Mandeep Goyal
New member
Indian Securities Market
What is Securities Market
Channel of Allocation of Savings to those who have a productive need for them
Facilitates Re-allocation of savings from savers to entrepreneurs
Has two interdependent & inseparable segments- Primary Market & Secondary Market
Money Market & Capital Market
Derivatives
Derivative is a Instrument whose value is derived from the under lying asset.
Types of derivatives:
1. Futures
2. Options
Derivatives contd…
Futures contract is a standardised contract which is an agreement between 2 parties to buy/sell an asset at a predetermined future time and price.
An option gives the holder of the option to do something.
- A call option gives the holder the right but not the obligation to buy an asset by a certain date & price
- A put option gives the holder the right but not the obligation to sell an asset by a certain date & price
Derivatives contd…
Derivative products:
a. Index futures & options – derive their value from an underlying index.
b. Stock futures & options – derive their value from an underlying stock
Applications of Derivatives:
1. Hedging 2. Speculation 3. Arbitrage
The Regulator
Securities and Exchange Board of India (SEBI) – Established under section 3 of Sebi Act 1992.
Role of Sebi:
a. Regulation of Securities market
b. Development of Securities market
c. Protection of investor interest
Players in the Market
Investors
Retail Investors
HNIs
Mutual Funds
FIs/FIIs
Corporates
Types of Investors
Investors – who do good amount of homework about the industry and company they want to invest in & usually with medium to long term horizon
Speculators – who try to make big bucks in a short time
Momentum Traders – Intra-day traders
Players in the Market contd…
Primary Market
Market wherein resources are mobilised by Companies through issue of new securities
Provides channel for sale of new securities
Two types of Issuers who issue securities
Primary Market (Contd…)
Listed Company
Unlisted Company
Debt Instruments
Lead Merchant Bankers
Admission to a Depository
Types of Issues
Ordinary IPOs where price is fixed
Book Building issues where price is being discovered
FPOs (Follow-on Public Issues by listed companies)
Rights issue
Bonus issue
Offer for Sale
Bonus Shares vs. Stock split
Bonus shares are issued to existing shareholders as a result of capitalisation of reserves and it increases the number of outstanding shares & the share capital of the company.
Stock split results in change in face value of the stock. Par value is reduced & number of shares is increased proportionately and there will be no change in share capital.
Secondary Market
Market where securities are traded after being initially offered to the Public in the primary Market and/or listed on the Stock Exchange
Facilitates Sale & Purchase of existing
Securities
Venue for trading of Securities
Trades take place through Stock Exchanges
What is an Index ?
An Index is a number which measures the change in a set of values over a period of time. – A stock index represents the change in value of a set of stocks which constitutes the index.
Indices in India:
a. BSE Sensex (30 stocks)
b. S&P CNX Nifty (50 stocks)
How Trading takes place ?
Types of Order
Order Entry & Unique code
Unique order number
Time stamping of Orders
Trade Number
Posted to Back office of the Broker/Sub-broker
Issue of Contract Note/Sale Purchase Note
Execution of Orders
Orders get executed on finding the right match.
Matching priority:
Best buy order – with highest price
Best sell order – with lowest price
*The unmatched orders are queued in the system by
Price-time priority basis.
Flow of Trading
How trades are Settled ?
Trades are settled on a T+2 basis
Netting of trades
Securities Pay-in
Funds Pay-in
Securities Pay-out
Funds Pay-out
Auction for Shortages
Settlement Calendar
Activity Day
Trading T
Funds Pay-in T+2
Securities Pay-in T+2
Funds Pay-out T+2
Securities Pay-out T+2
Auction for Shortage T+3
Auction Pay-in/Pay-out T+5
CIRCUIT BREAKERS
Depending upon the Index
movement trading halt takes place.
. Sensex or Nifty whichever is earlier
. May 17, 2004 & May 22, 2006: Both Equity & Derivatives market suspended nation wide.
Formalities Before Trading
Identify Broker/Sub-Broker
Client Registration
Client Agreement
Risk Disclosure document
Allotment of Unique Client Code
Margin Payment
Demat Account
Brokerage charges & Taxes
Maximum brokerage : 2.5% ( Main broker : 1% + Sub-broker : 1.5%)
Securities Transaction Tax (STT)
> Delivery based transactions : .125%
> Non-deliveries (squared off trans) : .025%
> Derivative transactions : .017%
Grievance Redressal Mechanism
Investor Grievance Cell
Exchange Arbitration Mechanism for cost effective & faster redressal
Investor Protection Fund
Trade Guarantee Fund
Recent Developments
Foreign Capital Issuance
Two main sources of raising foreign currency resources:
Issue of foreign currency convertible bonds (Euro issues)
Issue of ordinary shares through depository receipts – ADRs & GDRs
Thank you!!!!
