Description
It explains the different equity instruments in India, US, UK equity markets. It also lists the regulations in place for India, US and UK equity market
Arpit Khandelwal Divya Gosain Eshaan Sharma Puja D Shah Raghav Nanda 09P160 Ritambhara Vasudeva Shefali Omer
09P129 09P135 09P137 09P157
09P163 09P170
OUTLINE
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Comparison of equity markets of India, UK and US Market Basics Indian Equity Market
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UK Equity Market
US Equity Market
Class Questions
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Financial Markets - Group 1
MARKET STRUCTURE/ REGULATIONS
Indian Market SEBI – SEBI Act 1992 UK Market FSA and UK Govt. US Market SEC – SEC Act of 1934 Initially , SRO?s & later regulated stringently by SEC •Regulations on net IPO Listing Requirement worth , profitability depends on market – •Promoter lock in period PSM , Specialist and price band specified Listing time depends on whether it?s a fixed price issue or book built issue Listing time clearly specified- with initial plan which takes 36 months and close to 6 months for actual listing process Different regulations for various segments of the market
Listing time pre-defined
Various regulations for intermediaries like mutual funds. Even interest rate futures & CDS highly regulated
Prior to financial crises, not heavily regulated. Instruments created havoc.
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Financial Markets - Group 1
COMPARISON OF INSTRUMENTS
Indian Markets • Ordinary shares • Preference shares UK Markets US Markets • Ordinary shares • Ordinary shares • Preference shares • Preference shares • Venture Capital • Venture Capital Trusts Trusts Real-Estate Investment Trusts Real-Estate Investment Trusts
REMF
Exchange Traded Fund
Exchange Traded Fund
Exchange Traded Fund
DRs
Eurobonds DRs
DRs
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Financial Markets - Group 1
Indian Markets
UK Markets
US Markets
•Long term option •Futures & Options on Securities •Mini dérivatives •Index Futures & Options
•Interest Rate Futures •CDS
•Long term option •Futures & Options on Securities •Mini dérivatives •Index Futures & Options
•Interest Rate Futures •Contract for Difference
•Long term option •Futures & Options on Securities •Mini dérivatives •Index Futures & Options
•Interest Rate Futures •CDO •CDS •MBO •Medium Term Notes •Convertible bonds
•Medium Term Notes •Convertible bonds
• Exchangeable bonds • Medium Term Notes • Convertible bonds
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Financial Markets - Group 1
MARKET TYPES
? Exchanges
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Physical location for trading Trading by members Stock traded on exchange are listed stocks
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OTC Market (For unlisted & listed stocks)
Electronic network of dealers all over the world ? ECNs -Electronic communication networks ? more than one dealer per stock -not obligated to make a market
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Direct Trading
Financial Markets - Group 1
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TRADING MECHANICS
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Market order
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Buy/sell order to be executed at best price
Get lowest price for buy order ? Get highest price for sell order
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Market orders given priority in trading ? No guarantee of execution price
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Price could rise/fall from time order is placed to time it is executed
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Limit order
Buy/sell order where investor specifies price range ? “buy at $50 or less” or “sell at $52 or more ? Specialist records orders in limit order book ? investor sets reservation price but no guarantee that limit order will be executed
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Financial Markets - Group 1
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TRADING MECHANICS (2)
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Stop order
Order lies dormant Turns into market order when certain price (“the stop”) is reached ? “buy if price rises to $60” or “sell if price falls to $58”
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e.g. stop loss order
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Investor does not have to watch market In a volatile market stop could be triggered prematurely , end up trading unnecessarily
? Stop limit order ? Turns into limit order when stop is reached ? “buy if price rises to $60, but only is executed at $65 or less”
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Market if touched order
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turns into market order if certain price is reached “buy if price falls to $55” or “sell if price rises to $62”
Financial Markets - Group 1
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TRADING MECHANICS (3)
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Order Size
Round lots - lots of 100 shares ? Odd lots - less than 100 shares , more difficult to trade ? Block trades
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10,000 shares or $200,000 value
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Short Selling
Sale of borrowed stock ? Profit from belief that stock price is too high will fall soon
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Buying on the margin
Buyer borrows part of purchase price of stock, using stock as collateral (borrow at call money rate ) ? Each market sets initial margin requirement ? Mark to Market , maintenance margin
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Financial Markets - Group 1
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STOCK MARKET INDEX
Different indexes are highly correlated ? They differ due to
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stocks included in the index ? weighting of stocks (equal, price, value )
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Financial Markets - Group 1
INDIAN EQUITY MARKET
100000 91,980
Equity Trading Volumes V/s Corporate Bond Trading
Trading Volume (in Rs. Crores)
75000
50000
25000
1,592 0
Equity Trading Volumes* Corporate Debt Trading Volumes
April 2009 – March 2010 * Cash and Derivatives
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Financial Markets - Group 1
100000 91,980
Equity Trading Volumes V/s Commodity Trading
Trading Volume (in Rs. Crores)
75000
50000
29,011 25000
0 Equity Trading Volumes* Commodity Trading Volumes
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April 2009 – March 2010 * Cash and Derivatives
Financial Markets - Group 1
MUTUAL FUNDS REGULATIONS, 2010
Open for subscription for "15 days" (45 days ) ? Refund of money to be made within "five working days" ( six weeks) ? Issue the applicant whose application has been accepted with a statement of the number of units allocated within "five working days" (thirty days) ? Total expenses of a scheme
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including management fees, not exceeding 0.75 per cent of the daily or weekly average net assets
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Financial Markets - Group 1
MUTUAL FUNDS REGULATIONS – CONTD..
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In the case of an index fund scheme or exchange traded fund, the total expenses of the scheme, including the investment and advisory fees should not exceed one and a half per cent (1.5 per cent) of the weekly average net assets. Intention
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to make mutual fund fees, issue norms more customer-friendly news
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Disclose the manner in which they exercised their votes on specific topics listed by SEBI in this circular
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Changes in the state of incorporation Mergers and other corporate restructuring Management remuneration, appointment Removal of directors Issues which impact shareholders in general and unit holders in particular. Manner in which voting rights are exercised indicate the level of corporate governance in the mutual funds. Bring to fore instances of collusion with the managements in order to manipulate minority shareholder interests and even stock prices
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Intention
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Financial Markets - Group 1
PUBLIC OFFERS AND DERIVATIVES, 2010
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All investors in public offerings (including retail investors) required to bring in 100% of the application money as margin along with the application
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Create a level playing-field and makes demand more realistic, by removing the disparity between retail investors and institutional investors (only required to bring in 10% of the application money under the current regulations)
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Details of qualified institutional placements (QIPs) to be filed with the stock exchanges
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Expected to enhance transparency in the QIP process.
