Submitted By:

LAXMI SHEWKANI
ROLL NO.37
T.Y.B.M.S.

Securities and Exchange Board of India

Securities Market Regulatory Body in India

SEBI Bhavan, Mumbai Headquarters of SEBI

INTRODUCTION
The Stock Exchange, Mumbai, popularly known as "BSE" was
established in 1875 as "The Native Share and Stock Brokers Association", as
a voluntary non-profit making association. It has evolved over the years into
its present status as the premier Stock Exchange in the country. It may be
noted that the Stock Exchanges is the oldest one in Asia, even older than the
Tokyo Stock Exchange, which was founded in 1878.
The Exchange, while providing an efficient and transparent
market for trading in securities, upholds the interests of the investors and
ensures redressal of their grievances, whether against the companies or its
own member-brokers. It also strives to educate and enlighten the investors
by making available necessary informative inputs and conducting investor
education programmes.
A Governing Board comprising of 9 elected directors (one
third of them retire every year by rotation), two SEBI nominees, a Reserve
Bank of India nominee, six public representatives and an Executive Director
is the apex body, which decides the policies and regulates the affairs of the
Exchange. The Executive Director as the Chief Executive Officer is
responsible for the day-to-day administration of the Exchange
The average daily turnover of the Exchange during the year 2000-2001
(April-March), was Rs.3984.19 crores and average number of daily trades
was 5.69 lakhs. However, the average daily turnover of the Exchange during
the year 2001- 2002 has declined to Rs. 1244.10 crores and number of
average daily trades during the period to 5.17 lakhs. The ban on all deferral
products like BLESS and ALBM in the Indian capital Markets by SEBI
w.e.f. July 2, 2001, abolition of account period settlements, introduction of
Compulsory Rolling Settlements in all scrips traded on the Exchanges w.e.f.

December 31, 2001, etc. have adversely impacted the liquidity and
consequently there is a considerable decline in the daily turnover at the
Exchange.

What is a share?
A share represents the smallest recognized fraction of ownership in a
publicly held business. Each such fraction of ownership is represented in the
form of a certificate known as a share certificate. The breaking up of total
ownership of a business into small fragments, each fragment represented by
a share certificate, enables them to be easily bought and sold.

What is a stock exchange?

The institution where this buying and selling of shares essentially
takes place is the Stock Exchange. In the absence of stock exchanges, ie.
Institutions where small chunks of businesses could be traded, there would
be no modern business in the form of publicly held companies. Today, owing
to the stock exchanges, one can be part owners of one company today and
another company tomorrow; one can be part owners in several companies at
the same time; one can be part owner in a company hundreds or thousands
of miles away; one can be all of these things. Thus by enabling the
convertibility of ownership in the product market into financial assets,
namely shares, stock exchanges bring together buyers and sellers (or their
representatives) of fractional ownerships of companies. And for that very
reason, activities relating to stock exchanges are also appropriately enough,
known as stock market or security market. Also a stock exchange is
distinguished by a specific locality and characteristics of its own, mostly a
stock exchange is also distinguished by a physical location and
characteristics of its own. In fact, according to H.T.Parekh, the earliest
location of the Bombay Stock Exchange, which for a long period was known
as the native share and stock brokers association, was probably under a
tree around 1870!

The stock exchanges are the exclusive centers for the

trading of securities. The regulatory framework encourages this by virtually
banning trading of securities outside exchanges. Until recently, the area of
operation/ jurisdiction of exchange was specified at the time of its
recognition, which in effect precluded competition among the exchanges.
These are called regional exchanges. In order to provide an opportunity to
investors to invest/ trade in the securities of local companies, it is mandatory
foe the companies, wishing to list their securities, to list on the regional
stock exchange nearest to their registered office.

Characteristics of Stock Exchanges in India

Traditionally, a stock exchange has been an association of individual
members called
member brokers (or simply members or brokers), formed for the express
purpose of regulating and facilitating buying and selling of securities by the
public and institution at large.
A stock exchange in India operates with due recognition from the
government under the
Securities and Contracts (Regulations) Act, 1956. the member brokers are
essentially the middlemen who carry out the desired transactions in
securities on behalf of the public(for a commission) or on their own behalf.
New membership to a Stock Exchange is through election by the governing
board of that stock exchange.
At present, there are 23 stock exchanges in India, the largest among them
being the
Bombay Stock Exchange. BSE alone accounts for over 80% of the total
volume of transactions in shares.
Typically, a stock exchange is governed by a board consisting of directors
largely elected
by the member brokers, and a few nominated by the government.
Government nominee include representatives of the ministry of finance, as

well as some public representatives, who are expected to safeguard the

public interest in the functioning of the exchanges. A president, who is an
elected member, usually nominated by the government from among the
elected members, heads the board. The executive director, who is usually
appointed by the by the stock exchange with the government approval is the
operational chief of the stock exchange. His duty is to ensure that the day to
day operations the Stock Exchange are carried out in accordance with the
various rules and regulations governing its functioning.
The overall development and regulation of the securities market has been
entrusted to the Securities and Exchange Board of India (SEBI) by an act of
parliament in 1992. All companies wishing to raise capital from the
public are required to list their securities on at least one stock exchange.
Thus, all ordinary shares, preference shares and debentures of the publicly
held companies are listed in the stock exchange.

