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8/4/2019 Management & Organization of Stock Exchange - Mukesh Carpenter
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Management &organization of
stock exchange
By- Mukeh Carpenter
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Introduction
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WHAT ISSTOCK EXCHANGE
Stock exchange isthat place wheretradingofshares,stocks,securities,
etc.isdone intermsofsale and
purchase.
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There are 23 stock exchangesinthe India.
Mumbai's (earlierknownas Bombay),BombayStock Exchange isthe largest, withover6,000 stocks listed. The BSE accountsforovertwothirdsofthe total tradingvolume
inthe country. Establishedin 1875,theexchange isalsothe oldestin Asia. Amongthe twenty-twoStock Exchangesrecognizedbythe GovernmentofIndiaundertheSecurities Contracts (Regulation) Act, 1956,it
wasthe firstone tobe recognizedanditisthe onlyone thathadthe privilege ofgettingpermanentrecognitionab-initio.
Introduction
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Name ofIndianstock exchange:
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1.Bombaystock exchange (Mumbai)2.National stock exchange(Mumbai)3.Banglore stock exchange(Banglore)
4.UtterPradeshstock exchange(kanpur)5.Magadhstock exchange(Patna)6.Ahmedabadstock exchange(Gujrat)7.Vadodarastock exchange(Baroda)
8.Bhubaneswarstock exchange(Orissa)9.Calcuttastock exchange(kolkata)10.Madrasstock exchange(Chennai)
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MajorUps & Downsof
Sensex Oct. 2000 Itreachedat 5928
Sept. 2001 ithita low of2594
Till Apr. 2003 itstayedbetween2595-3750
Jan. 2008 21000
Oct. 2008 8700
Oct. 2009 17000
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TodaysStock Market
Easilyaccessible toinvestors
Opportunitytoinvestinvery
transparentmarket
Integratednationwide screen-based
trading
Fullycomputerized High liquidity with large no.of
participants
Multiple level redressal mechanism8/29/2011 6MK
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ROLE PLAYERS
EXTERNAL:----
1.SHAREHOLDER
2.DEBENTURE HOLDER
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SHAREHOLDER
Shareholdersare dividedintotwo parts
1.Preference shareholder: Preference
shareholderare those whichhavepreferential righttothe paymentofdividend
duringthe life time ofthe company,and a
preferential righttothe returnofthe capital
whenthe companyis woundup.
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KINDS OF PREF.SHAREHOLDER
1.Comulative shareholder: These sharesare
entitledtofixeddividends whetherthere are
profitsor loss.Ifprofitsare notsufficientto
payina particularyearthenthat will payon
nextyear.
2.Noncumulative pref.share: These shares
cannotclaimarrearsofdividendsofanyyear(ifnot paiddue toinsufficiencyofprofits)out
ofprofitsofsubsequentyear.
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Cont.
3.Participating pref.Shares: These shares
receivesafixedrate ofdividendin priorityto
ordinarysharesandfurther,the rightto
participate inbalance ofprofitsinanagreed
proportiontogetherwithordinaryshares.
4.Redeemable pref.share: These are shares
whichcanbe purchasedbackbythecompany. The companyreservesitsrightsto
call backorpurchasedthese sharesatany
time .
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EQUITY SHARES
All shares whichare not preference shares
are equityshares. These sharesdonothave
afixedrate ofdividend,theyare always
irredeemable andtheirholdershave normal
votingrights.
Theyare alsothe ownersofthe company.
Theytake dividend.
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DEBENTURES
A documentunderthe companyseal which
providesforthe paymentofa principal sum
andinterestthere onatregularintervals
whichisusuallysecuredbyafixedor
floatingcharge onthe companys propertyor
undertaking whichacknowledgesa loanto
the company.
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INTERNAL PLAYERS
The membersofthe stock exchange canbedividedintotwo parts:
A.Broker: He isacommissionagent whotransactsbusinessinsecuritiesonbehalfofnon-members.Theymayhave numberofsub-brokerstocanvassandsecure businessforthem.
B.Jobber: He isanindependentdealersecurities.He purchase andsellssecuritiesinhisownname. He isnotallowedtodealwithnon-membersdirectly.He worksfor
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Initial public offering
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Aninitial public offering (IPO),referredtosimplyasan
"offering" or"flotation",is whenacompany (calledthe issuer)
issuescommonstockorsharestothe publicforthe firsttime.
Theyare oftenissuedbysmaller,youngercompaniesseeking
capital to expand,butcanalsobe done by large privately-owned
companies lookingtobecome publiclytraded.
InanIPO the issuermayobtainthe assistance ofan
underwritingfirm, whichhelpsitdetermine whattype ofsecurity
toissue (commonorpreferred),bestoffering price andtime to
bringittomarket.