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Financial Markets - Group 1
HISTORICAL REGULATIONS
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Financial Markets - Group 1
CAPITAL ISSUES (CONTROL) ACT, 1947
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Origin during the war in 1943 Objective - Channel resources to support the war effort. Retained with some modifications as a means of controlling the raising of capital by companies and to ensure that national resources were channelled into proper lines. Any firm wishing to issue securities had to obtain approval from the Central Government, which also determined the amount, type and price of the issue. The Act was repealed in 1992 paving way for market determined allocation of resources
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Financial Markets - Group 1
SECURITIES CONTRACTS (REGULATION) ACT, 1956
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Provides for direct and indirect control of virtually all aspects of securities trading and the running of stock exchanges Gives Central Government regulatory jurisdiction over
Stock exchanges through a process of recognition and continued supervision ? Contracts in securities ? Listing of securities on stock exchanges
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For recognition, a stock exchange complies with conditions prescribed by Central Government Organised trading activity in securities takes place on a specified recognised stock exchange Stock exchanges determine their own listing regulations which have to conform to the minimum listing criteria set out in the Rules.
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Financial Markets - Group 1
COMPANIES ACT, 1956
Deals with issue, allotment and transfer of securities and aspects relating to company management ? Regulates underwriting, the use of premium and discounts on issues, rights and bonus issues, payment of interest and dividends, supply of annual report and other information
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Financial Markets - Group 1
SEBI ACT, 1992
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Enacted to empower SEBI with statutory powers for
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Protecting the interests of investors in securities Promoting the development of the securities market Regulating the securities market
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Regulatory jurisdiction over corporates in the issuance of capital and transfer of securities, in addition to all intermediaries and persons associated with securities market Provides for standard of disclosure in public issues of capital, in the fields of company management and projects, information about other listed companies under the same management, and management perception of risk factors Can conduct enquiries, audits and inspection of and adjudicate offences under the Act Has full autonomy and authority to regulate and develop an orderly securities market
Financial Markets - Group 1
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PREVENTION OF MONEY LAUNDERING ACT, 2002
To prevent money-laundering and to provide for confiscation of property from money-laundering ? Act also provides other measures for prevention of Money Laundering ? Act also casts an obligation on the intermediaries, banking companies etc to furnish information, of such prescribed transactions to the Financial Intelligence Unit- India, to appoint a principal officer, to maintain certain records etc
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Financial Markets - Group 1
SECURITIES CONTRACTS (REGULATION) AMENDMENT ACT, 2007
In India, the market for securitised debt remains underdeveloped ? Buyers of securitised financial instruments have few exit options. ? The Securities Contracts Regulation Act, 1956 was amended in 2007 to include securitised instruments under the definition of „securities? and provide for disclosure based regulation for issue of the securitized instruments
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Financial Markets - Group 1
IPO GRADING, 2008
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Compulsory for companies coming out with IPOs of equity shares to get their IPOs graded by at least one credit rating agency registered with SEBI This measure is intended to provide the investor with an informed and objective opinion expressed by a professional rating agency after analyzing factors like business and financial prospects, management quality and corporate governance practices etc The grading would be disclosed in the prospectus, abridged prospectus and in every advertisement for IPOs
Financial Markets - Group 1
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PERMANENT ACCOUNT NUMBER
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PAN as the sole identification number
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An investor friendly measure Need not have different identification numbers for different kinds of transactions/different segments in financial markets
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Financial Markets - Group 1
SOME INSTRUMENTS
Futures & Options on Securities ? Index Futures & Options ? Interest Rate Futures
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Real Estate Mutual Funds- Allow retail investors to invest in real estate. A REMF has investment objective to invest directly or indirectly in real estate property Mini dérivatives Futures & Options contracts Long term option contracts on S&P CNX Nifty
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Financial Markets - Group 1
180
160 140 Amount in Rs. Crores 120 100 80 60 40 20 0 01/Sep/09
Interest Rate Futures Volume – Sept’09 to Mar’10
01/Oct/09
01/Nov/09
01/Dec/09
01/Jan/10
01/Feb/10
01/Mar/10
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Financial Markets - Group 1
INITIATIVES
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Volatility Index
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Volatility Index is a measure, of the amount by which an underlying Index is expected to fluctuate, in the near term, (calculated as annualised volatility, denoted in percentage e.g. 20%) based on the order book of the underlying index options On April 08, 2008, NSE launched the Volatility Index, India VIX, based on the Nifty 50 Index Option prices From best bid-ask prices of Nifty 50 Options contracts, a volatility figure (%) is calculated which indicates the expected market volatility over the next 30 days
Regulatory restrictions in the Indian markets which enabled only retail investors to short sell
Financial Markets - Group 1
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Short Selling
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INITIATIVES
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Direct Market Access
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DMA allows brokers to offer clients direct access to the exchange trading system through the broker?s infrastructure without manual intervention by the broker
DMA facility give clients direct control over orders, helps in faster execution of orders, reduce the risk of errors from manual order entry and lend greater transparency and liquidity DMA also leads to lower impact cost for large orders, better audit trails and better use of hedging and arbitrage opportunities through the use of decision support tools/algorithms for trading
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Financial Markets - Group 1
PRIMARY MARKET
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Financial Markets - Group 1
ELIGIBILITY NORMS
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File a draft prospectus with SEBI, through an eligible merchant banker, at least 30 days prior to the filing of prospectus with the Registrar Of Companies (RoCs) Enter into an agreement with the depository for dematerialisation of its securities and should give an option to subscribers/ shareholders/ investors to receive the security certificates either in physical or in dematerialised form For a listed company the aggregate of the proposed issue and all previous issues made in the same financial year in terms of issue size should not exceed 5 times its pre-issue net worth An unlisted company can make an IPO of equity shares or any other security, which may be converted into equity shares, only if it has a track record of profitability and required net worth and net tangible assets
Financial Markets - Group 1
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PRICE BAND
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Can mention a price band of 20% (cap in the price band should not be more than 20% of the floor price) in the offer documents filed with the Board and actual price can be determined at a later date before filling of the offer document with the ROCs If the Board of Directors has been authorized to determine the offer price within a specified price band such price should be determined by a Resolution to be passed by the Board of Directors In case of a public issue by a listed issuer company, issue price or price band may not be disclosed in the draft prospectus filed with the Board
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In case of a rights issue, issue price or price band may not be disclosed in the draft letter of offer filed with the Board. The issue price may be determined any time before fixation of the record date
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Financial Markets - Group 1
CONTRIBUTION OF PROMOTERS AND LOCK-IN