Exchange management
Made some attempts in this direction, but this did not
materially alter the situation. In view of the less than satisfactory quality, of
administration of broker-managed exchanges, the finance minister in march
2001 proposed demutualisation of exchanges by which ownership,
management and trading membership would be segregated from each other.
The regulators are working towards implementing this. Of the 23 stock
exchanges in India, two stock exchanges viz., OTCEI and NSE are already
demutualised. Board of directors, which do not include trading members,
manages these. Theses are purest form of demutualised exchanges, where
ownership, management and trading are in the hands of three sets of people.
The concept of demutualisation completely eliminates any conflict of
interest and helps the exchange to pursue market efficiency and investors
interest aggressively.

Role of SEBI
The SEBI, that is, the Securities and the Exchange Board of
India, is the national regulatory body for the securities market, set up under

the securities and Exchange Board of India act, 1992, to protect the interest
of investors in securities and to promote the development of, and to regulate
the securities market and for matters connected therewith and incidental
too.
SEBI has its head office in Mumbai and it has now set up regional
offices in the metropolitan cities of Kolkata, Delhi, and Chennai. The Board
of SEBI comprises a Chairman, two members from the central government
representing the ministries of finance and law, one member from the Reserve
Bank of India and two other members appointed by the central government.
As per the SEBI act, 1992, the power and functions of the Board
encompass the regulation of Stock Exchanges and other securities markets;
registration and regulation of the working stock brokers, sub-brokers,
bankers to an issue (a public offer of capital), trustees of trust deeds,
registrars to an issues, merchant bankers, under writers, portfolio managers,
investment advisors and such other intermediaries who may be associated
with the stock market in any way; registration and regulations of mutual
funds; promotion and regulation of self- regulatory organizations;
prohibiting Fraudulent and unfair trade practices and insider trading in
securities markets; regulating substantial acquisition of shares and takeover
of companies; calling for information from,undertking inspection,
conducting inquiries and audits of stock exchanges, intermediaries and selfregulatory organizations of the securities market; performing such functions
and exercising such powers as contained in the provisions of the Capital
Issues (Control) Act,1947 and the Securities Contracts (Regulation) Act,
1956, levying various fees and other charges, conducting necessary research
for above purposes and performing such other functions as may be
prescribes from time to time.
SEBI as the watchdog of the industry has an important and crucial role in the
market in ensuring that the market participants perform their duties in
accordance with the regulatory norms. The Stock Exchange as a responsible
Self Regulatory Organization (SRO) function to regulate the market and its
prices as per the prevalent regulations. SEBI and the Exchange play
complimentary roles to enhance the investor protection and the overall
quality of the market.

Membership
The trading platform of a stock exchange is accessible only
to brokers. The broker enters into trades in exchanges either on his own
account or on behalf of clients. The clients may place their order with them
directly or a sub-broker indirectly. A broker is admitted to the membership of
an exchange in terms of the provisions of the SCRA, the SEBI act 1992, the
rules, circulars, notifications, guidelines, etc. prescribed there under and the
byelaws, rules and regulations of the concerned exchange. No stockbroker or
sub-broker is allowed to buy, sell or deal in securities, unless he or she holds
a certificate of registration granted by SEBI. A broker/sub-broker compiles
with the code of conduct prescribed by SEBI.

The stock exchanges are free to stipulate stricter requirements

for its members than those stipulated by SEBI. The minimum standards
stipulated by NSE for membership are in excess of the minimum norms laid
down by SEBI. The standards for admission of members laid down by NSE
stress on factors, such as, corporate structure, capital adequacy, track record,
education, experience, etc. and reflect the conscious endeavors to ensure
quality broking services.

Listing
Listing means formal admission of a security to the trading
platform of a stock exchange, invariably evidenced by a listing agreement
between the issuer of the security and the stock exchange. ; Listing of
securities on Indian Stock Exchanges is essentially governed by the
provisions in the companies act, 1956, SCRA, SCRR, rules, bye-laws and
regulations of the concerned stock exchange, the listing agreement entered
into by the issuer and the stock exchange and the circulars/ guidelines issued
by central government and SEBI.
Index services

