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2008-10

Report On Summer Training

Functioning Of Ludhiana Stock


Exchange And Role Of Depositories

UNDERTAKEN AT
LUDHIANA STOCK EXCHANGE
LIMITED
FEROZE GHANDHI MARKET, LUDHIANA

SUBMITTED TO -

g.n.i.m.t.
IN THE PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR
THE AWARD OF THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION


(SESSION : 2008-2010)

submitted by
DEEPIKA DHAWAN
REG NO:

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PREFACE
One should always work with an objective in its mind.

In order to make the students competent, all students are required to take a real time
project work. This exposure to real life situation given an insight to the students about what
problem he/she can expect to face during his career.

Studying books and merely passing exams is not worth the education knowledge
and in fact, experience is incomplete without being exposed to what is happening in real.
With the introduction of compulsory trading by SEBI, there has been mushroom growth of
LSE and all the undertaking departments.

Efficient working of any organisation is based on the proper management of


time, machines, methods and financial resources of an enterprise. The coordination of this
is must to determine the degree of success.

Keeping all this in view, report of FUNCTIONING OF LUDHIANA STOCK


EXCHANGE AND ROLE OF DEPOSIOTRIES is prepared by all rounded encouraging
support by many persons towards. This report has created in me the confidence regarding
the approval of the subject matter.

The report is well arranged in a coherent manner. In my project, I have made


the study of all the departments and consulted heads, staff members of various respective
departments.

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The main intention of this report is to compile the subject matter in such a way
that anybody who has no prior knowledge of elements of LSE and DP can understand
properly without any difficulty.
This report is one of precious opportunity for me to gain knowledge, improve
myself and build confidence. In this I have done my best to make it a genuine study. But as
we all know that “Making error is a part of human attitude”, there may be chance of some
mistakes. I look forward to suggestions from all readers and other teachers for further
improvement.

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Acknowledgement
“EDUCATION IS LIFE AND LIFE IS EDUCATION”

No task is a single man’s effort Co-operation and Co-ordination of various people at


various places go into the successful implementation. It is a great pleasure to have
opportunity to extend my heart-felt thanks to everybody who helped me through the
successful completion of this project.

It would be prudent to commence this report with a sincere tribute to all those who played
an indispensable role in the accomplishment of this work and obliged whenever and
wherever their able guidance was required.

My first and foremost note of thanks to Ms. Pooja Sharma (Head Of Training And
Education Cell, Ludhiana Stock Exchange) for giving me opportunities in the esteemed
organization to undertake such type of valuable project.

I would like to express my deep sense of gratitude to my college faculty guide Ms.
Tavleen and other teachers for providing me regular guidance, full cooperation, support
and encouragement throughout the project. Under her experienced teaching and guidance,
my knowledge has increased resulting in achieving better results.

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CONTENTS
• EXECUTIVE SUMMARY/ ABSTRACT
• REVIEW OF LITERATURE
• INTRODUCTION OF STOCK EXCHANGE
 Profile of Ludhiana Stock Exchange
 Operations of Ludhiana Stock Exchange
 Operations of Ludhiana securities limited
 Details Of Board Of Directors Of Company
 Product And Services Operated At LSE.
 Recent Developments And Achievements
 Swot Analysis
• INTRODUCTION OF DEPARTMENTS
• ROLE OF DEPOSITORIES
 Legal Framework & Functions Of Depositories
 Introduction To National Securities Depository Limited
 Introduction To Central Depository Service Limited
• RESEARCH METHODOLOGY
 Result And Analysis
 Limitations
• RECOMMENDATIONS AND SUGGESTIONS
• CONCLUSION
• APPENDIX

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 Questionnaire
 Glossary of Terms
 Abbreviations
 Bibliography
 Documents

EXECUTIVE SUMMARY/ ABSTRACT


STOCK EXCHANGE
“A market with a trading floor where securities are bought and sold is called a stock
exchange.”
“The market or place, where securities, viz. shares are exchanged / traded or simply
where buying and selling takes place, is called stock exchange or stock market.”

A stock exchange, (formerly a securities exchange) is a corporation or mutual


organization which provides "trading" facilities for stock brokers and traders, to trade
stocks and other securities.

Broadly speaking, the stock market can be divided into two independent and inseparable
segments viz.
• Primary segment market (New issue market)
• Secondary Segment (Stock market)

The various features of stock exchange are as follows:


• It is the place where listed securities are bought and sold.

• It is an association of persons known as members.

• Membership is must for transacting business

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The role or functions of the stock exchange is as follow:


• Mobilizing savings for investment

• Raising capital for businesses

• Facilitating company growth

PROFILE OF LUDHIANA STOCK EXCHANGE

The Ludhiana Stock Exchange Limited was established in 1981, by Sh. S.P. Oswal and
Sh. B.M. Munjal, leading industrial luminaries, to fulfil a vital need of having a Stock
Exchange in this region. Since its inception, the Stock Exchange has grown
phenomenally. The Stock Exchange has played an important role in channelizing savings
into capital for the various industrial and commercial units of the State of Punjab and
other parts of the country.

LSE SECURITIES LIMITED

LSE Securities Ltd., was incorporated in 07TH January, 2000 with a view to revive the
capital market in the region and for taking full advantage of the emerging opportunities
being provided by expansion of bigger stock exchanges like NSE and BSE. The company
since its inception has marched forward rapidly and has maintained consistent growth
record.
LSE SECURITIES LIMITED is a subsidiary of the Ludhiana Stock Exchange has
present at various locations to effectively service its large base of individual clients. The
clients of the company greatly benefit from strong research capability, which
encompasses fundamentals as well as technical of LSE Securities Ltd, besides its wide
reach in this part of the country.

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PRODUCT & SERVICES


• Capital Market:
• Derivatives:
• Initial Public Offer
• Depository Services:

DEPARTMENTS OF LUDHIANA STOCK EXCHANGE

The main aim of LUDHIANA STOCK EXCHANGE is to ensure safety and security to
the investment of the investors and provide the proper services under the prescribed
guidelines of S. 131.

• OPERATIONAL DEPARTMENTS
• SERVICE DEPARTMENTS

DEPOSITORY

The term depository means a place where something is deposited for safekeeping, a bank
in which other deposit funds or securities are kept usually under the terms of specific
depository agreement. A depository is an organization where the securities of
shareholders are held in the electronic form at the request of shareholders through the
medium of depository participant.
Depository means

• A service organization for the capital market and participants.


• Securities banks that hold share in electronic form.
• Registered owner of the securities and the holders are called beneficial owner.

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• Provide services through its SEBI registered agents know as DP (depository


participants).
• Facilitates book entry transfer of securities.

In India two Depositories have got registration from SEBI

NSDL- National Securities Depository Ltd.

CDSL- Central Depository Services Ltd.

OBJECTIVES OF THE STUDY

• To know about the appropriate organisational structure of Ludhiana Stock

Exchange.

• To study about various departments of Ludhiana Stock Exchange and their

performance.

• To know the financial aspect of the Ludhiana Stock exchange.

• To know about the awareness of people about Demat .

• To study the overall functionary of depository.

RECOMMENDATIONS

• The priority of depository participant should be setting the investors grievances


because investor plays a significant role in making a DP successful.

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• NSDL should try to reduce the charges in order to satisfy the investor a more and
more of the investors are of the opinion that dealing in NSDL is costlier over
dealing in physical shares
• More awareness among the public should be created by advertising campaigns.
• reduction in time taken for sending holding statement as well as transaction
purposes.

LITERATURE REVIEW
The role of financial system is considered to be the key to economic growth. A well
developed financial system promotes investment by identifying and financing lucrative
business opportunities, mobilizing savings, allocating resources efficiently, helping
diversify risks and facilitating the exchange of goods and services (Mishkin 2001). A
growing body of literature has affirmed the importance of financial system to economic
growth. Stock market development has assumed a developmental role in global
economics and finance following the impact they have exerted in corporate finance and
economic activity.

Schumpeter 1932, McKinnon 1973 The link between stock markets and economic
growth pivots on a major strand of finance-growth hypothesis with an insight into how
financial intermediation facilitates economic growth. Studies on the link between stock
markets and growth have varied in methods and results.

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Spears (1991) reports that in the early stages of development, financial intermediation
induced economic growth in Sub-Saharan Africa.