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The promoters? contribution in case of public issues by unlisted companies should not be less than 20% of the post issue capital In case of public issues by listed companies, promoters should contribute to the extent of 20% of the proposed issue or should ensure post-issue share holding to the extent of 20% of the post-issue capital For a composite issue, the promoters? contribution should either be 20% of the proposed public issue or 20% of the post-issue capital At least one day prior to the opening of the issue the promoters should bring in the full amount of the promoters contribution including premium which should be kept in an escrow account with a Scheduled Commercial The minimum promoters? contribution should be locked in for a period of 3 years in case of all types of issues. In case of public issue of an unlisted company if the promoters? contribution exceeds the required minimum, then the excess is locked in for a period of one year
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Financial Markets - Group 1
Size wise breakup of IPOs in 2009
Large IPOs crowding out Small IPOs
Aggregate value of IPOs with less than Rs. 150 Crs size – Rs 644 Crs
4%
Aggregate value of IPOs with more than Rs. 150 Crs size – Rs. 16,364 Crs
96%
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Financial Markets - Group 1
ORIGIN
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Trading started in 17th Century to finance the two voyages
The Muscovy Company's attempt to reach China via the White Sea north of Russia ? The East India Company voyage to India and the east
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Financial Markets - Group 1
BIG BANG
On 27 October 1986 ? Reforms by the then PM, Margaret Hilda Thatcher ? Abolition of fixed commission charges for brokers ? Electronic, screen based trading was started ? Reason for reforms - the once-dominant financial institutions of the City of London were failing to compete with foreign banking, esp. those in New York ? Consequences –
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London's place as a financial capital decisively strengthened An economic boom, that lasted for two decades
Financial Markets - Group 1
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CORE AREAS
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Equity markets
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Main Market Alternative Investment Market (AIM) Professional Securities Market (PSM) Specialist Fund Market (SFM)
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Trading services
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UK and international equities Exchange traded funds (ETFs) Exchange Traded Commodities (ETCs) Contracts for difference (CFDs) Depositary receipts
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Information Services
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Real time information
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Derivatives
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EDX London, created in 2003
Financial Markets - Group 1
MAIN MARKET
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Financial Markets - Group 1
INSTRUMENTS
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Ordinary shares Preference shares Venture Capital Trusts Eurobonds Convertible bonds Exchangeable bonds Medium Term Notes DRs Investment entities Securitized derivatives Securitized commodities UK Real-Estate Investment Trusts
Financial Markets - Group 1
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LISTING
UKLA is a division of Financial Services Authority (FSA)
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Financial Markets - Group 1
TYPES OF LISTING
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Primary Listing
Meet the Gold Standard of regulations and disclosure ? Must be listed in the home country(for foreign cos.) ? Only ordinary shares can be primary listed ? All benefits – can raise capital at lower cost
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Secondary Listing
Must meet harmonized European standards ? Listing in home country not required
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Passporting in
Uses its prospectus approved by a competent authority within the EEA ? Considered to be secondary listed
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Financial Markets - Group 1
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Group 1 - Equity Markets
Financial Markets - Group 1
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Group 1 - Equity Markets
Financial Markets - Group 1
INDICES
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Only Primary listed companies in FTSE UK Index Series
Financial Markets - Group 1
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ALTERNATIVE INVESTMENT MARKET (AIM)
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Allows smaller companies to float shares with a more flexible regulatory system Launched in 1995 and has raised almost £24 billion for more than 2,200 companies Three Indices
FTSE AIM UK 50 Index ? FTSE AIM 100 Index ? FTSE AIM All-Share Index
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AIM?s regulatory model is based on a comply-or-explain option
Financial Markets - Group 1
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ALTERNATIVE INVESTMENT MARKET (AIM)
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An exchange regulated market segment – not required to comply with European Union directives as implemented in the UK - and other rules applicable to companies listed in the LSE
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Nominated Advisors(Nomads) advises each firm as to which rules should be complied and how Start ups and highly risky companies – investor base is largely of institutional investors and wealthy individuals
Financial Markets - Group 1
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TWO REGIMES
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There are two regimes in the main market
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Retail Regulated Market
Detailed prospectus ? Securities denominated below €50,000
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Wholesale Regulated Market
Less details in the offer document ? Securities denominated at or above €50,000
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Financial Markets - Group 1
PROFESSIONAL SECURITIES MARKET (PSM)
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The Professional Securities Market was launched on 1 July 2005 PSM allows issuer to issue
Any type of debt, security or DR(including those carrying a right to convert or acquire equity) ? In any denomination ? Under the wholesale regime
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All the regulations of the main market apply to PSM
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Financial Markets - Group 1
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Financial Markets - Group 1
SPECIALIST FUND MARKET (SFM)
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Targets institutional, professional and highly knowledgeable investors The Specialist Fund Market has been designed to suit a range of highly specialized funds for e.g.
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Private equity funds Feeder funds Hedge funds, both single and multi-strategy Specialist geographical funds Funds with sophisticated structures or security types Specialist property funds Infrastructure funds Sovereign wealth funds
Financial Markets - Group 1
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US MARKETS
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Financial Markets - Group 1
REGULATION OF U.S. CAPITAL MARKETS
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Securities Act of 1933
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Two basic objectives:
Require that investors receive financial and other significant information concerning securities being offered for public sale ? Prohibit deceit, misrepresentations, and other fraud in the sale of securities
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Sarbanes-Oxley Act of 2002
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Mandated a number of reforms to enhance corporate responsibility, enhance financial disclosures and combat corporate and accounting fraud Created the "Public Company Accounting Oversight Board," also known as the PCAOB, to oversee the activities of the auditing profession
Financial Markets - Group 1
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REGULATION OF U.S. CAPITAL MARKETS
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Securities Exchange Act of 1934
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Congress created the Securities and Exchange Commission Act empowers the SEC with broad authority over all aspects of the securities industry Includes the power to register, regulate, and oversee brokerage firms, transfer agents, and clearing agencies as well as the nation's securities self regulatory organizations (SROs) The various stock exchanges, such as the New York Stock Exchange, and American Stock Exchange are SROs. The Financial Industry Regulatory Authority, which operates the NASDAQ system, is also an SRO Identifies and prohibits certain types of conduct in the markets and provides the Commission with disciplinary powers over regulated entities and persons associated with them Empowers the SEC to require periodic reporting of information by companies with publicly traded securities
Financial Markets - Group 1
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U.S. SECURITIES AND EXCHANGE COMMISSION
Stock market crashed in October 1929 - Passed the Securities Act of 1933 ? This law, together with the Securities Exchange Act of 1934, created the SEC ? SEC was designed to restore investor confidence in the capital markets by more reliable information and clear rules of honest dealing ? The main purposes of these laws can be reduced to two common-sense notions:
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Full disclosure by the listed companies ? Fair dealings of brokers, dealers, and exchanges – put investors' interests first.