Stock index uses a set of stocks that are representative of the

whole market, or a specified sector to measure the change in overall
behavior of the markets or sector over a period of time. India Index Services
& Products Limited (IISL), promoted by NSE and CRISIL, is the only
specialized organization in the country to provide stock index services.
Trading Mechanism
All stock exchanges in India follow screen-based
trading system. NSE was the first stock exchange in the country to provide
nation-wide order-driven, screen-based trading system. NSE model was
gradually emulated by all other stock exchanges in the country. The trading
system at NSE known as the National Exchange for Automated Trading
(NEAT) system is an anonymous order-driven system and operates on a
strict price/time priority. It enables members from across the countries to
trade simultaneously with enormous ease and efficiency. NEAT has lent
considerable depth in the market by enabling large number of members all
over the country to trade simultaneously and consequently narrowed the
spreads significantly. A single consolidated order book for each stock
displays, on a real time basis, buy and sell orders originating from all over
the country. The bookstores only limit orders, which are orders to buy or sell
shares at a stated quantity and stated price. The limit order is executed only
if the price quantity conditions match. Thus, the NEAT system provides an
open electronic consolidated limit order book (OECLOB). The trading
system provides tremendous flexibility to the users in terms of kinds of
orders that can be placed on the system. Several time-related (Good-TillCancelled, Good-TillDay, Immediate-or-Cancel), price related (buy/sell limit
and stop-loss orders) or volume related (All-or-None, Minimum Fill, etc.)
conditions van be easily built into an order. Orders are sorted and match
automatically by the computer keeping the system transparent, objective and
fair. The trading system also provides complete market information on-line,
which is updated on real time basis. The trading platform of the CM segment
of NSE is accessed not only from the computer terminals from the premises
of brokers spread over 420 cities, but also from the personal computers in
the homes of investors through the internet and from the hand-held devices

through WAP. The trading platform of BSE is also accessible from 400
cities.
Internet trading is available on NSE and BSE, as of now. SEBI has approved
the use of Internet as an order routing system, for communicating clients
orders to the exchanges through brokers. SEBI- registered brokers can
introduce internet-based trading after obtaining permission from the
respective Stock Exchanges. SEBI has stipulated the minimum conditions to
be fulfilled by trading members to start internet-based trading and services.

BSE /NSE

Mutual Funds
Listed Schemes
Open Ended
Close Ended
Scheme Code

Commodity
Mutual Funds News
Latest NAV's
more...

NCDEX
Agro Products
MCX
Metals
NMCEIL
more...
Bullion
NSE was the first exchange in the country to provide web-based access to
investors to trade directly on the exchange. It launched Internet trading in
February 2000. It was followed by the launch of Internet trading by BSE in

March 2001. The orders originating from the personal computers (PCs) of
investors are routed through the Internet tot eh trading terminals of the
designated brokers with whom they have relations and further to the
exchange of trade execution. Soon after these orders get matched and result
into trades, the investors get confirmation about them on their PCs through
the same Internet routes.
SEBI approved trading through wireless medium or WAP platform. NSE is
the only exchange to provide access to its order book through the hand held
devices, which use WAP technology. This serves primarily retail investors
who are mobile and want to trade from any place when the market prices for
st0ocks of their choice are attractive.

CAPITAL LISTED AND MARKET CAPITALIZATION.

The Stock Exchange, Bombay (BSE) is the premier Stock Exchange in
India. The BSE accounted for 46 per cent of listed companies on an all India
basis as on 31st March 1994. It ranked first in terms of the number of listed
companies and stock issues listed. The capital listed in the BSE as on 31st
March 1994 accounted for 50% of the overall capital listed on all the stock
exchanges. Its share of the market capitalization was around 74% as on the
same date. The paidup capital of equity, debentures/bonds and preference
were 73%, 31%, 44% respectively of the overall capital listed on all the
Stock Exchanges as on the same date.
On the BSE, the Steel Authority of India had the largest market
capitalization of Rs.19, 908 crores as on the 31st March, 1994 followed by
the State Bank of India with the market capitalization of Rs.16, 702 crores
and Mahanagar Telephone Nigam Limited with the market capitalization of
Rs.11, 700 crores.

BSE SENSEX

The BSE SENSEX, short form of Sensitive Index, first compiled in 1986 is
a market Capitalization-Weighted index of 30 component stocks
representing a sample of large, wellestablished and financially sound
companies. The index is widely reported in both, the domestic international,

print electronic media and is widely used to measure the used to measure the
performance of the Indian stock markets.
The BSE SENSEX is the benchmark index of the Indian capital market and
one, which has the longest social memory. In fact the SENSEX is considered
to be the pulse of the Indian stock markets. It is the oldest index in India and
has acquired a unique place in collective consciousness of the investors.
Further, as the oldest index of the Indian Stock Market, it provides time
series data over a fairly long period of time. Small wonder that the SENSEX
has over the years has become one of the most prominent brands of the
Country.

Objectives of SENSEX
The BSE SENSEX is the benchmark index with wide acceptance among
individual investors, institutional investors, foreign investors, foreign
investors and fund managers. The objectives of the index are:
To measure market movements Given its long history and its wide
acceptance, no other index matches the BSE SENESX in the reflecting
market movements and sentiments. SENSEXis widely used to describe the
mood in the Indian stock markets.
Benchmark for funds performance The inclusion of blue chip companies
and the wide and balanced industry Representation in the SENSEX makes it
the ideal benchmark for fund managers to compare the performance of their
funds.
For index based derivatives products Institutional investors, money
managers and small investors, all refer to the BSE
SENSEX for their specific purposes. The BSE SENSEXis in effect the
proxy for the Indian stock markets. Since SENSEXcomprises of the leading
companies in allthe significant sectors in the economy, we believe that it will
be the most liquid contract in the Indian market and will garner a
predominant market share.