Pardy (1992) has noted that even in less developed countries capital markets are able to
mobilize domestic savings and allocate funds more efficiently. Stock markets can play a
role in inducing growth in less-developed countries. Empirical investigations into the link
between stock market development and economic growth is therefore important.

Atje and Jovanic (1993) using cross-sectional regressions conclude that stock markets
have long-run impacts on economic growth and it was also found that stock markets
influence growth through a number of channels: liquidity, risk diversifications,
acquisition of information about firms, corporate governance and savings mobilization

Comincioli (1996) it seems relevant to conduct a research in this topic. The traditional
valuation model of stock prices and the “wealth effect” provide theoretical justification
for stock prices to act as indicator of economic growth. According to fundamental
valuation models, stock prices depend on expectations about the future economy.
Therefore, expected changes in real economy cause the values of stock prices. According
to wealth effect, however, changes in stock prices cause the variation in the real
economy.

Luintel and Khan (1999) study 10 developing economies and find bi-directional
causality between financial development and economic growth in all sample countries.
Levine and Zervos (1998) measure stock market development along various dimensions:
aggregate stock market capitalization to GDP and the number of listed firms (size),
domestic turnover and value traded (liquidity), integration with world capital markets,

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and the standard deviation of monthly stock returns (volatility). The results suggest a
strong and statistically significant relationship between initial stock market development
and subsequent economic growth.

Rousseau and Wachtel (2000) analyze 47 economies and report that greater financial
sector development leads to increased economic activity.

Chief Dennis O. Odife (2000) The state and extent of stock exchange and capital market
development in sub-Saharan African have come under scrutiny arising from increased
global interest in emerging markets. Recent changes in stock exchange and capital market
development all over the world and especially in the emerging economies of Eastern
Europe contain lessons, which African nations need to imbibe for their benefit. These
changes are in the area of ownership and operation of stock exchanges, distribution of
stock exchanges worldwide, trends towards alliances between stock exchanges in Europe,
and in economic literature concerning economic growth. This paper examines some of
these changes and suggests new directions for African economies in their quest for more
rapid and broad based sustainable economic development.

Momaya Kumar Mukherjee, Joy Deep (2000) Regional stock exchanges in India have
for a long time, been suffering from low turnover and lack of liquidity. After NSE
launched its screen-based trading through terminals located all over the country, regional
exchanges were facing a very tough time and struggling to survive. This note describes
the status, operations, sources of revenue of one such regional exchange. This note also
provides comparative data on the regional exchanges in India

Goel, Prabhu (2004) National Securities Depository Ltd. (NSDL) is India's first and
largest depository with more than 90% market share. NSDL provides infrastructure
facility to hold and transfer shares, debentures, bonds and such securities in an electronic
book entry form. NSDL provides these services to 48.85 lacs investors from 1700
locations in the country through its network of around 400 Business partners connected to

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its central system over VSAT/Leased line Closed User Group network. NSDL has also
set-up PKI enabled Internet based common infrastructure facility to enable its Business
Partners to receive instructions from depository users in an electronic from. The system
holds records of over Rs. 9 lacs crores securities assets and daily handles close to million
booking transactions and settlement exceeding Rs. 2000 crores. For NSDL, authenticity
of debit instruction, privacy of investor's data, continuity of its service, reconciliation and
system integrity are core area of risk containment.

Adjasi and Biekpe (2005) find that positive influence of stock market development on
economic growth is significant for countries classified as upper middle income
economies from the study of 14 African countries. Similarly, Siliverstovs and Duong
(2006) reveal that even when accounting for expectations, represented by the economic
sentiment indicator, the stock market has certain predictive content for the real economic
activity.

Paudel (2005) states that stock markets, due to their liquidity, enable firms to acquire
much needed capital quickly, hence facilitating capital allocation, investment and growth.
Stock market activity is thus rapidly playing an important role in helping to determine the
level of economic activities in most economies. However, controversy does exist on the
role of stock market as an indicator of future economic activity.

Jain, Tarun and Sharma (2007) Stock Exchanges act as Self Regulatory Organizations
(SROs) and the very nature of this function necessitates acting beyond their own
monetary gains in order to secure good governance. Conflicts of interest are antithetical
to the role of an SRO. Internationally, competition and rapid technological changes have
actuated Stock Exchanges to move from a mutual association model to a public limited

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company model through a process called 'demutualization'. However, demutualization


has posed a new conflict of interest situation before these exchanges: Self Listing i.e.
listing on their own circuits.
Currently, the process of Stock Exchange demutualization is going on in India and the
Indian capital market regulator; the Securities and Exchange Board of India (SEBI) is
searching for solutions concerning the issue of their listing. This issue, carrying with it a
huge potential for abuse, is neither new nor specific to India as most major stock
exchanges in the world have already the treaded the path of self-listing. However, the
solution proposed by SEBI is novel and unprecedented viz. cross-listing of stock
exchanges.
In this paper we examine the pros and cons of this invented solution to deal with conflict
of interests arising out of self-listing of stock exchanges and the potential impacts on the
working of stock exchanges in India. Deriving support from international experience on
self-listing, we conclude that cross listing cannot be the sole solution in the post-
demutualisation phase and has to be in addition to self-listing along with measures to
manage the potential conflicts of interest.

Vidyalaya, Kanya (2007) the trend of automation especially, Dematerialization, has


enabled the Indian Capital Market to take the world’s center stage and scale
unprecedented heights. Securities market in India has grown exponentially as measured
in terms of amount raised from the market, number of stock exchanges and
intermediaries, the number of listed stocks, market capitalization, trading volumes,
turnover on stock exchanges and investor’s population. The services offered by the
Depositories like Pledge and Hypothecation, Account Transfer, Stock Lending and
Borrowing, Nomination, Tax Information Network (TIN), Speed-E, Internet – based
Demat Account Statement (Ideas), Securities Trading Information Easy Access and
Delivery (STEADY), etc bear testimony to the fact that it is perpetually progressing by

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leaps and bounds, thereby elevating its status to internationally acceptable standards. The
analysis of the progress of National Securities Depository Limited (NSDL) and Central
Depository Services (India) Limited (CDSL) in economic terms clearly reveals that both
the depositories have shown a remarkable progress in terms of Demat Accounts, Demat
value and quantity, Settlement value and quantity and the number of Depository
Participants. In spite of its late emergence, the growth at CDSL is almost at par with that
of NSDL.The exponential spurt in Demat Accounts, both at NSDL and CDSL (i.e., about
100,000 Demat accounts as on 30-6-06) reaffirms the increased reliance of the investors
on the depository System. In this study, an attempt has been made to evaluate the overall
progress of the depository system in India and its impact on the market capitalization
over a period of six years..

Sabharwal, Satneet And Crack, Timothy Falcon(2009) We fill a gap in the literature
by re-examining the performance of value and growth strategies in India. Fama and
French (1998) note that stock returns in India increase with market cap and with P/E.
Their emerging market data are limited, however, and their counterintuitive results for
India are neither statistically nor economically significant. We use a large and recent data
set, and we are surprised to find that these odd results have maintained their sign and
strengthened dramatically. In particular, we find that stock returns in India increase
strongly with both market cap and P/E, and decrease strongly with dividend yield.
International investors need to be aware that Indian markets do not follow the patterns
that we have seen in most other markets and that growth beats value on the Bombay
Stock Exchange.

The Icfai Journal Of Applied Finance (2009) The National Stock Exchange (NSE) is
India's first fully demutualized stock exchange. It is also the largest exchange in India in
terms of volumes in both equity and derivatives segments. This study looks at the pricing
of IPO’s in the NSE, in particular, it seeks to empirically explain the first day under
pricing in terms of the demand generated during the book building of an issue, the listing

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delay between the closure of the book building and the first day listing of the issue, and
the money spent on the marketing of the IPO’s by the firms. The results suggest that the
demand generated for an issue during book building and the listing delay positively
impact the first day under pricing, whereas the effect of money spent on the marketing of
the IPO is insignificant. It is also found that in consonance with the extant literature, the
Post-IPO performance in one month after the listing for the firms under study, is
negative.

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STOCK EXCHANGE

“A market with a trading floor where securities are bought and sold is called a stock
exchange.”
“The market or place, where securities, viz. shares are exchanged / traded or simply
where buying and selling takes place, is called stock exchange or stock market.”

A stock exchange, (formerly a securities exchange) is a corporation or mutual


organization which provides "trading" facilities for stock brokers and traders, to trade
stocks and other securities.