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Financial Markets - Group 1
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EQUITY MARKETS
In 2007 Initial Public Offering (IPO) activity in the United States was the highest reported since the dot-com boom in 2000
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Financial Markets - Group 1
SECONDARY MARKETS
American S tock E xchange B os ton S tock E xchange C hicago S tock E xchange Hedge S treet NAS DAQ National S tock E xchange New Y ork B oard of T rade New Y ork S tock E xchange NY S E Arca P hiladelphia S tock E xchange New Y ork C ity B os ton C hicago S an Mateo New Y ork C ity C hicago New Y ork C ity New Y ork C ity New Y ork C ity P hiladelphia 1834 1882 AME X BS E C HX Hedge S treet NAS DAQ NS X NY B O T NY S E NY S E Arca P HL X
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1885 1998 1817 2006 1790
Financial Markets - Group 1
STOCK MARKETS
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The NASDAQ Stock Market
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Originally stood for "National Association of Securities Dealers Automated Quotations," but the exchange's official stance is that the acronym is obsolete It is the largest electronic screen-based equity securities trading market in the United States and fourth largest by market capitalization in the world
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The New York Stock Exchange (NYSE)
It is the world's largest stock exchange by market capitalization of its listed companies at US$12.25 trillion as of May 2010 ? Average daily trading value was approximately US$153 billion in 2008
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Financial Markets - Group 1
MAJOR INDICES
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Financial Markets - Group 1
NASDAQ COMPOSITE
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Nasdaq Composite is a stock market index of the common stocks and similar securities Has over 3,000 components It is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies Both U.S. and non-U.S. companies are listed on the NASDAQ stock market, the index is not exclusively a U.S. index Calculated under a market capitalization weighted methodology
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Financial Markets - Group 1
S&P 500
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S&P 500 is a free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States
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Financial Markets - Group 1
DOW JONES INDUSTRIAL AVERAGE
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Created by Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow 30 large, publicly owned companies based in the United States have traded during a standard trading session in the stock market The average is price-weighted
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Financial Markets - Group 1
NYSE
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Covering all common stock listed on the New York Stock Exchange, including American Depositary Receipts, Real Estate Investment Trusts, tracking stocks, and foreign listings Over 2,000 stocks are covered in the index, of which over 1,600 are from United States corporations and over 360 are foreign listings It uses free-float market cap weighting
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Financial Markets - Group 1
COMPARISON OF THE 4 MAJOR US INDICES
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Financial Markets - Group 1
CLASS QUESTIONS
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Financial Markets - Group 1
1. REAL ESTATE MUTUAL FUNDS IN INDIA
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It is mandatory for an REMF to invest at least 35 per cent of its corpus in completed real estate assets (read flats, row houses, bungalows, shops). These could be either residential or commercial properties, but must be finished and ready-to-use and not under construction. At least 75 per cent of the corpus should be invested in real estate or related securities. These can be debentures of real estate companies and mortgage-backed securities and equity shares of real estate companies listed on the stock exchange
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Ex: HDFC Property Fund, DHFL Venture Capital Fund, Kotak Mahindra Realty Fund, Kshitij Venture Capital Fund. Other major foreign players in the sector include Siachen Capital, New York, Tishman Speyer Properties
Financial Markets - Group 1
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2. WHY NSE IS FREE FLOAT MARKET CAPITALIZATION AND NASDAQ IS NOT?
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Taking on the class discussion, U.S. is a much more mature market with majority of blue chip companies whose major chunk of shares are held by owners and promoters Hence, total market cap method may be better in their case
3. PIT TRADING ON NYSE
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Open outcry is the name of a method of communication between professionals on a stock exchange or futures exchange which involves shouting and the use of hand signals to transfer information primarily about buy and sell orders. The part of the trading floor where this takes place is called a pit.
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Financial Markets - Group 1
4. MUTUAL FUND V/S EXCHANGE TRADED FUND V/S INDEX FUND
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A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests typically in investment securities Exchange-traded fund is often structured as an open-end investment company. ETFs combine characteristics of both mutual funds and closed-end funds. ETFs are traded throughout the day on a stock exchange An index fund or index tracker is a collective investment scheme (usually a mutual fund or exchange-traded fund) that aims to replicate the movements of an index of a specific financial market
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Financial Markets - Group 1
5. REIT V/S REMF
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A REIT is mandated to distribute at least 90 per cent of the gains it makes in a year to those holding its units A REIT can invest only in finished projects and not those that are under construction. Hence, it earns its major chunk from rental income
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Sebi guidelines mandate REMFs to invest at least 35 per cent in completed and ready-to-use properties
Financial Markets - Group 1
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6. WHAT IS THE REGULATORY FRAMEWORK IN US
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SEC is the only regulator of Capital Markets in US
7. MANAGING FEES IN INDEX MUTUAL FUNDS IS 1.5% WHEREAS IN MUTUAL FUND IS 0.75%
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1.5% is for all expenses whereas 0.75% is management fees
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Financial Markets - Group 1
8. HOW ARE INVESTORS INTEREST PROTECTED IN THE LONDON STOCK MARKET
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London market is a much mature market. Guidelines by FSA. LSE only sock exchange. Frames its own rules and regulations
9. IS THE GLASS-STEGALL ACT STILL VALID
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No. Established in 1933 and repealed in 1999
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Financial Markets - Group 1
THANK YOU
doc_110996728.pptx
It explains the different equity instruments in India, US, UK equity markets. It also lists the regulations in place for India, US and UK equity market
Arpit Khandelwal Divya Gosain Eshaan Sharma Puja D Shah Raghav Nanda 09P160 Ritambhara Vasudeva Shefali Omer
09P129 09P135 09P137 09P157
09P163 09P170
OUTLINE
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Comparison of equity markets of India, UK and US Market Basics Indian Equity Market
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UK Equity Market
US Equity Market
Class Questions
2
Financial Markets - Group 1
MARKET STRUCTURE/ REGULATIONS
Indian Market SEBI – SEBI Act 1992 UK Market FSA and UK Govt. US Market SEC – SEC Act of 1934 Initially , SRO?s & later regulated stringently by SEC •Regulations on net IPO Listing Requirement worth , profitability depends on market – •Promoter lock in period PSM , Specialist and price band specified Listing time depends on whether it?s a fixed price issue or book built issue Listing time clearly specified- with initial plan which takes 36 months and close to 6 months for actual listing process Different regulations for various segments of the market
Listing time pre-defined
Various regulations for intermediaries like mutual funds. Even interest rate futures & CDS highly regulated
Prior to financial crises, not heavily regulated. Instruments created havoc.
