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Capital Market
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- 10. Primary market isa market for raising fresh capital in the form of shares and debentures It allows for the formation of capital in the country and the accelerated industrial and economic development Public limited companies who are desirous of raising capital funds through the issue of securities approach this market. The Public limited and government companies are the issuers and individuals, institutions and mutual funds are the investors in this market
- 11. NEW ISSUE MARKET •It refers to the set-up which helps the industry to raise the funds by issuing different types of securities. • These securities are issued directly to the investors (both Individuals as well as institutional) through the mechanism called primary market or new issue market. • The securities take birth in this market.
- 12. E-IPO The companies arenow allowed to issue capital to the public through the on- line system of the stock exchanges. For making such on-line issues, the Companies should comply with the provisions contained in Chapter 11A of SEBI(Disclosure and Investor Protection) Guidelines,
- 14. Secondary Market • Thesecondary market is that market in which the buying and selling of the previously issued securities is done. • The transactions of the Secondary market are generally done through the medium of stock exchange. • The chief purpose of the secondary market is to create liquidity in securities.
- 15. What are theproducts dealt in Secondary Market? Equity shares. Debentures. Government securities. Bonds. Commercial Papers.
- 16. Step 1: Investor/Traderdecides to trade Step 2: Places order with a broker to buy/sell the require quantity of respective security. Step 3: Best priced order matches based on price-time Step 4: Order execution is electronically communicated tobroker’s terminal
- 17. Steps 5: Tradeconfirmation slip issued to the investor trader by the broker Step 6: Within 24 hours of trade execution, contract note is issued to the investor trader the broker Step 7: pay-out of funds securities on T+2 day
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- 19. Difference between Primary Marketand secondary market Primary Market • In primary market , securities are bought by way of public issue directly from company • New issue are available in primary market • The primary is a middlemen • New issue of common stock,bonds and preferred stock are sold Secondary Market • In secondary market share are traded between to investors • Securities usually bought and sold through the secondary market • The secondary market or broker and dealer • In Secondary Market bonds issue are sold to the public
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- 22. Regulation of StockExchange The Securities Contract Regulation Act, 1956 and the Securities and Exchanges Board of India Act, 1992, provided a comprehensive legal framework. A three tire regulatory structure comprising the Ministry of Finance, the Securities and Exchanges Board of India and the Governing Boards of the Stock Exchanges regulates the functioning of stock exchanges.
- 23. Ministry of Finance Thestock Exchanges Division of the Ministry of Finance has powers related to the application of the provision of the SCR Act and licensing of dealers in the other area. According to SEBI Act, the Ministry of Finance has the appellate and supervisory powers over the SEBI. It has power to grant recognition to the Stock Exchanges and regulation of their operations. Ministry of Finance has the power to approve the appointments of chief executives and nominations of the public representatives in the Governing Boards of the stock exchanges. It has the responsibility of preventing undesirable speculation.
- 24. The Securities andExchange Board of India The Securities and Exchange Board of India even though established in the year 1988, received statutory powers only on 30th Jan 1992. Under the SEBI Act, a wide variety of powers is vested in the hands of SEBI. SEBI has the powers to regulate the business of stock exchanges, other security markets and mutual funds. Registration and regulation of market intermediaries are also carried out by SEBI. It has the responsibility to prohibit the fraudulent unfair trade practices and insider dealings. Takeovers are also monitored by the SEBI. Stock Exchanges have to submit periodic and annual returns to SEBI. The main objective of the SEBI is to promote the healthy growth of the capital market and protect the investors.
- 25. These functions areperformed by SEBI to regulate the business in stock exchange. To regulate the activities of stock exchange following functions are performed- • SEBI has framed rules and regulations and a code of conduct to regulate the intermediaries such as merchant bankers, brokers, underwriters, etc. • These intermediaries have been brought under the regulatory perview & private placement has been made more restrictive. • SEBI registers and regulates the working of stock brokers,sub-brokers, share transfer agents, trustees, merchant Bankers & all those who are associated with stock exchange in any manner. • SEBI registers and regulates the working of mutual funds etc. • SEBI regulates takeover of the companies. • SEBI conducts inquiries and audit of stock exchanges.
- 26. The Governing Board TheGoverning Board of the stock exchange consists of elected member directors, government nominees and public representatives. Rules, byelaws and regulations of the stock exchange provide substantial powers to the Executive Director for maintaining efficient and smooth day-to-day functioning of the stock exchange. The governing Board has the responsibility to orderly maintain the well-regulated market. The governing body of the stock exchange consists of 13 members of which; (a) 6 members of the stock exchange are elected by the members of the stock exchange (b) central government nominates not more than three members, (c) the board nominates three public representatives (d) SEBI nominates persons not exceeding three (e)the stock exchange appoints one Executive Director