Stock Exchanges are an organised segment of capital market, where members of the
organisation gather to trade company stocks and other securities. The members may act
either as agents for their customers, or as principals for their own accounts.

The securities traded on a stock exchange include:


• shares issued by companies,
• unit trusts,
• derivatives,
• pooled investment products and
• Bonds.

Stock exchanges also facilitate for the issue and redemption of securities and other
financial instruments including the payment of income and dividends. The record keeping

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is central but trade is linked to such physical place because modern markets are
computerised. The trade on an exchange is only by members and stock broker do have a
seat on the exchange.

There is usually no compulsion to issue stock via the stock exchange itself, nor must
stock be subsequently traded on the exchange. Such trading is said to be off exchange or
over-the-counter. This is the usual way that derivatives and bonds are traded.

Increasingly, stock exchanges are part of a global market for securities.

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STOCK MARKET SEGMENTS

Broadly speaking, the stock market can be divided into two independent and inseparable
segments viz.
• Primary segment market (New issue market)
• Secondary Segment (Stock market)

Primary segment market - The primary market is that part of the capital markets that
deals with the issuance of new securities. Companies, governments or public sector
institutions can obtain funding through the sale of a new stock or bond issue. This is
typically done through a syndicate of securities dealers. The process of selling new issues
to investors is called underwriting. In the case of a new stock issue, this sale is an initial
public offering (IPO). Dealers earn a commission that is built into the price of the
security offering, though it can be found in the prospectus.

Methods of issuing securities in the primary market are:


• Initial public offering;
• Rights issue (for existing companies);
• Preferential issue.

Secondary segment market- The secondary market, also known as the aftermarket, is
the financial market where previously issued securities and financial instruments such as
stock, bonds, options, and futures are bought and sold.

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The secondary market for a variety of assets can vary from fragmented to
centralized, and from illiquid to very liquid. The major stock exchanges are the most
visible example of liquid secondary markets. Most bonds and structured products trade
“over the counter,” or by phoning the bond desk of one’s broker-dealer.

DEFINITION OF STOCK EXCHANGE

ACCORDING TO:
SUPREME COURT OF INDIA

“A stock exchange fulfils a vital function in the economic development of a nation.


Its main function is to liquefy capital by enabling a person who has invested money
in, say a factory or railway to convert it in to cash by disposing off his shares in the
enterprises to someone else.”

Stock exchanges are the nerve centre of the capital market, which is also said to be a
barometer of the economy. It provides a linkage between the savings of household sector
and investment in corporate sector or economy.

The main two stock exchanges of world are:


• Johannesburg securities exchange
• Nasdaq

Bombay stock exchange and National stock exchange are two Indian stock exchanges
which come at the 7th and 10th number in ranking respectively.

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FEATURES OF STOCK EXCHANGE

The various features of stock exchange are as follows:

• It is the place where listed securities are bought and sold.

• It is an association of persons known as members.

• Membership is must for transacting business.

• Trading is allowed under rule and regulations of stock exchange.

• Brokers and sub- brokers act as an intermediate between stock exchange and the

investors and speculators.

• A company has to be listed in stock exchange to do trading.

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THE ROLE OF STOCK EXCHANGES

The role or functions of the stock exchange is as follow:


• Mobilizing savings for investment

• Raising capital for businesses

• Facilitating company growth

• Profit sharing

• Barometer of the economy

• Creating investment opportunities for small investors

• Corporate governance

• Government capital-raising for development projects

The stock exchange discharges these functions by laying down a number of regulations,
which is to be compiled with while making public issues. e.g offering at least a
prescribed percentage of capital to the public, keeping subscription list open at least for 3

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days making provisions for receiving application, allotting shares against on a fair and
unconditional basis etc.

STOCK EXCHANGES IN INDIA


Presently, the stock market in India consists of twenty one regional stock exchanges, one
Bombay stock exchange and two national exchanges, namely

1. National Stock Exchange of India (NSE)


2. Over the Counter Exchange of India (OTC)

The Bombay Stock Exchange (BSE) is the largest Stock Exchange, in the country,
where maximum transactions, in terms of money and shares take place. Bombay Stock
Exchange Limited is the oldest stock exchange in
Asia. Popularly known as BSE it was established
as "The Native Share & Stock Brokers
Association" in 1875.

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It is the first stock exchange in India to obtain permanent recognition from the
Government of India under the Securities Contracts (Regulation) Act, 1956.

Bombay Stock Exchange played a pivotal role in the development of the Indian capital
market and its index, SENSEX, is tracked worldwide. The Exchange has a nation-wide
reach with a presence in 417 cities and towns of India. BSE provides an efficient and
transparent market for trading in equity, debt instruments and derivatives.

National stock exchange limited (NSE), is a Mumbai-based stock exchange. It is the


largest stock exchange in India in terms of daily turnover and number of trades, for both
equities and derivative trading. The NSE's key index is the S&P CNX Nifty, known as
the Nifty, an index of fifty major stocks weighted by market capitalisation.

NSE is mutually-owned by a set of leading financial institutions, banks, insurance


companies and other financial intermediaries in India but its ownership and management
operate as separate entities. There are at least 2 foreign investors NYSE Euro next and
Goldman Sachs who have taken a stake in the NSE. As of 2006, the NSE VSAT
terminals, 2799 in total, cover more than 1500 cities across India. In October 2007, the
equity market capitalization of the companies listed on the NSE was US$ 1.46 trillion,
making it the second largest stock exchange in South Asia. NSE is the third largest Stock
Exchange in the world in terms of the number of trades in equities. It is the second fastest
growing stock exchange in the world with a recorded growth of 16.6%.

OTC stock exchange of India (OTCEI) was incorporated in 1990 as a Section 25


company under the Companies Act 1956 and is recognized as a stock exchange under
Section 4 of the Securities Contracts Regulation Act, 1956. The Exchange was set up to

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aid enterprising promoters in raising finance for new projects in a cost effective manner
and to provide investors with a transparent & efficient mode of trading.

Modelled along the lines of the NASDAQ market of USA, OTCEI introduced many
novel concepts to the Indian capital markets such as screen-based nationwide trading,
sponsorship of companies, market making and scrip less trading. As a measure of success
of these efforts, the Exchange today has 115 listings and has assisted in providing capital
for enterprises that have gone on to build successful brands for themselves like VIP
Advantage, Sonora Tiles & Brilliant mineral water, etc.

DETAILS OF STOCK EXCHANGES

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Sr. Name of the Exchange Valid Upto


No.
1 Ahmadabad Stock Exchange Ltd. PERMANENT
2 Bangalore Stock Exchange Ltd. PERMANENT
3 Bhubaneswar Stock Exchange Ltd. June 04, 2010
4 Bombay Stock Exchange Ltd. PERMANENT
5 Calcutta Stock Exchange Association Ltd., PERMANENT
6 Cochin Stock Exchange Ltd. November 07, 2009
7 Coimbatore Stock Exchange Ltd. September 17, 2006

Due to pending litigation before the Hon'ble Madras High


Court, Coimbatore Stock Exchange Ltd. (CSX) has not
filed application for renewal of recognition which expired
on 17.09.06.
8 Delhi Stock Exchange Ltd. PERMANENT
9 Gauhati Stock Exchange Ltd., April 30, 2010

10 Hyderabad Stock Exchange Ltd.


The Hyderabad Stock Exchange Ltd. (HSE) failed to
dilute at least 51% of its equity share capital to
public other than shareholders having trading rights
on or before the
stipulated date i.e. August 28, 2007. Consequently, in
terms
of section 5(2) of the Securities Contracts (Regulation)
Act, 1956,
the recognition granted to HSE stands withdrawn
with effect from August 29, 2007.

11 Interconnected Stock Exchange of India Ltd. November 17, 2009


12 Jaipur Stock Exchange Ltd. January 08, 2010
13 Ludhiana Stock Exchange Ltd. April 27, 2010

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14 Madhya Pradesh Stock Exchange Ltd


PERMANENT
15 Madras Stock Exchange Ltd. PERMANENT
16 Magadh Stock Exchange Ltd.