3
Financial Markets - Group 1
COMPARISON OF INSTRUMENTS
Indian Markets • Ordinary shares • Preference shares UK Markets US Markets • Ordinary shares • Ordinary shares • Preference shares • Preference shares • Venture Capital • Venture Capital Trusts Trusts Real-Estate Investment Trusts Real-Estate Investment Trusts
REMF
Exchange Traded Fund
Exchange Traded Fund
Exchange Traded Fund
DRs
Eurobonds DRs
DRs
4
Financial Markets - Group 1
Indian Markets
UK Markets
US Markets
•Long term option •Futures & Options on Securities •Mini dérivatives •Index Futures & Options
•Interest Rate Futures •CDS
•Long term option •Futures & Options on Securities •Mini dérivatives •Index Futures & Options
•Interest Rate Futures •Contract for Difference
•Long term option •Futures & Options on Securities •Mini dérivatives •Index Futures & Options
•Interest Rate Futures •CDO •CDS •MBO •Medium Term Notes •Convertible bonds
•Medium Term Notes •Convertible bonds
• Exchangeable bonds • Medium Term Notes • Convertible bonds
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Financial Markets - Group 1
MARKET TYPES
? Exchanges
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Physical location for trading Trading by members Stock traded on exchange are listed stocks
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OTC Market (For unlisted & listed stocks)
Electronic network of dealers all over the world ? ECNs -Electronic communication networks ? more than one dealer per stock -not obligated to make a market
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Direct Trading
Financial Markets - Group 1
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TRADING MECHANICS
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Market order
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Buy/sell order to be executed at best price
Get lowest price for buy order ? Get highest price for sell order
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Market orders given priority in trading ? No guarantee of execution price
?
?
Price could rise/fall from time order is placed to time it is executed
?
Limit order
Buy/sell order where investor specifies price range ? “buy at $50 or less” or “sell at $52 or more ? Specialist records orders in limit order book ? investor sets reservation price but no guarantee that limit order will be executed
?
Financial Markets - Group 1
7
TRADING MECHANICS (2)
?
Stop order
Order lies dormant Turns into market order when certain price (“the stop”) is reached ? “buy if price rises to $60” or “sell if price falls to $58”
? ?
?
e.g. stop loss order
? ?
Investor does not have to watch market In a volatile market stop could be triggered prematurely , end up trading unnecessarily
? Stop limit order ? Turns into limit order when stop is reached ? “buy if price rises to $60, but only is executed at $65 or less”
?
Market if touched order
? ?
turns into market order if certain price is reached “buy if price falls to $55” or “sell if price rises to $62”
Financial Markets - Group 1
8
TRADING MECHANICS (3)
?
Order Size
Round lots - lots of 100 shares ? Odd lots - less than 100 shares , more difficult to trade ? Block trades
?
?
10,000 shares or $200,000 value
?
Short Selling
Sale of borrowed stock ? Profit from belief that stock price is too high will fall soon
?
?
Buying on the margin
Buyer borrows part of purchase price of stock, using stock as collateral (borrow at call money rate ) ? Each market sets initial margin requirement ? Mark to Market , maintenance margin
?
Financial Markets - Group 1
9
STOCK MARKET INDEX
Different indexes are highly correlated ? They differ due to
?
stocks included in the index ? weighting of stocks (equal, price, value )
?
10
Financial Markets - Group 1
INDIAN EQUITY MARKET
100000 91,980
Equity Trading Volumes V/s Corporate Bond Trading
Trading Volume (in Rs. Crores)
75000
50000
25000
1,592 0
Equity Trading Volumes* Corporate Debt Trading Volumes
April 2009 – March 2010 * Cash and Derivatives
12
Financial Markets - Group 1
100000 91,980
Equity Trading Volumes V/s Commodity Trading
Trading Volume (in Rs. Crores)
75000
50000
29,011 25000
0 Equity Trading Volumes* Commodity Trading Volumes
13
April 2009 – March 2010 * Cash and Derivatives
Financial Markets - Group 1
MUTUAL FUNDS REGULATIONS, 2010
Open for subscription for "15 days" (45 days ) ? Refund of money to be made within "five working days" ( six weeks) ? Issue the applicant whose application has been accepted with a statement of the number of units allocated within "five working days" (thirty days) ? Total expenses of a scheme
? ?
including management fees, not exceeding 0.75 per cent of the daily or weekly average net assets
14
Financial Markets - Group 1
MUTUAL FUNDS REGULATIONS – CONTD..
?
?
In the case of an index fund scheme or exchange traded fund, the total expenses of the scheme, including the investment and advisory fees should not exceed one and a half per cent (1.5 per cent) of the weekly average net assets. Intention
?
to make mutual fund fees, issue norms more customer-friendly news
?
Disclose the manner in which they exercised their votes on specific topics listed by SEBI in this circular
? ? ? ? ?
Changes in the state of incorporation Mergers and other corporate restructuring Management remuneration, appointment Removal of directors Issues which impact shareholders in general and unit holders in particular. Manner in which voting rights are exercised indicate the level of corporate governance in the mutual funds. Bring to fore instances of collusion with the managements in order to manipulate minority shareholder interests and even stock prices
?
Intention
? ?
15
Financial Markets - Group 1
PUBLIC OFFERS AND DERIVATIVES, 2010
?
All investors in public offerings (including retail investors) required to bring in 100% of the application money as margin along with the application
?
Create a level playing-field and makes demand more realistic, by removing the disparity between retail investors and institutional investors (only required to bring in 10% of the application money under the current regulations)
?
Details of qualified institutional placements (QIPs) to be filed with the stock exchanges
?
Expected to enhance transparency in the QIP process.
16
Financial Markets - Group 1
HISTORICAL REGULATIONS
17
Financial Markets - Group 1
CAPITAL ISSUES (CONTROL) ACT, 1947
? ? ?