Companies represented in the SENSEX

Company name (As on 15.06.01) Hindustan lever Reliance limited Infosys
technologies Reliance petroleum ITC State bank of India MTNL Satyam
computers Zee telefilms Ranbaxy labs ICICI Larsen & toubro Cipla
Hindalco HPCL TISCO Nestle Sector FMCG Chemicals and petrochemicals
Information technology Oil and gas FMCG Finance Telecom Information
technology Media Healthcare Finance Diversified Healthcare Metals and
mining Metal and mining Metal and mining FMCG

Trading System
Till Now, buyers and sellers used to negotiate face-to-face
on the trading floor over a security until agreement was reached and a deal
was struck in the open outcry system of trading, that used to take place in the
trading ring. The transaction details of the account period (called settlement
period) were submitted for settlement by members after each trading session.

The computerized settlement system initiated the netting

and clearing process by providing on a daily basis statements for each
member, showing matched and unmatched transactions. Settlement
processing involves computation of each member's net position in each
security, after taking into account all transactions for the member during the
settlement period, which is 10 working days for group 'A' securities and 5
working days for group 'B' securities.

Trading is done by members and their authorized assistants

from their Trader Work Stations (TWS) in their offices, through the BSE OnLine Trading (BOLT) system. BOLT system has replaced the open outcry
system of trading. BOLT system accepts two-way quotations from jobbers,
market and limit orders from client-brokers and matches them according to
the matching logic specified in the Business Requirement Specifications
(BRS) document for this system.

TRADING
The Exchange, which had an open outcry trading
system, had switched over to a fully automated computerized mode of
trading known as BOLT (BSE on Line Trading) System. Through the BOLT
system the members now enter orders from Trader Work Stations (TWSs)
installed in their offices instead of assembling in the trading ring. This
system, which was initially both order and quote driven, was commissioned
on March 14, 1995. However, the facility of placing of quotes has been
removed w.e.f., August 13, 2001 in view of lack of market interest and to
improve system-matching efficiency. The system, which is now only order
driven, facilitates more efficient processing, automatic order matching and
faster execution of orders in a transparent manner.

Earlier, the members of the Exchange were permitted to

open trading terminals only in Mumbai. However, in October 1996, the
Exchange obtained permission from SEBI for expansion of its BOLT
network to locations outside Mumbai. In terms of the permission granted by
SEBI and certain modifications announced later, the members of the
Exchange are now free to install their trading terminals at any place in the
country. Shri P. Chidambaram inaugurated the expansion of BOLT network
the then Finance Minister, Government of India on August 31, 1997.

In order to expand the reach of BOLT network to centers

outside Mumbai and support the smaller Regional Stock Exchanges, the
Exchange has, as on March 31, 2002, admitted subsidiary companies formed
by 13 Regional Stock Exchanges as its members. The members of these
Regional Stock Exchanges work as sub-brokers of the member-brokers of
the Exchange.

The objectives of granting membership to the subsidiary

companies formed by the Regional Stock Exchanges were to reach out to
investors in these centers via the members of these Regional Exchanges and
provide the investors in these areas access to the trading facilities in all
scrips listed on the Exchange.

Trading on the BOLT System

Trading on the BOLT System is conducted from Monday to
Friday between 9:55 a.m. and 3:30 p.m. The scrips traded on the Exchange
have been classified into 'A', 'B1', 'B2', 'F' and 'Z' groups. The number of
scrips listed on the Exchange under 'A', 'B1 ', 'B2' and 'Z' groups, which
represent the equity segment, as on March 31, 2002 was 173, 560,1930 and
3044 respectively. The 'F' group represents the debt market (fixed income
securities) segment wherein 748 securities were listed as on March 31, 2002.
The 'Z' group was introduced by the Exchange in July 1999 and covers the
companies which have failed to comply with listing requirements and/or
failed to resolve investor complaints or have not made the required
arrangements with both the Depositories, viz., Central Depository Services
(I) Ltd. (CDSL) and National Security Depository Ltd. (NSDL) for
dematerialization of their securities by the specified date, i.e., September 30,
2001. Companies in "Z" group numbered 3044 as on March 31, 2002. Of
these, 1429 companies were in "Z" group for not complying with the
provisions of the Listing Agreement and/or pending investor complaints and
the balance 1615 companies were on account of not making arrangements
for dematerialization of their securities with both the Depositories. 1615
companies have been put in "Z" group as a temporary measure till they make
arrangements for dematerialization of their securities. Once they finalize the
arrangements for dematerialization of their securities, trading and settlement
in their scrips would be shifted to their respective erstwhile groups.
The Exchange has also the facility to trade in "C" group which
covers the odd lot securities in 'A', 'B1', 'B2' and 'Z' groups and Rights
renunciations in all the groups of scrips in the equity segment. The
Exchange, thus, provides a facility to market participants of on-line trading
in odd lots of securities and Rights renunciations. The facility of trading in
odd lots of securities not only offers an exit route to investors to dispose of
their odd lots of securities but also provides them an opportunity to
consolidate their securities into market lots.