"SEBI vide order dated September 3, 2007 refused to renew the


recognition granted to Magadh Stock Exchange Ltd."
17 * Mangalore Stock Exchange
As per Securities Appellate Tribunal order dated
October 4, 2006, the Mangalore Stock Exchange is a
de-recognized Stock Exchange under Section 4 (4)
of SCRA
18 MCX Stock Exchange Ltd September 15, 2009
19 National Stock Exchange of India Ltd. PERMANENT

20 OTC Exchange of India August 22, 2009

21 Pune Stock Exchange Ltd. September 01, 2009

22 Saurashtra Kutch Stock Exchange Ltd.

SEBI vide order dated July 06, 2007 has withdrawn the recognition
granted to Saurashtra Kutch Stock Exchange Limited.
23 Uttar Pradesh Stock Exchange Association Ltd. June 02, 2009

24 Vadodara Stock Exchange Ltd. January 03, 2010

SEBI- SECURITIES EXCHANGE


BOARD OF INDIA
SEBI is the Regulator for the Securities Market in India. Originally set up by the
Government of India in 1988, it acquired statutory form in 1992 with SEBI Act 1992

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being passed by the Indian Parliament; Chaired by C B Bhave, SEBI is headquartered in


the popular business district of Bandra-Kurla complex in Mumbai, and has Northern,
Eastern, Southern and Western regional offices in New Delhi, Kolkata, Chennai and
Ahmadabad.

Chandrasekhar Bhaskar Bhave is the sixth chairman of the Securities Market Regulator.

FUNCTIONS AND RESPONSIBILITIES

SEBI has to be responsive to the needs of three groups, which constitute the market:

• The issuers of securities

• The investors

• The market intermediaries.

SEBI has three functions rolled into one body quasi-legislative, quasi-judicial and quasi-
executive. It drafts regulations in its legislative capacity, it conducts investigation and
enforcement action in its executive function and it passes rulings and orders in its judicial
capacity. Though this makes it very powerful, there is an appeals process to create
accountability. There is a Securities Appellate Tribunal which is a three member tribunal
and is presently headed by a former Chief Justice of a High court - Mr. Justice NK Sodhi.
A second appeal lies directly to the Supreme Court.

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PROFILE
The Ludhiana Stock Exchange Limited was established in 1981, by Sh. S.P. Oswal and
Sh. B.M. Munjal, leading industrial luminaries, to fulfil a vital need of having a Stock
Exchange in this region. Since its inception, the Stock Exchange has grown

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phenomenally. The Stock Exchange has played an important role in channelizing savings
into capital for the various industrial and commercial units of the State of Punjab and
other parts of the country.
The Ludhiana Stock Exchange is a technology savvy, forward looking and modern
Regional stock exchange. The stock exchange has introduced latest technological
developments in the capital markets to keep itself in pace with the changes sweeping
across the stock exchanges through out the country.
The Ludhiana Stock exchange was incorporated in the year 1983. It was granted
recognition in the year 1993.
Exchanges among the Regional Stock Exchanges of the country, and has been providing
trading platform for the investors situated in Punjab, J&k, Himachal Pradesh &
Chandigarh. At present, it has 380 listed companies and among them, 249 are listed as
regional companies.

1. GOVERNING COUNCIL, COMMITTEES AND


ADMINISTRATION

The Council of Management of the Exchange consists of nine members, out of whom
two are Government Nominees; four are Public Representatives and one Executive
Director who is also Ex-officio member of the Board. At every Annual General Meeting,
one third of the elected Directors retire by rotation. Administration of the Exchange is
managed by the Executive Director who is assisted by a Company Secretary and a team
of Executives, Assistants, Technicians and Sub-staff. The Exchange has four Statutory
Committees namely Disciplinary Committee, Arbitration Committee and Defaults
Committee and Investor Services Committee. In addition, it has Advisory and Standing
committees to assist the administration.

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TABLE OF THE MEMBERS

SEBI Nominee 2 members


Public Representatives 4 members
Executive Director 1 member
Ejected Member 2 members
2. CORPORATE GOVERNANCE
The Ludhiana Stock Exchange is a listed Company, yet it has followed a model of
corporate governance, which is evident from the composition of the Statutory
Committees, the Investor Services Committee and Audit Committee. The Investor
Services Committee comprises of four Public Representatives and one broker members.
It is headed by Sh. D.K.Malhotra, a, a legal expert. The audit committee is headed by Sh.
R.K. Bansal, Chartered Accountant. Statutory Committees are represented by brokers and
non-brokers in 20:80 ratios.

3. TRADING ON BIGGER STOCK EXCHANGES


THROUGH SUBSIDIARY ROUTE

As stated in the preceding Para, the Exchange acquired the membership of NSE & BSE
through its subsidiary, the LSE Securities Limited, with the objective of providing an
enabling mechanism to its member brokers to trade on NSE and BSE as sub-brokers of
LSE Securities Limited. Trading at BSE and NSE was commenced through the
subsidiary route from September 2000 and December 2000, respectively, and the trading
in F&O segment of NSE commenced in February 2002.

Trading In Commodities

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The Ludhiana Stock Exchange has also facilitated the formation of LSE commodities
Trading Services Company for providing a platform for trading in commodities like
bullion, cereal, crude etc. The company has grown in size and scale and is attaining
newer heights daily. The daily turnover of the company has already crossed Rs.100
crores and the company is providing trading in commodities through both MCX and
NCDEX two leading National Commodities Exchanges in India.

4. INVESTOR RELATED SERVICES


• Investor Grievances
The Exchange has made special arrangements to handle investor's complaints and
grievances. It has established an Investor Grievance Cell which receives complaints from
investors and follows up the complaints with companies and member-brokers to ensure
their satisfactory redresses. Recording of complaints and monitoring of their redressal has
been fully computerized. The Committee meets periodically to console the grievances
between investors and broker members.
• Investor Protection Fund
The Exchange has set-up an Investor Protection Fund in the month of January, 1990 for
providing compensation to individual investors in case of default by a member of the
Exchange. In case any member-broker defaults to meet his obligation towards investors
in respect of deals that took place through the trading system of the Stock Exchange, then
the concerned investors are compensated from this fund.

• Investor Service Centre


The Exchange has set-up an Investor Service Centre in its premises for providing
information relating to Capital Market to the general public. The Centre has a well
equipped library, which subscribes to leading economic, financial dailies and periodicals.
It also stores the Annual Reports of the companies listed at the Stock Exchange. The

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Investor Service Centre is also equipped with a Terminal for providing "live" rates of
trading at NSE and BSE. A large number of the investors visit the centre to utilize the
services being provided by the Exchange.

• Website of Ludhiana Stock Exchange


The exchange has got developed its website www.lse.co.in and it is now up to date and
running. The site provides material information about the market and the operations
being done by the Ludhiana stock exchange.

• Certification Programme In Capital Market


The exchange in association, with centre for industry institute Partner programme, Punjab
university, Chandigarh launched one and a half month programme in capital market in
feb, 2006. The exchange is also launching short duration programme in modules like
Technical analysis, fundamental analysis and derivatives etc for the public investing at
large.

• Investors awareness workshops


The exchange has been organizing investor awareness programme in the parts of Punjab,
Himachal Pradesh, Chandigarh and adjoining areas of Rajasthan and Haryana since
March 2003. The exchange has conducted more than 200 workshops in all the above
mentioned places to spread awareness about securities Market as a part of Securities
market campaign launched by SEBI. The exchange has also started the programme to
educate the customers or investors about the do’s and don’ts for investor series by giving
advertisements in newspapers i.e. Indian express and Hindustan Times etc. The exchange
has also facilitated the formation of an investor association in Ludhiana with the name
and style of “Ludhiana Retail Investors Association” Which will further strengthen the
Securities Market Awareness campaign.

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OPERATIONS OF L S E

• TURNOVER
Ludhiana Stock Exchange is one of the leading Stock Exchanges among the Regional
Stock Exchanges of the country, and has been providing trading platform for the
investors situated in Punjab, J&k, Himachal Pradesh & Chandigarh. At present, it has 380
listed companies and among them, 249 are listed as regional companies. It had been
generating significant amount of the business in the secondary market. It recorded a peak
turnover of Rs.9154 crores during the year 2000-2001. The structural changes that took
place in the recent past in the Capital Market of the country had a negative impact on the
trading volume of the Regional Stock Exchanges. There has been a significant reduction
of turnover during the financial year 2001-2002, but the reduction in the turnover of the
Exchange has been more than adequately compensated by substantial rise in the turnover
of LSE Securities Limited, a subsidiary of Ludhiana Stock Exchange.