Origin during the war in 1943 Objective - Channel resources to support the war effort. Retained with some modifications as a means of controlling the raising of capital by companies and to ensure that national resources were channelled into proper lines. Any firm wishing to issue securities had to obtain approval from the Central Government, which also determined the amount, type and price of the issue. The Act was repealed in 1992 paving way for market determined allocation of resources
?
?
18
Financial Markets - Group 1
SECURITIES CONTRACTS (REGULATION) ACT, 1956
?
?
Provides for direct and indirect control of virtually all aspects of securities trading and the running of stock exchanges Gives Central Government regulatory jurisdiction over
Stock exchanges through a process of recognition and continued supervision ? Contracts in securities ? Listing of securities on stock exchanges
?
? ?
?
For recognition, a stock exchange complies with conditions prescribed by Central Government Organised trading activity in securities takes place on a specified recognised stock exchange Stock exchanges determine their own listing regulations which have to conform to the minimum listing criteria set out in the Rules.
19
Financial Markets - Group 1
COMPANIES ACT, 1956
Deals with issue, allotment and transfer of securities and aspects relating to company management ? Regulates underwriting, the use of premium and discounts on issues, rights and bonus issues, payment of interest and dividends, supply of annual report and other information
?
20
Financial Markets - Group 1
SEBI ACT, 1992
?
Enacted to empower SEBI with statutory powers for
? ? ?
Protecting the interests of investors in securities Promoting the development of the securities market Regulating the securities market
?
Regulatory jurisdiction over corporates in the issuance of capital and transfer of securities, in addition to all intermediaries and persons associated with securities market Provides for standard of disclosure in public issues of capital, in the fields of company management and projects, information about other listed companies under the same management, and management perception of risk factors Can conduct enquiries, audits and inspection of and adjudicate offences under the Act Has full autonomy and authority to regulate and develop an orderly securities market
Financial Markets - Group 1
?
?
?
21
PREVENTION OF MONEY LAUNDERING ACT, 2002
To prevent money-laundering and to provide for confiscation of property from money-laundering ? Act also provides other measures for prevention of Money Laundering ? Act also casts an obligation on the intermediaries, banking companies etc to furnish information, of such prescribed transactions to the Financial Intelligence Unit- India, to appoint a principal officer, to maintain certain records etc
?
22
Financial Markets - Group 1
SECURITIES CONTRACTS (REGULATION) AMENDMENT ACT, 2007
In India, the market for securitised debt remains underdeveloped ? Buyers of securitised financial instruments have few exit options. ? The Securities Contracts Regulation Act, 1956 was amended in 2007 to include securitised instruments under the definition of „securities? and provide for disclosure based regulation for issue of the securitized instruments
?
23
Financial Markets - Group 1
IPO GRADING, 2008
?
Compulsory for companies coming out with IPOs of equity shares to get their IPOs graded by at least one credit rating agency registered with SEBI This measure is intended to provide the investor with an informed and objective opinion expressed by a professional rating agency after analyzing factors like business and financial prospects, management quality and corporate governance practices etc The grading would be disclosed in the prospectus, abridged prospectus and in every advertisement for IPOs
Financial Markets - Group 1
?
?
24
PERMANENT ACCOUNT NUMBER
?
PAN as the sole identification number
?
?
An investor friendly measure Need not have different identification numbers for different kinds of transactions/different segments in financial markets
25
Financial Markets - Group 1
SOME INSTRUMENTS
Futures & Options on Securities ? Index Futures & Options ? Interest Rate Futures
?
?
? ?
Real Estate Mutual Funds- Allow retail investors to invest in real estate. A REMF has investment objective to invest directly or indirectly in real estate property Mini dérivatives Futures & Options contracts Long term option contracts on S&P CNX Nifty
26
Financial Markets - Group 1
180
160 140 Amount in Rs. Crores 120 100 80 60 40 20 0 01/Sep/09
Interest Rate Futures Volume – Sept’09 to Mar’10
01/Oct/09
01/Nov/09
01/Dec/09
01/Jan/10
01/Feb/10
01/Mar/10
27
Financial Markets - Group 1
INITIATIVES
?
Volatility Index
?
? ?
Volatility Index is a measure, of the amount by which an underlying Index is expected to fluctuate, in the near term, (calculated as annualised volatility, denoted in percentage e.g. 20%) based on the order book of the underlying index options On April 08, 2008, NSE launched the Volatility Index, India VIX, based on the Nifty 50 Index Option prices From best bid-ask prices of Nifty 50 Options contracts, a volatility figure (%) is calculated which indicates the expected market volatility over the next 30 days
Regulatory restrictions in the Indian markets which enabled only retail investors to short sell
Financial Markets - Group 1
?
Short Selling
?
28
INITIATIVES
?
Direct Market Access
?
DMA allows brokers to offer clients direct access to the exchange trading system through the broker?s infrastructure without manual intervention by the broker
DMA facility give clients direct control over orders, helps in faster execution of orders, reduce the risk of errors from manual order entry and lend greater transparency and liquidity DMA also leads to lower impact cost for large orders, better audit trails and better use of hedging and arbitrage opportunities through the use of decision support tools/algorithms for trading
29
?
?
Financial Markets - Group 1
PRIMARY MARKET
30
Financial Markets - Group 1
ELIGIBILITY NORMS
?
File a draft prospectus with SEBI, through an eligible merchant banker, at least 30 days prior to the filing of prospectus with the Registrar Of Companies (RoCs) Enter into an agreement with the depository for dematerialisation of its securities and should give an option to subscribers/ shareholders/ investors to receive the security certificates either in physical or in dematerialised form For a listed company the aggregate of the proposed issue and all previous issues made in the same financial year in terms of issue size should not exceed 5 times its pre-issue net worth An unlisted company can make an IPO of equity shares or any other security, which may be converted into equity shares, only if it has a track record of profitability and required net worth and net tangible assets
Financial Markets - Group 1
?
?
?
31
PRICE BAND
?
Can mention a price band of 20% (cap in the price band should not be more than 20% of the floor price) in the offer documents filed with the Board and actual price can be determined at a later date before filling of the offer document with the ROCs If the Board of Directors has been authorized to determine the offer price within a specified price band such price should be determined by a Resolution to be passed by the Board of Directors In case of a public issue by a listed issuer company, issue price or price band may not be disclosed in the draft prospectus filed with the Board
?
?
?