The 'C' group can also be used by investors for selling upto 500
shares in physical form in respect of scrips of companies where trades are to
be compulsorily settled by all investors in demat mode. This scheme of
selling physical shares in compulsory demat scrips is called as Exit Route
Scheme.
Permitted Securities The Exchange has since decided to permit trading in
the securities of the companies listed on other Stock Exchanges under "
Permitted Securities" category which meet the relevant norms specified by
the Exchange. Accordingly, to begin with the Exchange has permitted
trading in scrips of five companies listed on other Stock Exchanges w.e.f.
April 22, 2002/ Computation of closing price of scrips in the Cash Segment:
The closing prices of scrips are computed on the basis of weighted average
price of all trades in the last 15 minutes of the continuous trading session.
However, if there is no trade during the last 15 minutes, then the last traded
price in the continuous trading session is taken as the official closing price.
A) Compulsory Rolling Segment (CRS):
Compulsory Rolling Settlement (CRS) Segment:
With a view to introduce the best international
trading practices and to achieve higher settlement efficiency, as mandated by
SEBI, trades in all the equity shares listed on the Exchange in CRS Segment
were to be settled on T+5 basis w.e.f. December 31, 2001. SEBI has further
directed the Stock Exchanges that trades in all scrips w.e..f. April 1, 2002
should be settled on T+3 basis. Accordingly, all transactions in all groups of
securities in the equity segment and fixed income securities listed on the
Exchange are settled on T+3 basis w.e.f. April 1, 2002
Under a rolling settlement environment, the trades done on
a particular day are settled after a given number of business days rather than
settling all trades done during a period at the end of an 'account period'. A
T+3 settlement cycle means that the final settlement of transactions done on
T or trade day by exchange of monies and securities, occurs on fifth business
day after the trade day.
The transactions in securities of companies which have made arrangements
for dematerialization of their securities by the stipulated date are settled only

in Demat mode on T+3 on net basis, i.e., buy and sale positions in the same
scrip are netted and the net quantity is to be settled. However, transactions in
securities of companies, which have failed to make arrangements for
dematerialization of their securities or /are in "Z" group, are settled only on
trade to trade basis on T+3 i.e., the transactions are settled on a gross basis
and the facility of netting of buy and sale transactions in a scrip is not
available. For example, if one buys and sells 100 shares of a company on the
same day which is on trade to trade basis, the two positions will not be
netted and he will have to first deliver 100 shares at the time of pay-in of
securities and then receive 100 shares at the time of pay-out of securities on
the same day. Thus, if one fails to deliver the securities sold at the time of
pay-in, it will be treated as a shortage and the position will be auctioned/
closed-out.
In other words, the transactions in scrips of companies which are in
compulsory demat are settled in demat mode on T+3 on netting basis and the
transactions in scrips of companies, which have not made arrangements for
dematerialization of their securities by the stipulated date or are in "Z" group
for other reasons, are settled on trade to trade basis on T+3 either in demat
mode or in physical mode.
The settlement of transactions in 'F' group securities representing Fixed
Income Securities is also on Rolling Settlement Cycle of T+3 basis.
The following tables summarizes the steps in the trading and settlement
cycle for scrips under CRS:

DAY ACTIVITY
Trading on BOLT and daily downloading of statements showing details of
transactions and margins at the end of each trading day.
6A/7A entry by the member-brokers.
T+1
Confirmation of 6A/7A data by the Custodians. Downloading of securities
and funds obligation statement by members.

T+3 Pay-in of funds and securities by 11:00 a.m. and pay-out of funds and
securities by 2:00 p.m
T+4 Auction on BOLT.
T+5 Auction pay-in and pay-out.
* 6A/7A : A mechanism whereby the obligation of settling the transactions
done by a memberbroker on behalf of a client is passed on to a custodian
based on his confirmation.
Thus, the pay-in and pay-out of funds and securities takes places on
the 3rd working day of the execution of the trade.
The Information Systems Department of the Exchange
generates the following statements, which can be downloaded by the
members in their back offices on a daily basis.
Statements giving details of the daily transactions entered into by the
members.
Statements giving details of margins payable by the members in respect of
the trades executed by them.
The settlement of the trades (money and securities) done by a member on his
own account or on behalf of his individual, corporate or institutional clients
may be either through the member himself or through a SEBI registered
Custodian appointed by him or the respective client. In case the
delivery/payment is to be given or taken by a registered Custodian, he has to
confirm the trade done by a member on the BOLT System through 6A-7A
entry. For this purpose, the Custodians have been given connectivity to
BOLT System and have also been admitted as members of the Clearing
House. In case a transaction is not confirmed by a registered Custodian, the
liability for pay-in of funds or securities in respect of the same devolves on
the concerned member.
The introduction of settlement on T+3 basis has resulted in reduction in
settlement risk, provided early receipt of securities and monies to buyers and
sellers respectively and brought Indian Capital Markets at the international
standard of settlements

