specific Margin: NSCCL may stipulate security specific

margins for the securities from time to time.The VAR based margin shall be capped at 100%.

2. Mark to Market (MTM) Margin:MTM profit/loss across different securities within the same settlement

shall not be set off to determine the MTM loss for a settlement.

The daily margin for rolling settlements shall be payable in cash onT+1 day. The margin shall be collected together for all settlements.

8. The cost of trading on the PSES capital Market segment would be asfollows:

Particulars:


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Service Charges (Excl. of any other levies but inclusive of ServiceTax).

1) Brokerage: 01 paisa / share on all trades.2) Transaction charges: 0.01% on turn-over (minimum 1 paisa)3) Delivery charges: 0.01 % extra on delivery. (Minimum 1 paisa)

Above charges are inclusive of NSE Transaction charges.Registered sub-brokers of PSES who have not completed 5 years in

PSE shall pay the SEBI fees in excess of the above-mentioned charges.However PSES reserves the right to change the mentioned levies & taxesas & when required.

Any other Government charges/fees, service charges are to be paid

extra at actuals. Any thing demanded by SEBI &/ Government with /without retrospective effect will be charged at actuals.

9. For all trades executed, during a particular trading period by a registeredsub-broker & its authorized users, a multilateral netting procedure is adoptedto determine the net settlement obligation of the registered sub-broker(delivery/receipt positions). Final obligation report is being downloaded toevery sub-broker. On the basis of this report actual delivery effect comesinto force. Members are required to maintain clear balances & effect pay-in24 hours before the NSE deadline date & time. All sub-brokers are furtherrequested to cross verify the final bill before delivering the shares to PSES

pool account. All outstanding positions will be considered for the purpose ofexposure & margin calculations. However, against the obligation, sub-brokers can avail the facility of early pay-in of securities/funds against theirobligations subject to a conditions stipulated by NSE. The sub-brokerswould be required to intimate the same to PSES in the prescribed formatattached herewith. The effect of exemption of margins & gross exposurewould be given only after the relevant securities have been credited to thepool account of PSES. The minimum value of each security delivered for thepurpose of early pay-in should be Rs. 25,000/-. The same would beapplicable in case of early pay-in of funds. The effect of exemption ofmargins & gross exposure would be given only after the relevant funds have

been debited from the settlement account of the sub-broker & confirmationhas been received by PSES for the same, after the receipt of the funds. Thesub-brokers would be required to intimate the same to PSES in theprescribed format attached herewith. Under current circumstances, thefacility of early Payin is restricted only for Var margin release. However, this


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facility will be extended soon for the purpose of gross exposure & tradinglimits also as soon as operations are streamlined.

Registered sub-brokers can avail the facility of inter-settlement transfersubject to a condition of T+1 basis. E.G.: For payout of shares in sett.Normal/2001001, inter-settlement transfer request will be accepted forsettlement normal/2001002 only. This should be delivered at PSES office inwriting on T+2 basis in prescribed format available at FTP server. Nominaladditional charges @ 0.03% of value (minimum 10/-Rs.) Will be collectedfrom such sub-broker on execution date. This facility is available subject toreceipt of shares from exchange.10. At the end of trading session PSES would generate contract notesseparately for each sub broker for the trades done by him through PSESgiving therewith the contract numbers. These contracts would be

downloaded in an electronic mode through appropriate connectivity within 3hours from close of the market to the respective TWSs of the sub-brokers orto such other convenient locations to which the sub brokers have access. Inaddition PSES would be giving hard copies of the contract notes as per thestatutory requirement. Similarly bills would be downloaded within 48 hoursfrom the end of the settlement. Once downloaded through FTP, aresupposed to be served on all sub-brokers.


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How does it work?

Trade details are available for verification on the same day (i.e. Titself) after 19:00 hours IST.

The investor needs to input minimum details of the trade viz. clientcode (provided by the trading member), security details (symbol andseries), order number, trade number, trade quantity and price(excluding brokerage). All the above details are mandatory.

If an identical match is found for the details provided, a confirmationalong with the details of the trade is displayed to the investor. If nomatch is found, a message is displayed to that effect.

Where no match is found, investors are advised to contact theirtrading member for clarification. For further assistance, pleasecontact the InvestorGrievances Cell of the Exchange.
http://www.nseindia.com/content/assist/asst_igccontactus.htmhttp://www.nseindia.com/content/assist/asst_igccontactus.htm


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Trade details for the last 5 trading days will be available on thewebsite. That is, trades executed on 'T' day, can be verified till the

T+4th

day. *

All trades can be verified.