In case of a rights issue, issue price or price band may not be disclosed in the draft letter of offer filed with the Board. The issue price may be determined any time before fixation of the record date
32
Financial Markets - Group 1
CONTRIBUTION OF PROMOTERS AND LOCK-IN
?
The promoters? contribution in case of public issues by unlisted companies should not be less than 20% of the post issue capital In case of public issues by listed companies, promoters should contribute to the extent of 20% of the proposed issue or should ensure post-issue share holding to the extent of 20% of the post-issue capital For a composite issue, the promoters? contribution should either be 20% of the proposed public issue or 20% of the post-issue capital At least one day prior to the opening of the issue the promoters should bring in the full amount of the promoters contribution including premium which should be kept in an escrow account with a Scheduled Commercial The minimum promoters? contribution should be locked in for a period of 3 years in case of all types of issues. In case of public issue of an unlisted company if the promoters? contribution exceeds the required minimum, then the excess is locked in for a period of one year
33
?
?
?
?
Financial Markets - Group 1
Size wise breakup of IPOs in 2009
Large IPOs crowding out Small IPOs
Aggregate value of IPOs with less than Rs. 150 Crs size – Rs 644 Crs
4%
Aggregate value of IPOs with more than Rs. 150 Crs size – Rs. 16,364 Crs
96%
34
Financial Markets - Group 1
ORIGIN
?
Trading started in 17th Century to finance the two voyages
The Muscovy Company's attempt to reach China via the White Sea north of Russia ? The East India Company voyage to India and the east
?
36
Financial Markets - Group 1
BIG BANG
On 27 October 1986 ? Reforms by the then PM, Margaret Hilda Thatcher ? Abolition of fixed commission charges for brokers ? Electronic, screen based trading was started ? Reason for reforms - the once-dominant financial institutions of the City of London were failing to compete with foreign banking, esp. those in New York ? Consequences –
?
?
?
London's place as a financial capital decisively strengthened An economic boom, that lasted for two decades
Financial Markets - Group 1
37
CORE AREAS
?
Equity markets
? ? ? ?
Main Market Alternative Investment Market (AIM) Professional Securities Market (PSM) Specialist Fund Market (SFM)
?
Trading services
? ? ? ? ?
UK and international equities Exchange traded funds (ETFs) Exchange Traded Commodities (ETCs) Contracts for difference (CFDs) Depositary receipts
?
Information Services
?
Real time information
38
?
Derivatives
?
EDX London, created in 2003
Financial Markets - Group 1
MAIN MARKET
39
Financial Markets - Group 1
INSTRUMENTS
? ? ? ? ? ? ? ? ? ?
?
? ?
Ordinary shares Preference shares Venture Capital Trusts Eurobonds Convertible bonds Exchangeable bonds Medium Term Notes DRs Investment entities Securitized derivatives Securitized commodities UK Real-Estate Investment Trusts
Financial Markets - Group 1
40
LISTING
UKLA is a division of Financial Services Authority (FSA)
41
Financial Markets - Group 1
TYPES OF LISTING
?
Primary Listing
Meet the Gold Standard of regulations and disclosure ? Must be listed in the home country(for foreign cos.) ? Only ordinary shares can be primary listed ? All benefits – can raise capital at lower cost
?
?
Secondary Listing
Must meet harmonized European standards ? Listing in home country not required
?
?
Passporting in
Uses its prospectus approved by a competent authority within the EEA ? Considered to be secondary listed
?
Financial Markets - Group 1
42
43
Group 1 - Equity Markets
Financial Markets - Group 1
44
Group 1 - Equity Markets
Financial Markets - Group 1
INDICES
?
Only Primary listed companies in FTSE UK Index Series
Financial Markets - Group 1
45
ALTERNATIVE INVESTMENT MARKET (AIM)
?
Allows smaller companies to float shares with a more flexible regulatory system Launched in 1995 and has raised almost £24 billion for more than 2,200 companies Three Indices
FTSE AIM UK 50 Index ? FTSE AIM 100 Index ? FTSE AIM All-Share Index
?
?
?
?
AIM?s regulatory model is based on a comply-or-explain option
Financial Markets - Group 1
46
ALTERNATIVE INVESTMENT MARKET (AIM)
?
An exchange regulated market segment – not required to comply with European Union directives as implemented in the UK - and other rules applicable to companies listed in the LSE
?
Nominated Advisors(Nomads) advises each firm as to which rules should be complied and how Start ups and highly risky companies – investor base is largely of institutional investors and wealthy individuals
Financial Markets - Group 1
?
47
TWO REGIMES
?
There are two regimes in the main market
?
Retail Regulated Market
Detailed prospectus ? Securities denominated below €50,000
?
?
Wholesale Regulated Market
Less details in the offer document ? Securities denominated at or above €50,000
?
48
Financial Markets - Group 1
PROFESSIONAL SECURITIES MARKET (PSM)
?
The Professional Securities Market was launched on 1 July 2005 PSM allows issuer to issue
Any type of debt, security or DR(including those carrying a right to convert or acquire equity) ? In any denomination ? Under the wholesale regime
?
?
?
All the regulations of the main market apply to PSM
49
Financial Markets - Group 1
50
Financial Markets - Group 1
SPECIALIST FUND MARKET (SFM)
?
Targets institutional, professional and highly knowledgeable investors The Specialist Fund Market has been designed to suit a range of highly specialized funds for e.g.
? ? ? ?
?
?
? ? ?
Private equity funds Feeder funds Hedge funds, both single and multi-strategy Specialist geographical funds Funds with sophisticated structures or security types Specialist property funds Infrastructure funds Sovereign wealth funds
Financial Markets - Group 1
51
US MARKETS
53
Financial Markets - Group 1
REGULATION OF U.S. CAPITAL MARKETS
?
Securities Act of 1933
?
Two basic objectives:
Require that investors receive financial and other significant information concerning securities being offered for public sale ? Prohibit deceit, misrepresentations, and other fraud in the sale of securities
?
?
Sarbanes-Oxley Act of 2002
?
?
Mandated a number of reforms to enhance corporate responsibility, enhance financial disclosures and combat corporate and accounting fraud Created the "Public Company Accounting Oversight Board," also known as the PCAOB, to oversee the activities of the auditing profession
Financial Markets - Group 1
54
REGULATION OF U.S. CAPITAL MARKETS
?
Securities Exchange Act of 1934
? ? ?
?
?
?