Settlement
Pay-in and Pay-out for 'A', 'B1', 'B2', 'C', "F" & 'Z' group of securities
As discussed earlier, the trades done by members in all the
securities in CRS are now settled by payment of money and delivery of
securities on T+3 basis. All deliveries of securities are required to be routed
through the Clearing House, except for certain off-market transactions
which, although are required to be reported to the Exchange, may be settled
directly between the members concerned.
The Clearing House is an independent company promoted
jointly by Bank of India and Stock Exchange, Mumbai for handling the
clearing and settlement operations of funds and securities on behalf of the
Exchange. For this purpose, the Clearing & Settlement Dept. of the
Exchange liaises with the Clearing House on a day to day basis.
The Information Systems Department (ISD) of the Exchange
generates Delivery and Receive Orders for transactions done by the
members in A, B1, B2 and F group scrips after netting purchase and sale
transactions in each scrip whereas Delivery and Receive Orders for "C" and
"Z" group scrips are generated on trade to trade basis, i.e., without netting of
purchase and sale transactions in a scrip.
The Delivery Orders provide information like scrip, quantity
and the name of the receiving member to whom the securities are to be
delivered through the Clearing House. The Money Statement provides scrip
wise/item wise details of payments/receipts for the settlement. The
Delivery/Receive Orders and money statements can be downloaded by the
members in their back offices
The bank accounts of members maintained with the eight
clearing banks, viz., Bank of India, HDFC Bank Ltd., Global Trust Bank
Ltd., Standard Chartered Bank, Centurion Bank Ltd., UTI Bank Ltd., ICICI
Bank Ltd., and Indusind Bank Ltd., are directly debited through

computerized posting for their settlement and margin obligations and

credited with receivables on accounts of pay-out dues and refund of margins.
The securities, as per the Delivery Orders issued by the
Exchange, are required to be delivered by the members in the Clearing
House on the day designated for securities pay-in, i.e., on T+3 day. In case
of the physical securities, the members have to deliver the securities in
special closed pouches (supplied by the Exchange) along with the relevant
details (distinctive numbers, scrip code, quantity, and receiving member) on
a floppy. The data submitted by the members on floppies is matched against
the master file data on the Clearing House computer systems. If there are no
discrepancies, then a scroll number is generated by the Clearing House and a
scroll slip is issued. The members can then submit the securities at the
receiving counter in the Clearing House.
Auto D.O. facility:
Instead of issuing Delivery Out instructions for their
delivery obligations in a settlement /auction, a facility has been made
available to the members of automatically generating Delivery-Out (D.O.)
instructions on their behalf from their CM Pool A/cs by the Clearing House
w.e.f., August 10, 2000. This Auto D.O. facility is available for CRS
(Normal & Auction) and for trade-to-trade settlements. This facility is,
however, not available for delivery of non-pari passu shares and shares
having multiple ISINs. The members wishing to avail of this facility have to
submit an authority letter to the Clearing House. This Auto D.O facility is
currently available only for Clearing Member (CM) Pool accounts/Principal
Accounts maintained by the members with National Securities Depository
Ltd. (NSDL) and Central Depositories Services Ltd. (CDSL)

SHORTAGES AND OBJECTIONS

Shortages & consequent actions The members download
Delivery/Receive Orders based on their netted positions for transactions
entered into by them during a settlement in 'A', 'B1', 'B2', and 'F' group
scrips and on trade to trade basis, i.e., without netting buy and sell
transactions in scrips in "C" & 'Z' groups and scrips in B1 and B2 groups
which have been put on trade to trade basis as a surveillance measure.
The seller members have to deliver the shares in the Clearing House as per
the Delivery Orders downloaded. If a seller member is unable to deliver the
shares on the Pay-in day for any reason, his bank account is debited at the
standard rate (which is equal to the closing price of the scrip on the day of
trading) fixed by the Exchange for the quantity of shares short delivered.
The Clearing House arrives at the shortages in delivery of various scrips by
members on the basis of their delivery obligations and actual delivery.
The members can download the statement of shortages on T+3 in Rolling
Settlements. After downloading the shortage details, the members are
expected to verify the same and report discrepancy , if any, to the Clearing
House by 1:00 p.m. If no discrepancy is reported within the stipulated time,
the Clearing House assumes that the shortage of a member is in order and
proceeds to auction the same. However, in 'C' group, i.e., Odd Lot segment
the members are themselves required to report the shortages to the Clearing
House.
The Exchange issues an Auction Tender Notice to the
members informing them about the names of the scrips, quantity slated for
auction and the date and time of the auction session on the BOLT. The
auction for the undelivered quantities is conducted on T+4 for all the scrips
under compulsory Rolling Settlements. The auction offers received in batch
mode are electronically matched with the auction quantities so as to award
the 'best price'. The members who participate in the auction session can
download the Delivery Orders on the same day, if their offers are accepted.
The members are required to deliver the shares in the Clearing House on the
auction Pay-in day, i.e, T+5. Pay-Out of auction shares and funds is also
done on the same day, i.e., T+5. The various auction sessions relating to
shortages, and bad deliveries are now conducted during normal trading hours
on BOLT. Thus, it is possible to schedule multiple auction sessions on a
single trading day.