• LISTING
Listing is one of the major functions of a Stock Exchange wherein the securities of the
Companies are enlisted for trading purpose. Any Company incorporated under

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Companies Act, 1956, coming out with an IPO, has to mandatorily list its shares on a
Stock Exchange. The Listing Department of Ludhiana Stock Exchange deals with listing
of securities, further listing of issues like bonus and rights issues, post listing compliance
of the companies which is already listed with Ludhiana Stock Exchange. The Companies
desirous of listing its securities on the Exchange have to sign a Listing Agreement with
the Stock Exchange. After getting the listing approval, the Company has to ensure and
report compliance of the post listing requirements. The listing section of the LSE
monitors the post-listing compliance of all the listed companies and follows up with the
companies, which are found deficient in compliance.

• SETTLEMENT GUARANTEE FUND (SGF)


The Stock Exchange established a Settlement Guarantee Fund (SGF) on April 6, 1998. It
provides guarantee of all the genuine trades made through the Screen Based Trading
System of the Stock Exchange.

• END OF AN ERA
The management of the Stock Exchange apprehended that the smaller regional Stock
Exchanges would not be able to meet the challenges imposed by expansion of bigger
Stock Exchanges like NSE and BSE and might end up losing their entire business to
VSAT counters of the bigger Stock Exchanges. In order to prepare for such an
eventuality, Stock Exchange set up a broking arm in the name of LSE Securities Limited
(a Subsidiary Company of the Stock Exchange) in January 2000 and built infrastructure
and IT based sophisticated systems to enable its members and investors to trade on NSE
and BSE through the subsidiary route. The Stock Exchange was thus able to convert the
"threat" it faced from expansion of NSE and BSE into an opportunity for its members and
investors. As expected, there was a marked shift in the trading volumes from the Stock
Exchange to the NSE and BSE through the Subsidiary Company. This shift became more
prominent when SEBI introduced compulsory Rolling Settlement and banned the deferral

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products like Badla, MCFS and ALBM w.e.f. July 2, 2001 causing thereby an end to
arbitrage opportunities between the Stock Exchange and NSE/BSE. Ultimately, there was
complete shift of trading from the Stock Exchange to the LSE Securities Limited in
January 2002.

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LSE Securities Limited

LSE Securities Ltd., was incorporated in 07TH January, 2000 with a view to revive the
capital market in the region and for taking full advantage of the emerging opportunities
being provided by expansion of bigger stock exchanges like NSE and BSE. The company
since its inception has marched forward rapidly and has maintained consistent growth
record.

LSE SECURITIES LIMITED is a subsidiary of the Ludhiana Stock Exchange has


present at various locations to effectively service its large base of individual clients. The
clients of the company greatly benefit from strong research capability, which
encompasses fundamentals as well as technical of LSE Securities Ltd, besides its wide
reach in this part of the country.

LSE SECURITIES LIMITED (LSESL) is a subsidiary of the Ludhiana Stock Exchange


Limited under the policy formulated by the Securities and Exchange Board of India
(SEBI) for “Revival of Small Stock Exchanges. The policy enunciated by the SEBI

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permits a stock exchange to float a subsidiary, which can take up membership of larger
stock exchanges, such as the National Stock Exchange of India Ltd. (NSE), and Bombay
Stock Exchange Ltd. (BSE). LSESL has been registered by SEBI as a Trading-cum-
Clearing Member in the Capital Market segment and Futures & Options segment of NSE
and Capital Market segment of BSE and Trading member of MCX-Stock Exchange
Limited. Trading Members of LSE can access NSE and BSE by registering themselves
with SEBI as Sub-brokers of LSESL.

LSE Securities Limited is a subsidiary of the Ludhiana Stock Exchange, which was
formed with an objective to enhance business and investment opportunities for the
investors and members of Ludhiana Stock Exchange at large, through innovative
products by encompassing a variety of activities related to the capital market. The
company has a paid-up capital of Rs. 5.55 crores.

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OPERATIONS OF THE LSE


SECURITIES LTD.

LSE Securities Ltd., was incorporated in January, 2000 with a view to revive the capital
market in the region and for taking full advantage of the emerging opportunities being
provided by expansion of bigger stock exchanges like NSE and BSE. The company since
its inception has marched forward rapidly and achieved many milestones in a short span
of existence.

• GOVERNING COUNCIL
The Council of the management of the Company comprises of 10 directors of which 3 are
broker members and 7 non-brokers. Five non broker members are Independent Directors
of eminent status from the field of finance, law and management and remaining two are
Chief Executive Officer of LSE Securities Limited and Executive Director of the holding
company (Ludhiana Stock Exchange), who is on the Board of the company as ex-officio
Directors. Thus the council of management has representation of sub-brokers as well as
professionals and subject specialists representing various fields of business activities.
Operations of the company are run in a professional, transparent and fair manner keeping
in view of the interest of investors as well as other stake-holders.

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• CORPORATE MEMBERSHIP OF NSE & BSE


SEBI, at the initiative of LSE, permitted smaller Stock Exchanges, to trade on bigger
Stock Exchanges through their subsidiary companies. The Ludhiana Stock Exchange
floated its subsidiary company, the LSE Securities Limited, with the objective of
obtaining trading rights on bigger Stock Exchanges. It has obtained corporate
membership of both NSE and BSE in the first half of year 2000.
• TRADING AT NSE AND BSE
The LSE Securities Ltd. commenced trading operations in Capital Market Segments of
BSE and NSE in September, 2000 and December 2000 respectively. The turnover of the
Company at NSE and BSE is growing by leaps and bounds ever since in incorporation.
There was encouraging response from the sub-brokers especially at NSE counters.
During the financial year 2005-06, the Company recorded a turnover of Rs. 7975 crores
and Rs.3834 crores in "Capital Market" segments of NSE and BSE respectively. For the
year ended 2005-2006, there were 128 sub-brokers registered for NSE and 68 for BSE.

• F&O SEGMENT OF NSE


The LSE Securities Ltd. commenced trading operations in Future and Options Segment
of NSE in February 2002. The Company became the first subsidiary of any Regional
Stock Exchange which commenced trading in “F&O” Segment of NSE. Response to
trading facilities in the “F&O” segment of NSE has been very encouraging and volumes
generated in this segment soon exceeded those in “Capital Market” segment.

• TRADING THROUGH V-SATS


The LSE Securities Limited has provided facility to its sub-brokers for trading on NSE
and BSE through VSAT counters which are located outside Stock Exchange Building.
During 2005-2006, 27 sub-brokers of the company have been trading through VSAT on
NSE and 13 on BSE.

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• CERTIFICATION IN FINANCIAL MARKET


In order to provide professional services to the investors of LSE Securities Limited
through its sub-brokers, the company motivated its sub-brokers and its staff to qualify the
certification in financial markets conducted by NSE. All trading terminals for Capital
Market Segment and F&O segment are being operated by the persons after having
qualified the said certification.

Directors of L.S.E Securities Limited


Sr.No. Name Designation Date of Appointment
1. Mr. Krishan Kant PurI Chairman 29.09.2007
2. Mr. Manoj Sarna Vice-Chairman 29.09.2007
3. Mr. Manjit Singh Sarna Member-Director 27.09.2008
4. Mr. Vishal Goomber Member-Director 27.09.2008
5. Mr. Lalit Kishore Member-Director 27.09.2008
Public Representative Director-
6. Dr. Anil Kumar Angrish 19.07.2007
Independent Director
Public Representative Director-
7. Mr. Vijay K. Bansal 12.03.2008
Independent Director
Public Representative Director-
8. Mr. Susheel Bhakoo 12.03.2008
Independent Director
Public Representative Director-
9. Mr. Pawan Kumar Garg 27.08.2008
Independent Director
Public Representative Director-
10. Dr. Prem Kumar 14.02.2009
Independent Director
11. Mrs. Pooja M. Kohli LSE-Representative Director 14.02.2009


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PRODUCT & SERVICES

• Capital Market:
We are the leading broker of NSE and BSE and have been providing capital market and
derivatives services to our clients. You can avail the following services by associating
yourself to ourselves.
• Fundamental and Technical Research to guide you in Capital Creation.
• Efficient Execution through our term of experienced dealers.

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• Transparent Dealings.
• Attractive Cost Structure.

• Derivatives:
Derivatives (Futures & Options) are ideal instruments to protect your portfolio against
risk. You can trade with index movements, hedge and leverage your portfolio by limiting
risk but keeping your upside unlimited.