AnIPO canbe ariskyinvestment. Forthe individual investorit
istoughto predict whatthe stockorshares will doonitsinitial
dayoftradingandinthe nearfuture since there isoften little
historical data with whichtoanalyze the company
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Securitiesand Exchange Board
ofIndia
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The Securitiesand Exchange Boardof
India (frequentlyabbreviatedSEBI)isthe
regulatorforthe securitiesmarketinIndia.It
wasformedofficiallybythe GovernmentofIndiain 1992 withSEBI Act 1992 being
passedbythe Indian Parliament. Chairedby
C B Bhave,SEBIisheadquarteredinthe
popularbusinessdistrictofBandra-Kurlacomplex in Mumbai,andhas Northern,
Eastern,Southernand Westernregional
officesin New Delhi, Kolkata, Chennaiand
Ahmadabad.
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SEBIhastobe responsive tothe needsofthreegroups, whichconstitute the market:
The issuersofsecurities
The investors
The marketintermediaries.
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Organizationstructure
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The Process of Issuing Shares
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The importantstepsinthe procedure of issuingshares are :
Issue of Prospectus: The companyfirstissuesthe prospectustothe
public. Prospectusisaninvitationtothe publicthatanew companyhas
come into existence anditneedsfundsfordoingbusiness.Itcontains
complete informationaboutthe companyandthe mannerin whichthe
moneyistobe collectedfromthe prospective investors
Receipt of Applications: When prospectusisissuedtothe public,
prospective investorsintendingtosubscribe the share capital ofthe
company wouldmake anapplicationalong withthe applicationmoneyand
depositthe same withascheduledbankasspecifiedinthe prospectus. Thecompanyhastogetminimumsubscription within 120 daysfromthe date of
the issue ofthe prospectus.Ifthe companyfailstoreceive the same within
the said period,the companycannot proceedforthe allotmentofshares and
applicationmoneyshouldbe returned within 130 daysofthe date ofissue of
prospectus
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Allotment of Shares:
Ifminimumsubscriptionhasbeenreceived,the company
may proceedforthe allotmentofsharesafterfulfillingcertainother legal formalities. Lettersofallotmentare senttothose
whomthe shareshave beenallotted,and lettersofregretto
those to whomnoallotmenthasbeenmore. Whenallotment
ismade,itresultsinavalidcontractbetweenthe company
andthe applicants whonow became the shareholdersofthecompany.
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Six StepstoIssuing YourFirst
Stock Certificate
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Afteryouhave formedyourcorporation,one ofthe firsttasksisissuingstockto
the shareholdersofthe company. There are six basicstepstoissuingstock
correctly.
Step 1 - Write downortype out eachofthe shareholdersnames,addresses,
and percentage ofthe companythey will own.
Step 2 - Determine how manysharesthe corporationhasavailable toissue.
The numberofsharesauthorizedtoissue are indicatedonthe first page ofyour
ArticlesofIncorporation.Ifyouare unable tofindthemthere,youcangotoyour
corporation's listingatyourSecretaryofState's website andsee how many
sharesare authorized.Ifyouare still unable tofindthe numberofshares,call theSecretaryofState directly.
Step 3 - Calculate the numberofsharesyou will issue to eachindividual
shareholderbasedonthe percentage ownership andnumberofshares. Don't
issue all sharesavailable.Ifyouhave 25,000 sharesavailable forissue,you
may wanttoonlyissue 1,000 or100 sharestostart. This will give youmore
sharestoissue ata latertime ifyouhave additional investorsorstake holderscome intothe company.
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step 4 - Physically write outthe stockcertificates withthe shareholdersname,numberofsharestheyownandthe certificate number.Stockcertificatescan
be purchasedfromoffice supplystores,directlyonline oryoucan purchase a
corporate recordbookthat will typicallycome withyourfirst 10 or20
certificates.
Step 5 - Recordinyourstock ledgereachcertificate thathasbeenissued.In
the stock ledgeryou will recordthe name ofthe shareholder,the numberof
sharesissued,the stockcertificate number,how muchthey paidforthe shares,
the type ofsharesthey were (common, preferred,voting,non-voting, etc.),the
date ofthe transaction,and whosoldthe sharestothe new shareholder.Ifthe
companyissuedthe sharesit wouldbe consideredaninitial offeringofthe
company.
Step 6 - Sendthe stockcertificatesto eachshareholder.
These steps provide aguide forissuingsharesofanew corporation. Additional
tasksthatshouldbe completeduponforminganew corporationare initial
meetingofshareholdersanddirectors, writingresolutionsandopeningabank
account.8/29/2011 21MK
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