41/51

Business Growth in CM Segment

Month/Year

Noof

co.s

listed*

No.ofco.s

permitted*

No. ofco.s

available for

trading*

No.of

tradin

gdays

No.ofco.

traded

No. oftrade

s(lakh)

TradedQuant

ity(lakh)

Turnover

(Rs.cr)

Average

DailyTu

rnover(Rs.cr)

AverageTr

adeSize

DematSecurities

Trad

ed(lakh)

Demat

Turn

over

MarketCapitalisation

(Rs.cr)*

Current Month

Jun-2005 987 1 854 23 861477

70,48

5

111,39

7

4,84

3

23,374

70,485

111,397

1,727,502

May-2005 977 1 842 22 875 412

56,

516

86,802

3,

946

21

,020

56,516

86,802

1,654,995

Apr-2005 973 1 836 20 952 367

51,26

82,718

4,13

22,5

51,265

82,718

1,517,908
http://www.nseindia.com/content/equities/eq_dailyturnover.htmhttp://www.nseindia.com/content/equities/eq_turnjun2005.htmhttp://www.nseindia.com/content/equities/eq_turnmay2005.htmhttp://www.nseindia.com/content/equities/eq_turnapr2005.htmhttp://www.nseindia.com/content/equities/eq_dailyturnover.htmhttp://www.nseindia.com/content/equities/eq_turnjun2005.htmhttp://www.nseindia.com/content/equities/eq_turnmay2005.htmhttp://www.nseindia.com/content/equities/eq_turnapr2005.htm


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5 6 27

2004-2005 970 1 839 253 870 4,510

79

7,684

1,1

40,071

4,

506

25

,279

797,684

1,14

0,071

1,585,585

2003-2004

909 18 787 254 8043,780

713,301

1,099,

535

4,32

8

29,088

713,301

1,099,53

51,120,976

2002-2003

818 107 788 251 8992,398

364,065

617,98

9

2,46

2

25,771

364,049

617,984

537,133

2001-2002

793 197 890 2471,01

91,753

278,4

08

513,16

7

2,07

8

29,2

74

277,717

512,866

636,861

2000-2001

785 320 1,029 2511,20

11,676

329,536

1,339,

510

5,33

7

79,923

307,222

1,264,33

7657,847

1999-2000

720 479 1,152 254 --984

242,704

839,05

2

3,30

3

85,270

153,772

711,706

1,020,426

1998-1999

648 609 1,254 251 --546

165,327

414,47

4

1,65

1

75,911

8,542

23,818

491,175

1997-1998

612 745 1,357 244 -- 381

135,685

370,19

3

1,52

0

97,164

-- -- 481,503

1996-1997

550 934 1,484 250 --264

135,561

295,40

3

1,17

6

111,895

-- -- 419,367

1995-1996

422 847 1,269 246 -- 6639,91

2

67,287

276

101,950

-- -- 401,459

1994-1995

135 543 678 102 -- 31,391

1,805

1760,167

-- -- 363,350
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This is the main screen which appears after putting the Username andpassword. Every Sub broker is given his Username and password. He is also given thecategory of a sub broker i.e. he can only view the reports and put the requests but cannotedit any data in the software.

Right on top of this menu we can see whether it is NSE or BSE or F&Osegment. Beneath that there is a box which indicates when the password needs to bechanged. Its mandatory to change password within 15 days for safety purpose. Besidesthis there is ticker i.e. the message flashed for the sub brokers about various reports, billsetc.


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On the left hand side is the menu .The main types are:

Management Reports:These reports are concerning the addition of new clients in Software,

delivery reports of shares, auction bills, securities shortage reports, etc.

Finance Accounting:In this, the ledger balances of the clients can be seen .The funds payin

and payout reports can also be seen through this menu.

Utilities:In this, the clients details, settlement calendars, auction calendar, etc. can be

seen.


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The details of the delivery of shares can be obtained from:

Again a new menu appears on its right hand side of the main menu. The above screenappears when we are in Clientwise Reports. Once the partycode is submitted, all the scripsin which the party has dealt in appears. The settlement wise dealing in each can thus beobtained by clicking on them.

OTHER

DELIVERY

REPORTS

SHARE

REPORTS

SHARE

REPORTS


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The party can also view the auction bill in this software. For this he has to go in

They then have to fill various details like Sett. Type, Sett. No., Party Code and submit it.The auction bill of that particular Sett appears on the screen.

Auction Reports Auction Bill


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The client wise securities payin payout shortage reports can also be obtained.This is necessary for the client to know whether he has made the delivery of the scrips sold.

Also it gives the payout shoratge reports which tells about shortage of shares received fromexchange, which helps in further dealing in shares.


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The party/sub broker needs to request for the payout of securities.In this option the sub broker needs to put the quantity of shares he wants the payout of. Therest of the shares are then lying with the broker in the Beneficiary A/C.

If in the next Settlement the Client sells the shares, they are automaticallyintersettled.


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Finance Reports gives various types of reports to the client. The main report is the PartyLedger Summary. This shows their ledger balances as per their various settlements andtheir net balance. This helps to know the funds position of the sub broker and the client.


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Utilities option helps to get the client information, settlement calendar, etc.The settlement calendar of various types helps us to know the date on whichthe settlement took place, the date of securities payin/ payout, funds payin/

payout of that settlement, etc.


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PRADNYA SOFTWARE

Before the use of Pradnya software, the companies used the BitsoftSoftware. In this software various reports, bills, etc.were made but it couldbe accessed only by the broker.

These reports then had to be kept in FTP site of the company andfurther the Sub brokers could see it. There was no transparency in dealings.

In Pradnya software all the reports , bills, information is transparentbetween all the parties. The data maintained by the broker can be accessedby the sub broker and the client at their end easily through net also. Everyclient can see his daily position through this software at his home itselfinstead of going to the sub broker for details.

Documents

Importance of Subsidiaries in Capital Market, Pune Stock Exchange (Finance)