• Initial Public Offer


IPO is the first offer from any corporate to public for the subscription for its shares. Our
clients can subscribe for IPO through us. We receive IPO applications from our
customers at our office only. For this we are associated with DSPML and Enam
Securities Pvt. Ltd.

• Depository Services:
A depository can be defined as an institution where the investors can keep their financial
assets such as equities in the dematerialized form and transactions could be effected on it.
Besides providing custodial facilities and dematerializations, depositories are offering
various transactional services to its clients to effect buying, selling, transfer of shares etc.

Our Depository Services Cell provides the following


services:

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• Convert your physical holding into electronic holding (which is called


"dematerialization" of securities).
• Keep custody of your holdings in electronic form.
• Transfer the shares in the electronic form from one account to another.
• Facilitate pledge of your electronic securities

Achievements Of Ludhiana Stock


Exchange

Screen Based Trading: Screen based trading in scrips was commenced at Ludhiana Stock
Exchange on 18th Nov, 1996. It became the SUI Stock Exchange in India to introduce
screen based trading at a capital coast of 5.50 crores. Its software was providing by CMC
LTD. After that start of screen based trading volume of turnover at LSE has arisen
substantially from an average of 26 scrips to 41 scrips.

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Trading through VSAT:


At present LSE is connected through LAN, WAN and VSAT. VSAT stands for very
small appetite terminal is a mode of communication through satellite. LSE has set up 37
terminals at remote sites in the State of Punjab Delhi & Chandigarh.

Derivative Trading:
In June, 2000 financial derivatives are traded for the maximum time period for 3 months.
And the minimum limit of trading is Rs. 21lacs.

Paper less Trading:


Ludhiana Stock Exchange started trading in the DEMAT shares from 16 November, 1998
by becoming a participant in NSDL.

Trading on BSE:
LSE started it trading on BSE through MULTEX by a way of subsidiary - LSE Securities
Ltd.

Normal Trading:
Buying – Selling = Trading

Other Developments:

• Listing ADR and GDR by the Indian companies.


• LSE started rolling settlement such that on T+2 basis.
• LSE started continuous disclosure scheme and corporate governance.

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• LSE though of dealing with MCX for survival and growth of members and
investors of LSE in face of threat from expansion of BSE/BNSE VSAT counters

SWOT ANALYSIS OF LUDHIANA


STOCK EXCHANGE

STRENGTHS OF LSE
• It has an ultra modern infrastructure.

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• It possesses dedicated manpower


• The management is fair at LSE
• It is one of the premier stock exchanges in India
• It is a high technology drive exchange
• It is air-conditioned and fully computerized.
• It has in house depository participants.

Weaknesses of LSE
• It has no different products and services from other stock exchanges.
• At LSE there is no trading of regional and non- regional companies.
• Investors and traders are not interested to trade at LSE because of lack of depth.
• LSE is not able to compete NSE and BSE.
• The value of LSE’s ticket is Rs. 4 lac, which were Rs. 50 lacs in 1992. This is
because of no trading at LSE.

Opportunities for LSE

LSE can introduce new products and services, which can benefit the exchange.
The merger with another stock exchange can improve it.
It can better utilize its assets by leasing.
The subsidiary of LSE has a bright future at NSE and BSE.

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Threats for LSE

NSE and BSE both are biggest threats for LSE.


Ban and Badla systems have shattered the LSE.
Competition from other stock exchanges.
SEBI’s rules and regulations.

DEPARTMENTS OF LUDHIANA
STOCK EXCHANGE
The main aim of LUDHIANA STOCK EXCHANGE is to ensure safety and security to
the investment of the investors and provide the proper services under the prescribed
guidelines of S. 131. So to maintain the proper system of working of exchange, there are
so many different departments in which particular functions are performed, assigned to

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those departments. Following is the list of various departments of Ludhiana Stock


Exchange.

OPERATIONAL DEPARTMENTS

• Margin section
• Clearing house
• Market surveillance
• Computer section and Information System Department

SERVICE DEPARTMENTS

• Legal department
• Secretarial Department
• Membership Department
• Listing Department
• Accounting Section
• Investor Grievance Cell
• Personnel Department
• Maintenance Department
• Know your client (KYC) Department
• Depository Department

All the section performs specific function. There is nowhere duplication of work; even
then all the sections are interconnected with each other. There is an organized network of
recording of activities performed there. But before studying the inter depositories of
section here is the detail of all department i.e. actually what function is performed by
each and every section

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 OPERATIONAL DEPARTMENTS

MARGIN SECTION

Margin Section is an important section. At present the head of this department is Mr.
Parshant Saluja. This section apart from dealing in the regulating the trading of brokers
keeps a check on excessive trading in speculation. Margin is the amount, which is
collected from tile brokers for the safety of transactions. As the transactions are to be
finalized on basis, in the mean time the rates may fluctuate which may lead to default. So
to make the transaction safe, daily margins are collected from brokers. When a member
gets registered in the exchange and with securities exchange board of India (SEBI), Then
before starting trading he is supposed to deposit some fixed by SEBI as security. Now in
SEBI rolling settlement prevails. Ultimately margin is the difference between the limit
and trade done by the member. The security deposit by member is called Base Minimum
Capital. If any member wants to do trade up to greater limit then he can deposit
Additional Base Minimum Capital.

CLEARING HOUSE

The head of this department is Mr. Vipin Goel. Clearing house takes care of pay-in and
pay-out securities. At this time there is weekly trading system (Monday to Friday)
prevails. And securities are settled by rolling settlement. Means pay-in and pay out of
securities is done on T+2 basis. T means Trade day on which transaction has been done.

MARKET SURVEILLANCE SECTION

The main task of this section to see the market sanctity and maintenance so that the
investors are not cheated. So Market Surveillance entails scientifically identifying points
in a stock price movement for trading volumes, which don’t match with the company’s
fundamentals. So the price and volumes trends in stock exchange are checked for
abnormalities scientifically

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COMPUTER SECTION

The growing technicalities and the increase workload have enhanced the importance of
this department at LSE. This department is also referred to as Electronic Data Processing
Section. This section is the backbone of entire stock exchange as the functioning of the
other departments would come to half if this department becomes inactive.

 SERVICE DEPARTMENTS

LEGAL DEPARTMENT

The objective of legal section is to make effective bylaws and regulation for the stock
exchange and to see that the guidelines, circular and any amendments in rules made by
the SEBI are enforced at appropriate time so that the future complication may be reduced
or avoided. Each of the matter involving legality is to be solved by the legal department.

SECRETARIAL SECTION

The functions and duties of the secretarial department include maintenance of record of
minutes of the meetings like:
• Recruitment of staff.
• Maintaining employee’s record e.g. attendance leave, overtime etc.
• Maintaining employee’s service book up to date and other details as per the
requirements of auditors, at the time of inspection.
• Other activities like staff farewell party and Diwali Puja.
Since LSE does not have a separate personnel department in its organizational chart,
therefore all activities relating to personnel are carried out by the secretarial department.

MEMBERSHIP DEPARTMENT

There are two types of members in stock exchanges.


• Corporate members
• Individual member
This department deals with membership of exchange. The trade in market is through the
authorized members who have duly registered with concerned stock exchange and SEBI.
Following are the requirement to be an individual member of exchange.

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AGE LIMIT:
To be member of stock exchange there is age limit minimum age is 21 years.
EXPERIENCE:
To be a member of stock exchange there is a need of experience of three years.
QUALIFICATION:
In stock exchange qualification of a member is minimum 10+2 is necessary.

LISTING DEPARTMENT

This department plays an important role in the stock exchange as it helps the company to
raise money from the capital market. Presently it is mandatory for regional companies to
get themselves listed at LSE. The schedule of annual listing fee and up front listing fee
payable is given below:

Paid up capital Annual Listing Fee

Up to 1 crore 7,000
1 crore to 5crore 10,000
5 crore to 10 crore 18,000
10 crore to 20 crore 36,000
20 crore to 50 crore 54,000
Above Rs. 50 crore 90,000

Company which have a paid up share, debenture capital of more then 50 Rs. Crore will
pay additional fee of Rs.2500 for every increase of Rs.5 crore paid thereof. If stock
exchange is not a regional stock exchange then fee will be 50% of fee indicated above.