What is Securities Market
Channel of Allocation of Savings to those who have a productive need for them
Facilitates Re-allocation of savings from savers to entrepreneurs
Has two interdependent & inseparable segments- Primary Market & Secondary Market
Money Market & Capital Market
Derivatives
Derivative is a Instrument whose value is derived from the under lying asset.
Types of derivatives:
1. Futures
2. Options
Derivatives contd…
Futures contract is a standardised contract which is an agreement between 2 parties to buy/sell an asset at a predetermined future time and price.
An option gives the holder of the option to do something.
- A call option gives the holder the right but not the obligation to buy an asset by a certain date & price
- A put option gives the holder the right but not the obligation to sell an asset by a certain date & price
Derivatives contd…
Derivative products:
a. Index futures & options – derive their value from an underlying index.
b. Stock futures & options – derive their value from an underlying stock
Applications of Derivatives:
1. Hedging 2. Speculation 3. Arbitrage
The Regulator
Securities and Exchange Board of India (SEBI) – Established under section 3 of Sebi Act 1992.
Role of Sebi:
a. Regulation of Securities market
b. Development of Securities market
c. Protection of investor interest
Players in the Market
Investors
Retail Investors
HNIs
Mutual Funds
FIs/FIIs
Corporates
Types of Investors
Investors – who do good amount of homework about the industry and company they want to invest in & usually with medium to long term horizon
Speculators – who try to make big bucks in a short time
Momentum Traders – Intra-day traders
Players in the Market contd…
Primary Market
Market wherein resources are mobilised by Companies through issue of new securities
Provides channel for sale of new securities
Two types of Issuers who issue securities
Primary Market (Contd…)
Listed Company
Unlisted Company
Debt Instruments
Lead Merchant Bankers
Admission to a Depository
Types of Issues
Ordinary IPOs where price is fixed
Book Building issues where price is being discovered
FPOs (Follow-on Public Issues by listed companies)
Rights issue
Bonus issue
Offer for Sale
Bonus Shares vs. Stock split
Bonus shares are issued to existing shareholders as a result of capitalisation of reserves and it increases the number of outstanding shares & the share capital of the company.
Stock split results in change in face value of the stock. Par value is reduced & number of shares is increased proportionately and there will be no change in share capital.
Secondary Market
Market where securities are traded after being initially offered to the Public in the primary Market and/or listed on the Stock Exchange
Facilitates Sale & Purchase of existing
Securities
Venue for trading of Securities
Trades take place through Stock Exchanges
What is an Index ?
An Index is a number which measures the change in a set of values over a period of time. – A stock index represents the change in value of a set of stocks which constitutes the index.
Indices in India:
a. BSE Sensex (30 stocks)
b. S&P CNX Nifty (50 stocks)
How Trading takes place ?
Types of Order
Order Entry & Unique code
Unique order number
Time stamping of Orders
Trade Number
Posted to Back office of the Broker/Sub-broker
Issue of Contract Note/Sale Purchase Note
Execution of Orders
Orders get executed on finding the right match.
Matching priority:
Best buy order – with highest price
Best sell order – with lowest price
*The unmatched orders are queued in the system by
Price-time priority basis.
Flow of Trading
How trades are Settled ?
Trades are settled on a T+2 basis
Netting of trades
Securities Pay-in
Funds Pay-in
Securities Pay-out
Funds Pay-out
Auction for Shortages
Settlement Calendar
Activity Day
Trading T
Funds Pay-in T+2
Securities Pay-in T+2
Funds Pay-out T+2
Securities Pay-out T+2
Auction for Shortage T+3
Auction Pay-in/Pay-out T+5
CIRCUIT BREAKERS
Depending upon the Index
movement trading halt takes place.
. Sensex or Nifty whichever is earlier
. May 17, 2004 & May 22, 2006: Both Equity & Derivatives market suspended nation wide.
Formalities Before Trading
Identify Broker/Sub-Broker
Client Registration
Client Agreement
Risk Disclosure document
Allotment of Unique Client Code
Margin Payment
Demat Account
Brokerage charges & Taxes
Maximum brokerage : 2.5% ( Main broker : 1% + Sub-broker : 1.5%)
Securities Transaction Tax (STT)
> Delivery based transactions : .125%
> Non-deliveries (squared off trans) : .025%
> Derivative transactions : .017%
Grievance Redressal Mechanism
Investor Grievance Cell
Exchange Arbitration Mechanism for cost effective & faster redressal
Investor Protection Fund
Trade Guarantee Fund
Recent Developments
Foreign Capital Issuance
Two main sources of raising foreign currency resources:
Issue of foreign currency convertible bonds (Euro issues)
Issue of ordinary shares through depository receipts – ADRs & GDRs
Thank you!!!!
