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Functional Report of Stock Exchange – HSC Project Maharashtra Board

INTRODUCTION :

Introduction for Functional Report of Stock Exchange

A stock market, equity market or share market is the aggregation of buyers and sellers of stocks which represent ownership claims on businesses; these may include securities listed on a public stock exchange as well as those only traded privately. A stock exchange is a place where, or an organization through which, individuals and organizations can trade stocks. Many large companies have their stock listed on a stock exchange. This makes the stock more liquid and thus more attractive to many investors. It may also act as a guarantor of settlement.

Participants in the stock market range from small individual stock investors to larger trader investors, who can be based anywhere in the world, and may include banks, insurance companies, pension funds and hedge funds. Stock market participation refers to the number of agents who buy and sell equity-backed securities either directly or indirectly in a financial exchange. Participants are generally subdivided into three distinct sectors; households, institutions, and foreign traders. Direct participation occurs when any of the above entities buys or sells securities on its own behalf on an exchange. Indirect participation occurs when an institutional investor exchanges a stock on behalf of an individual or household.

A stock exchange facilitates stock brokers to trade company stocks and other securities. A stock may be bought or sold only if it is listed on an exchange. Thus, it is the meeting place for the stock buyers and sellers. India’s premier stock exchanges are the Bombay Stock Exchange and the National Stock Exchange.

 

AIMS AND OBJECTIVES :

An association, organization or body of individuals, whether incorporated or not, established for the purpose of assisting, regulating and controlling business in buying, selling and dealing in securities.The important objectives of Stock Markets are given below:

  1. To provide a fair, transparent and efficient securities market to investors using the electronic trading system.
  2. To establish a nationwide trading facility for equities and debt instruments.
  3. To ensure equal access to investors all over the country through an appropriate communication network.
  4. To improve the standard of securities market to international level.
  5. Provide an organized, fair, transparent, and efficient market for trading securities, and secure a safe environment for trading securities
    to deepen trust in the stock market therefore to serve the national economy.
  6. Creating an attractive, safe, competitive, transparent and credible investment environment.
  7. Developing processes, methods, and systems for trading securities in the stock market according to the latest international standards.
  8. Developing and delivering an outstanding service to the related parties.
  9. Disseminating trading information to the largest possible number of traders and interested parties.
  10. Enhance the public awareness of all segments of society, while devoting special attention to traders of securities.

METHOD AND METHODOLOGY :

  • The primary sources of collection of the data would be from SEBI, Derivatives Exchange, Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), MCX, NCDEX, Financial Institutions, Merchant Bankers apart from brokers who would be trading in these exchanges. Purposeful Random Sampling technique has been administered for collecting primary data.
  •  The research would include primarily the study of the existing mechanism of various methods of trading in stock exchanges (derivatives, badla etc.), its history, success, and failures.
  • Study the emergence of derivatives method of trading in the world and in India.
  • Studying its regulatory structure, comparing it with badla system, by finding out their weaknesses and strengths.
  • Studying the impact of derivatives trading on the Indian Financial System.
  • Analyzing them and recommending ways to stabilize the regulatory system of derivatives.
  • Descriptive and Exploratory research methods are used to gather and analyze data. Exploratory research would rely on collection of data through secondary research such as reviewing available literature and/or data, or qualitative approaches such as informal discussions with respondents (here brokers, managers in Financial Institutions and Banks, management of the regulatory bodies) and more formal approaches through in-depth interviews, focus groups, projective methods, case studies or pilot studies. Internet research methods like posting of the questionnaire through Google support would be used to reach respondent. The results of the exploratory research would provide significant insight into a given situation or concept.

 

DETAIL REPORT OF PROJECT :

The government of India has enacted an act (SEBI Act 1952), which provides for the establishment of a board to protect the interest of investor in securities. The SEBI has emerged as a monitoring institution of the country for the development and regulation of the stock market, SEBI has issued from time to time guideline to insider trading listing of securities, registration of intermediaries mutual funds etc.

Management of stock exchange is done an elected body of members. These bodies are known by different names in different stock exchange, for example, the BOMBAY, INDORE, and AHMEDABAD stock exchange is managed by a ‘governing board’.  ‘Council of management’ governs the MADRAS stock exchange. A committee manages the CALCUTTA stock exchange. While the  ‘ board of director’ manages the stock exchange.

These governing bodies are powerful bodies enjoying the extensive administrative power of management and control over their respective stock exchange the day-to-day function of the stock exchanges are executed by the sub-committee like the ‘defaulters committee’ ‘listing committee’, ‘settlement committee’ etc.

The SEBI closely monitors the outstanding position of top buying member-brokers and top-selling member-brokers on a daily basis. For this purpose, it has developed various market monitoring reports based on certain pre-set parameters. These reports are scrutinized by officials of the Surveillance Dept. to ascertain whether a member-broker has built up excessive purchase or sale position compared to his normal level of business. Further, it is examined whether purchases or sales are concentrated in one or more scrips, whether the margin cover is adequate, whether transactions have been entered into on behalf of institutional clients and even the quality of scrips, i.e., liquid or illiquid is looked into in order to assess the quality of exposure. The Exchange also scrutinizes the pay-in position of the member-brokers and the member-brokers having larger funds pay-in positions are at times, at the discretion of the Exchange, required to make advance pay-in on T+1 day instead of on T+2 day.

The marketing of the securities on the stock exchange can be done through the member of the stock exchange. This member can be either individuals or corporate bodies.

For the process of trading on a stock exchange, there is the basic need for a transaction between an individual and the broker execute customer’s order to buy or sell on the stock exchange trading ring. The exchange of scrip between the member of the exchange in form of buying or selling is called trading

The broker is the member of recognized stock exchange and helps the customers in buying or selling the securities for the brokerage that he receives.

BIBLIOGRAPHY / REFERENCE :

  • Wikipedia.com for basic stock exchange information.
  • Microsoft Encarta encyclopedia premium 2009 application.
  • Different web blogs on the stock exchange.
  • Kotak Mahindra article on “Understanding How Share Market Works”.[/sociallocker]

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Contents1 INTRODUCTION :2 AIMS AND OBJECTIVES :3 METHOD AND METHODOLOGY :4  NEEDS AND IMPORTANCE:5 DETAIL …

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