ACCOUNTING SECTION

Most of the work in account section of LSE is done manually, although help is taken
through computers for the purpose of making trail balance income and expenditure
statement and Balance sheet. The annual report of LSE is generally published in August
every year

FUNCTIONS OF ACCOUNTS SECTION

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The account section performs the following function.

• To make and receive payments to the outside agencies, include companies listed
at LSE brokers working at LSE,
• To disburse personnel expenses,
• To keep the records of all incoming and outgoing money depreciation of financial
statements at the end of financial Year,
• To get their accounts audited from the third party.

INVESTOR GRIEVIANCE CELL

LSE has a separated investor’s grievance cell, which receives complaints from investors
and follows up the complaints with companies and member broker to ensure their
satisfactory redresses. For proving better services to the investors the stock exchange has
maintained investor protection fund Rs. 500 is collected and 10% interest covered on
company deposits is also transferred to the investor protection fund.

PERSONNEL DEPARTMENT

LSE does not have a personnel department in its organization chart. This department
carries out all activities relating to the recruitment of the personnel, whenever and
wherever a vacancy arises, and employees attendance on register.
This department also deals with appointment or removal of floor clerks or authorized
representatives of brokers. These departments also maintain records of leaves and
overtime of employees.

MAINTENANCE OR TECHNICAL DEPARTMENT

This department of LSE is regulating the activities related to the files of electrical,
mechanical and civil engineering besides having other functions like that of security.
Here are some of the important aspects.

• Electrification of Building.

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• Air conditioning of Plant.


• Maintenance of Lifts.
• Maintenance of Generators.
• Maintenance of safety equipments such as smoke detectors, fire, extinguishers
etc.
• Maintenance of Telephone Exchange.

The electricity bill of stock exchange is 8 Lakh to 10 Lakh per month. It has given its
some portion on rent to three banks i.e.4500 sq feet to HSBC, 3000 sq feet to HDFC and
7000 sq feet to City Bank. Stock exchange gets rental income of Rs. 9 to 10 Lakh
securities. This is an additional charge given to this to this department. The supervision
staff maintenance of mental detectors is also under preview.
At the ground floor of LSE there are many transformers, generators. These transformers
cover all these building’s electricity.

KNOW YOUR CLIENT (KYC) DEPARTMENT

It is a main department of LSE. In this department client registration is necessary. Client


registration includes all the information about the client who has opened a trading
account.
Some documents e.g.

• Client’s ID proof.
• Client’s voter ID.
• Client’s passport.
• Client’s proper address.
• PAN is most important.
• Signature is important of a client.
• Driving license, electricity bills, telephone bills are the necessary to attach with
the form.
DEPOSITORY SECTION

A depository is organization where the securities of the shareholders are held in


electronic from at the request of the shareholders through DP

The main aims are:

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• To minimize paper work.


• To reduce the settlement cycle.
• To eliminate the bad delivery.

Functions performed by depository participant of LSE:

• Account Maintains
• Transfer& transmission
• Dematerialization
• Rematerialization
• Pledge creation& closure
• Settlement of trades

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INTRODUCTION TO DP

UNDERSTANDING THE DEPOSITORY SYSTEM

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Depository system in concerned with conversion of securities from physical to electronic


form, settlement of trades in electronics segment transfer of ownership and electronics
custody of securities. All securities in the depositories are indentifical in all respect and
are thus fungible. In the depository system the ownership and transfer of securities takes
place by means of electronic book entries. This rids the capital market of the danger sand
risks related to handling of paper. It transaction cost are also less as compared to that of
physical transactions. in a depository system the ownership records of securities’ are
maintained in an electronics form and the transfer of ownership will be through
electronics entries.

National securities depository Ltd (NSDL) is the country ‘s first depository which
provides electronics’ depository facilities for securities traded in the equity and debt
markets. The launch of NSDL is a significant reform in the capital market and shall play
a crucial role in driving market efficiency. The second depository is central depository
services (India) Ltd (CSDSL) while investor will continue to exercise the option of
holding securities in the physical form, those preferring rematerialization of scrip are
permitted to withdraw from the depository by requesting the issue of physical certificated
again. Share transaction cost in the depository shall be lower than the cost of buying and
selling physical shares.
Depository system is not mandatory is it optional and is left to the investor to decide
whether he want the securities to be dematerialized but SEBI has made riding in certain
stocks to be compulsory settled in electronic form. It is certain that a large quantity of
existing floating stock shall get immobilized. Mutual funds shall also opt for depositories
and foreign investor are expected to increase exposure in India and domestic capital
market will have a highly efficient settlement and clearance system like American and
European exchanges.

In a bank the exchange is done by the medium of money, where as in depository it is den
with securities. In a bank money is given for safekeeping In depository securities are kept

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safely. Banks hold and transfer founds, depositories perform the same function with
securities Bank can transfer founds from one account to another without handling cash in;
a depository can do the same with physical securities just as in a bank account is opened
to avail of the banking services; an account has to be opened with a DP for holding
scripts in the depository segment.

ELIGIBILITY CRITERIA FOR A DEPOSITORY


A depository can be promoted by any the following
• A public financial institution as defined in section 4A of the companies Act 1956
• A bank include in the second schedule to the RBI Act, 1934
• A foreign bank operating in India with the approval of the RBI
• A recognized stock exchange.
• A custodian of securities approved y government of India
• An institution engaged in providing financial services where not less then 75% of
the equity
A gorging financial services institution approved by government of India. The sponsors is
a word. Which synonymously used in place of the promoters of a depository. A
depository company must have a minimum net worth of Rs. 100 crores. The sponsor(s) of
the depository have to hold at least 51% any can hold the balance of equity capital of the
depository company. Participant of that depository, if any can hold the balance of equity
capital but no single participant can hold at any point of time, more then 5% of equity
capital. No foreign equity individually or collectively either as a sponsor or as a DP or as
a sponsor and DP together, can hold more than 20% of he equity capital of the depository

DEPOSITORY PARTICIPANT

Depository participant (DP) is the agent of the depository and is the interface between the
depository and the investor. A DP can offer depository services only after it gets proper

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registration from SEBI. According to SEBI guidelines, financial institutions, bank


custodians, stock brokers etc. can become depository participant. Stock holding
corporation of India is the first participant in India registered with NSDL. IN order to
avail the services of a depository an investor has to open an account with a depository
through a DP just like a person maintaining the securities account of the investor and
handling it in accordance with the investors instructions. Banking services can be availed
through a branches whereas depository services can be availed through DP.

Both NSDL and CDSL have launched the facility for delivering instructions to DP over
Internet, called SPEED-e and EASI respectively. The facility can be used by all
registered users after paying the applicable charges.

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LEGAL FRAMEWORK

The operations of the depositories are primarily governed by the depositories Act, 1996,
securities and Exchange Board of Indian (Depositories and participants Regulations,
1996, Bay laws approved by SEBI, and business rules framed in accordance with the
regulations and byelaws.

The depositories Act passed by parliament received the President’s assent on August 10,
1996. It was notified in a Gazette on august 12 of the same year. The act enables the
setting up of multiple depositories in the country. This was to provide competition in the
service. At present, two depositories are registered with SEBI – the national securities
depositories Limited (NSDL) and central Depositories services (India) limited (CDSL).

Only a company registered under the companies Act, 1956 and sponsored by the
specified categories of by the specified categories of institutions can set up a depository
in India., Before commencing operations, depositories should obtain a certificate of
registration and a certificate of commencement of business from SEBI. The depository
offers services relating to holding of securities and facilitate processing of transactions in
such securities in book-entry form. The transactions handled by depositories include
settlement of market trades, securities lending and borrowing, pledge and hypothecation
etc. the rights and obligations of depositories, DP’s issuers and beneficial owners are
spelt out clearly in the depositories Act, 1996.

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AS PER ACT:
• Section 4: DP is an agent of NSDL: A DP is an agent of the depository, who
provides various services of the depository to this effect any investor ho would
like to avail the services of a depository has to enter into an agreement with any
DP of his choice. The DP will then make the depository services available to the
investor.
• Section 7: Free Transferability: The Securities held by an investor in the
depository are freely transferable from one beneficial owner to another.
• Section 8: Option to hold securities in demat form: In the depository system,
every investor subscribing to securities offered by an issuer has an option to
receive the same in physical form or dematerialized form. If an investor opts for
receiving the securities in dematerialized form, the issuer intimates the depository
the details of allotment of security as the beneficial owner of the at security in its
records.
• Section 9: Securities held in a depository are fungible: All securities held by the
depository are in dematerialized and fungible form.
• Section 10: Registered owner and beneficial owner: The depository is deemed to e
the registered owner for the purpose of affecting transfer of ownership of security
on behalf of a beneficial owner. But as a registered those securities. The
beneficial owner is entities to all rights and benefits as well as subject to all
liabilities in respect of the securities held in the depository.
• Section 14: Choice to opt out of depository: A beneficial owner opt out of a
depository in respect of any security by giving requisite intimation to the
depository.
• Section 16: Depository to indemnify losses: A depository shall indemnify a
beneficial owner of any loss cause due to negligence of the depository of
participant.