DOES AND DONTS :-

Does SEBI approve the contents of the issue?

It is to be distinctly understood that submission of
offer document to SEBI should not in any way be deemed or
construed that the same has been cleared or approved by SEBI. The
Lead manager certifies that the disclosures made in the offer
document are generally adequate and are in conformity with SEBI
guidelines for disclosures and investor protection in force for the time
being. This requirement is to facilitate investors to take an informed
decision for making investment in the proposed issue.

Does SEBI tag make my money safe?

The investors should make an informed decision
purely by themselves based on the contents disclosed in the offer
documents. SEBI does not associate itself with any issue/issuer and
should in no way be construed as a guarantee for the funds that the
investor proposes to invest through the issue. However, the investors
are generally advised to study all the material facts pertaining to the
issue including the risk factors before considering any investment.
They are strongly warned against any 'tips' or news through unofficial
means
How does SEBI ensure compliance with DIP?
The Merchant Banker are the specialized intermediaries who are
required to do due diligence and ensure that all the requirements of
DIP are complied with while submitting the draft offer document to
SEBI. Any non compliance on their part, attract penal action from
SEBI, in terms of SEBI (Merchant Bankers) Regulations. The draft

offer document filed by Merchant Banker is also placed on the

website for public comments. Officials of SEBI at various levels
examine the compliance with DIP guidelines and ensure that all
necessary material information is disclosed in the draft offer
documents.
With the presence of the Central Listing Authority (CLA), what would
be the role of SEBI in the processing of Offer docume nts for an
issue?
The Central Listing Authority's (CLA) functions have been detailed
under Regulation 8 of SEBI (Central Listing Authority) Regulations,
2003 (CLA Regulations) issued on August 21, 2003 and amended up
to October 14, 2003.

In brief, it covers processing applications for letter

precedent to listing from applicants; to make recommendations to the
Board on issues pertaining to the protection of the interest of the
investors in securities and development and regulation of the
securities market, including the listing agreements, listing conditions
and disclosures to be made in offer documents; and; to undertake
any other functions as may be delegated to it by the Board from time
to time.
SEBI as the regulator of the securities market examines all the
policy matters pertaining to issues and will continue to do so even
during the existence of the CLA.
Since the CLA is not yet operational, the reply to this question would
be updated thereafter.
Who decides the price of an issue?
Indian primary market ushered in an era of free pricing in 1992.
Following this, the guidelines have provided that the issuer in
consultation with Merchant Banker shall decide the price. There is no
price formula stipulated by SEBI. SEBI does not play any role in price
fixation. The company and merchant banker are however required to
give full disclosures of the parameters which they had considered
while deciding the issue price. There are two types of issues one

where company and LM fix a price (called fixed price) and other,
where the company and LM stipulate a floor price or a price band and
leave it to market forces to determine the final price (price discovery
through book building process).
How does one com of the draft offer document?e to know about the
issues on offer? And from where can I get copies

SEBI issues press releases every week regarding the draft offer
documents received and observations issued during the period. The
draft offer documents are put up on the website under
Reports/Documents section. The final offer documents that are filed
with SEBI/ROC are also put up for information under the same
section. Copies of the draft offer documents in hard copy form may
be obtained from the office of SEBI
Who is eligible to be a BRLM?
A Merchant banker possessing a valid SEBI registration i
n accordance with the SEBI (Merchant Bankers) Regulations, 1992 is
eligible to act as a Book Running Lead Manager to an issue.
What and where do I find them?
The SEBI Manual is SEBI authorized publication
that is a compre hensive databank of all relevant Acts, Rules,
Regulations and Guidelines that are related to the functioning of the
Board. The details pertaining to the Acts, Rules, Regulations,
Guidelines and Circulars are placed on the SEBI website under the
"Legal Framework" section.

Will SEBI answer my queries online in case of doubts and

clarifications?
The "Feedback" section on the SEBI website
has a provision for the visitors to the site to ask questions on
clarifications on smaller issues pertaining to the availability of
information and a facility for users to provide feedback on the same.