Congress created the Securities and Exchange Commission Act empowers the SEC with broad authority over all aspects of the securities industry Includes the power to register, regulate, and oversee brokerage firms, transfer agents, and clearing agencies as well as the nation's securities self regulatory organizations (SROs) The various stock exchanges, such as the New York Stock Exchange, and American Stock Exchange are SROs. The Financial Industry Regulatory Authority, which operates the NASDAQ system, is also an SRO Identifies and prohibits certain types of conduct in the markets and provides the Commission with disciplinary powers over regulated entities and persons associated with them Empowers the SEC to require periodic reporting of information by companies with publicly traded securities
Financial Markets - Group 1
55
U.S. SECURITIES AND EXCHANGE COMMISSION
Stock market crashed in October 1929 - Passed the Securities Act of 1933 ? This law, together with the Securities Exchange Act of 1934, created the SEC ? SEC was designed to restore investor confidence in the capital markets by more reliable information and clear rules of honest dealing ? The main purposes of these laws can be reduced to two common-sense notions:
?
Full disclosure by the listed companies ? Fair dealings of brokers, dealers, and exchanges – put investors' interests first.
?
Financial Markets - Group 1
56
EQUITY MARKETS
In 2007 Initial Public Offering (IPO) activity in the United States was the highest reported since the dot-com boom in 2000
57
Financial Markets - Group 1
SECONDARY MARKETS
American S tock E xchange B os ton S tock E xchange C hicago S tock E xchange Hedge S treet NAS DAQ National S tock E xchange New Y ork B oard of T rade New Y ork S tock E xchange NY S E Arca P hiladelphia S tock E xchange New Y ork C ity B os ton C hicago S an Mateo New Y ork C ity C hicago New Y ork C ity New Y ork C ity New Y ork C ity P hiladelphia 1834 1882 AME X BS E C HX Hedge S treet NAS DAQ NS X NY B O T NY S E NY S E Arca P HL X
58
1885 1998 1817 2006 1790
Financial Markets - Group 1
STOCK MARKETS
?
The NASDAQ Stock Market
?
?
Originally stood for "National Association of Securities Dealers Automated Quotations," but the exchange's official stance is that the acronym is obsolete It is the largest electronic screen-based equity securities trading market in the United States and fourth largest by market capitalization in the world
?
The New York Stock Exchange (NYSE)
It is the world's largest stock exchange by market capitalization of its listed companies at US$12.25 trillion as of May 2010 ? Average daily trading value was approximately US$153 billion in 2008
?
59
Financial Markets - Group 1
MAJOR INDICES
60
Financial Markets - Group 1
NASDAQ COMPOSITE
?
? ?
?
?
Nasdaq Composite is a stock market index of the common stocks and similar securities Has over 3,000 components It is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies Both U.S. and non-U.S. companies are listed on the NASDAQ stock market, the index is not exclusively a U.S. index Calculated under a market capitalization weighted methodology
61
Financial Markets - Group 1
S&P 500
?
S&P 500 is a free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States
62
Financial Markets - Group 1
DOW JONES INDUSTRIAL AVERAGE
?
?
?
Created by Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow 30 large, publicly owned companies based in the United States have traded during a standard trading session in the stock market The average is price-weighted
63
Financial Markets - Group 1
NYSE
?
?
?
Covering all common stock listed on the New York Stock Exchange, including American Depositary Receipts, Real Estate Investment Trusts, tracking stocks, and foreign listings Over 2,000 stocks are covered in the index, of which over 1,600 are from United States corporations and over 360 are foreign listings It uses free-float market cap weighting
64
Financial Markets - Group 1
COMPARISON OF THE 4 MAJOR US INDICES
65
Financial Markets - Group 1
CLASS QUESTIONS
66
Financial Markets - Group 1
1. REAL ESTATE MUTUAL FUNDS IN INDIA
?
It is mandatory for an REMF to invest at least 35 per cent of its corpus in completed real estate assets (read flats, row houses, bungalows, shops). These could be either residential or commercial properties, but must be finished and ready-to-use and not under construction. At least 75 per cent of the corpus should be invested in real estate or related securities. These can be debentures of real estate companies and mortgage-backed securities and equity shares of real estate companies listed on the stock exchange
?
?
Ex: HDFC Property Fund, DHFL Venture Capital Fund, Kotak Mahindra Realty Fund, Kshitij Venture Capital Fund. Other major foreign players in the sector include Siachen Capital, New York, Tishman Speyer Properties
Financial Markets - Group 1
67
2. WHY NSE IS FREE FLOAT MARKET CAPITALIZATION AND NASDAQ IS NOT?
?
?
Taking on the class discussion, U.S. is a much more mature market with majority of blue chip companies whose major chunk of shares are held by owners and promoters Hence, total market cap method may be better in their case
3. PIT TRADING ON NYSE
?
?
Open outcry is the name of a method of communication between professionals on a stock exchange or futures exchange which involves shouting and the use of hand signals to transfer information primarily about buy and sell orders. The part of the trading floor where this takes place is called a pit.
68
Financial Markets - Group 1
4. MUTUAL FUND V/S EXCHANGE TRADED FUND V/S INDEX FUND
?
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests typically in investment securities Exchange-traded fund is often structured as an open-end investment company. ETFs combine characteristics of both mutual funds and closed-end funds. ETFs are traded throughout the day on a stock exchange An index fund or index tracker is a collective investment scheme (usually a mutual fund or exchange-traded fund) that aims to replicate the movements of an index of a specific financial market
69
?
?
Financial Markets - Group 1
5. REIT V/S REMF
?
A REIT is mandated to distribute at least 90 per cent of the gains it makes in a year to those holding its units A REIT can invest only in finished projects and not those that are under construction. Hence, it earns its major chunk from rental income
?
?
Sebi guidelines mandate REMFs to invest at least 35 per cent in completed and ready-to-use properties
Financial Markets - Group 1
70
6. WHAT IS THE REGULATORY FRAMEWORK IN US
?
SEC is the only regulator of Capital Markets in US
7. MANAGING FEES IN INDEX MUTUAL FUNDS IS 1.5% WHEREAS IN MUTUAL FUND IS 0.75%
?
1.5% is for all expenses whereas 0.75% is management fees
71
Financial Markets - Group 1
8. HOW ARE INVESTORS INTEREST PROTECTED IN THE LONDON STOCK MARKET
?
London market is a much mature market. Guidelines by FSA. LSE only sock exchange. Frames its own rules and regulations
9. IS THE GLASS-STEGALL ACT STILL VALID
?
No. Established in 1933 and repealed in 1999
72
Financial Markets - Group 1
THANK YOU
doc_110996728.pptx