However, if the queries are legalistic and deep in nature, they are to
be referred to SEBI under the SEBI (informal Guidance) Scheme,
2003.
Sebi' Latest Announcement....
Nebody knows about the Sebi's latest Announce .....?
CNBC-TV18 has learnt from sources that Sebi is likely to
propose short swing rule in India. The move restricts company insiders from
making short-term profit at the companys expense.

It is a move that could potentially have a big impact on promoters

of listed companies. Market regulator Sebi is proposing to put in place a new
rule-the short swing rule- in India. This is similar to one that exists in the
USA.
The rule prevents company insiders, who have greater access to material
information, from taking advantage of the information to make short-term
profits. So, Sebi proposes that company insiders buying and selling their
company's stock within a 6-month period return the money they make to the
company. As of now, this is just a consultative paper and the regulator has
invited feedback to this proposal.

Sources added that the move proposes insiders return profits

from buying and selling the companys stock. It proposes a tenor of six
months for the short swing rule.It has circulated a paper on short swing
profit regulations.

Sebi has proposed last-in-first-out method to determine the

six month period and the move is intended to check insider trading. The
designated insider will include all key management personnel and directors
of companies as well as officials who own above 10% stake in the company.

Sebi says that any officer who buys and sells shares of a
company within six-months will have to return those profits to the company,
which means that he cannot buy and sell shares within six months and
make a profit on them. If he makes, he will return the profit.

Who cannot do these transactions or who will be brought under the ambit of
this short swing rule?
]
It is a designated insider and a designated insider goes
beyond the threshold of any person who holds 10%. An insider is basically
defined as a person who would own more than 10% shares in a company.
But here it says a designated insider would include all key management
personnel.

It would include all directors of the company, all officers of

the company who are beneficial owners of 10% or more stake in that
company. So, a designated insider concept seems to be a far wider definition.
They have given it a far wider definition than what an insider would be who
owns only 10% in that company. It is a draft proposal. They have invited
suggestions to these proposals.

The future of stock exchanges

The future of stock trading appears to be electronic, as
competition is continually growing between the remaining traditional New

York Stock Exchange specialist system against the relatively new, all
Electronic Communications Networks, or ECNs. ECNs point to their speedy
execution of large block trades, while specialist system proponents cite the
role of specialists in maintaining orderly markets, especially under
extraordinary conditions or for special types of orders.

The ECNs contend that an array of special interests profit at

the expense of investors in even the most mundane exchange-directed trades.
Machine-based systems, they argue, are much more efficient, because they
speed up the execution mechanism and eliminate the need to deal with an
intermediary.

Historically, the 'market' (which, as noted, encompasses

the totality of stock trading on all exchanges) has been slow to respond to
technological innovation, thus allowing growing pure speculation to
continue. Conversion to all-electronic trading could erode/eliminate the
trading profits of floor specialists and the NYSE's "upstairs traders", who,
like in September and October 2008, earned billions of dollars selling shares
they did not have, and days later buying the same amount of shares, but
maybe 15 % cheaper, so these shares could be handed to their buyers,
thereby making the market fall deeply.

William Lupien, founder of the Instinet trading system and the

OptiMark system, has been quoted as saying "I'd definitely say the ECNs are
winning... Things happen awfully fast once you reach the tipping point.
We're now at the tipping point."

One example of improved efficiency of ECNs is the

prevention of front running, by which manual Wall Street traders use
knowledge of a customer's incoming order to place their own orders so as to
benefit from the perceived change to market direction that the introduction

of a large order will cause. By executing large trades at lightning speed

without manual intervention, ECNs make impossible this illegal practice, for
which several NYSE floor brokers were investigated and severely fined in
recent years. Under the specialist system, when the market sees a large trade
in a name, other buyers are immediately able to look to see how big the
trader is in the name, and make inferences about why s/he is selling or
buying. All traders who are quick enough are able to use that information to
anticipate price movements.

ECNs have changed ordinary stock transaction processing

(like brokerage services before them) into a commodity-type business. ECNs
could regulate the fairness of initial public offerings (IPOs), oversee
Hambrecht's OpenIPO process, or measure the effectiveness of securities
research and use transaction fees to subsidize small- and mid-cap research
efforts.

Some however, believe the answer will be some

combination of the best of technology and "upstairs trading" in other
words, a hybrid model.

Trading 25,000 shares of General Electric stock (recentquote:

$7.54; recent volume: 216,266,000) would be a relatively simple ecommerce transaction; trading 100 shares of Berkshire Hathaway Class A
stock (recent quote: $72,625.00; recent volume: 877) may never be. The
choice of system should be clear (but always that of the trader), based on the
characteristics of the security to be traded.
[]

Even with ECNs forming an important part of a national market

system, opportunities presumably remain to profit from the spread between
the bid and offer price. That is especially true for investment managers that
direct huge trading volume, and own a stake in an ECN or specialist firm.
For example, in its individual stock-brokerage accounts, "Fidelity
Investments runs 29% of its undesignated orders in NYSE-listed stocks, and

37% of its undesignated market orders through the Boston Stock Exchange,
where an affiliate controls a specialist post."