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THE DEPOSITORIES ACT, 1996

The depository act makes provision for the setting up to multiple depositors to India. The
investor has been granted the option of holding securities in a physical of decentralized
form. Thus it is matter of choice for the investor as to whether he wants to avail of the
depository services. Depository act, 1996 provide a legal trade work for establishment of
depository mode will be fungible. They will cases to have distinctive numbers. The act
provides for detailed regulations to be framed by SEBI as well as detailed by laws to be
laws to be framed by depositories with the approval of SEBI. SEBI has been given power
under section 18 (call for information and inquiry), section 19 (direction) and section
25( power of depository to make bye-laws) of the depository act.

COMMENCEMENTY OF BUSINESS

To get the business commenced by depository, the following is required to perform.


Registration: As per the provisions of the SEBI, Act a depository can deal in securities
only after obtaining a certificate of registration from SEBI, the sponsors of the proposed
depository should apply to SEBI for a certificate of registration in the prescribed form.
On being satisfied with the eligibility parameters of a company to act a depository, SEBI
may grant a certificate of registration subject to certain conditions.

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COMMENCEMENT OF BUSINESS

A depository which has obtained a certificate of commencement of business from SEBI


within one year from the date of receiving the certificate of registration from SEBI, SEBI
grants a certificate of commencement of business if it is satisfied that the depository has
adequate system and safeguards to prevent manipulation of records and transactions.
SEBI takes into accounts all matters relevant to the efficient and orderly functioning of
the depository. It particularly examines whether:

• The depository has a net worth of not less than Rs.100 lacks.
• The bye-laws of the depository have been approved by SEBI.
• The automatic against data processing system of the depository have been
protected against unauthorized access, alteration, destruction, disclosure or
dissemination of records and data;
• The network, network through which continuous electtronic means of
communications are established between the depository, DPs, issuers and R&T
agents;
• the depository has established standard transmission and encryption formats for
electronic communication of data between the depository, DPs, issuers and R&T
agents;
• The physical and electronic access to the premises, facilities, automatic data
processing systems , data storage sites and facilities including back up sites, and
to the electronic data communication network connecting the DPs issuers and
R&T agents is controlled monitored and recorded.

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• The depository has detailed operational manual explaining all aspects or its
functioning including the interface and methods of transmission if information
between the depository, issuers, R&T agents, DPs and beneficial owners.
• The depository has established adequate procedures and facilities to ensure that its
records are protected loss or destruction and arrangements have been made for
maintaining back-up facilities at a location different from that of the depository;
• The depository has made adequate arrangements, including insurance, for
indemnifying owners for any loss that may be caused to such beneficial owners
by the wrongful act, negligence or default of the depository or its DPs participants
or any employee of the depository or participants; and
• The granting of certificate of commencement of business in the interest of
investors securities market.

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RIGHT& OBLIGATION

Depositories have the rights & obligations conferred upon them under the depositories
Act 1906 the regulations made under the depositories act bye laws approved by SEBI &
the agreement made with DP’s issuers & their R&T agents.

Every depository must have adequate mechanisms for reviewing monitoring & evaluating
its control, system procedures & forward a copy of the inspection report to SEBI. The
depository is also required to ensure that the integrity of the automatic data processing
systems is maintained to ensure all time & take all precaution necessary to ensure that the
records are not lost, destroyed or tempered with. In the event of loss or destruction
sufficient back up of records should be available at a different place. Adequate measure
should be taken, including insurance, to protect the interests of beneficial owners against
any risk

Every depository is required to all such co-operations to the beneficial downers, issuers
R&T agents, custodian of securities other depositories and cleaning organization as is
necessary for the effective prompt and accurate clearance and settlement of security
transaction and conduct of business

The depository should indemnify beneficial owners of securities for any los cause to
them due to the negligence of the DP however, where the loss is caused due to the
negligence of a DP, the depository shall have the right to recover it from such DPs.

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BYE-LAWS: A depository is required to make bye laws governing its operation. The
byelaws have to be in conformity with depositories act, 1996 and the regulations made
there under and need to e approved by SEBI before becoming effective.

SERVICES OF DEPOSITORY

A depository established under the depository act, 1996 can provide any services
connecting with recording of the allotment of securities or transfer of ownership of
securities in the record of the depository. A depository can provide services through DP.
Generally the following securities are eligible for dematerialization.
• Share, scripts, stock, bonds, debentures or other marketable security of alike
nature.
• Units of mutual funds, rights under collective investment scheme and venture
capital funds, commercial paper, certificates of deposit, securities debt, money
market instrument, government securities and unlisted securities.
• Securities admitted to NSDL depository are notified to all DPs through circulars
and sent email every day. Investors are informed about these securities through
NSDL’s www.nsdl.co.in and Nest update a monthly newsletter of NSDL.

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FUNCTIONS OF DEPOSITORIES

DEMATERIALIZATION
One of the methods for preventing all the problems that occur with physical
securities is through dematerialization. India has demat route in which the book entry is
made electronically against securities that are cancelled, the share certificate are shredded
(destroyed) and corresponding credit entry of the number of securities is made in the
account opened with the DPs Dematerialization is the process by which a client can get
physical certificates converted into electronic balances maintained in its account with DP.
Securities held in dematerialized form are fungible i.e. they do not bear any
distinguishing features.

REMATERIALIZATION
Rematerialization is the process of converting electronics holding of investors back into
share certificates in paper form. The process of remat is also carried out through DP.
Once the securities are dematerialized it is not necessary that the investors to continue in
depository mode for all the time to come. He can switch over to remat. The depository
confirms rematerialization request to R&T agents.

ACCOUNT TRANSFER
The depository gives effect to the transfers resulting from the settlement of trades and
other transaction between various beneficial owners by recording entries in the account of
such beneficial owners.

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TRANSFER AND REGISTRATION


A transfer is the legal change of ownership of security in the records of the issuer. For
affecting a transfer, certain legal steps have to be taken like endorsement, execution of
transfer instrument and payment of stamp duty. The depository accelerated the transfer
process by registering the ownerships of entire issue in the name of the depository. Under
a depository system, transfer of securities occurs merely by passing book entries in the
records of the depositories on the instructions of the beneficial owners.

PLEDGE AND HYPOTHECATION


Depositories allow the securities placed with them to be used as collateral to secure loans
and other credits. In a manual environment, borrowers are required to deliver pledged
securities in physical form to the lenders or its custodian. These securities are verified for
authenticity and often need to be transferred in the name of order all this takes time. It
also has money cost by way of transfer fees or stamp duty. If borrower wants to
substitute the pledge securities, these steps have to be repeated. Use of depository
services for pledging/ hypothecation the security makes the process very simple and cost
effective. The securities pledge are transferred to segregated or collateral account through
book entries in the depository.

CORPORATE ACTION
A depository may handle corporate actions in two ways. In the first case, it merely
provides information to the issuer about the persons entitled to receive corporate benefits.
In the other case, depository itself the responsibility of distribution of corporate benefits.

LINKAGE WITH CLEARING SYSTM


Whether it is separate Clearing Corporation attached to a stock exchange or clearing houses of
a stock exchange, the clearing systems performs the functions of ascertaining pay in/sells or
pays out/buy of brokers who have traded on die stock exchange. Actual delivery of securities to

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the clearing system from the selling brokers and delivery of securities from the clearing system
to buying broker is done by the depository. To achieve this, depositories and

ADMISSION OF PARTICIPANTS
To know properly about the admission of participants, it requires to know firstly
depository participants (DP's).Depositor participants are described as an agent of the
depository. They are the intermediaries between depository and the investor. The
relationship between the depository and the investor. The relationship between and the
depository is governed by an agreement made between the two under the depositories Act
In a strictly legal sense, a DP is an entity who is registered as such with SEBI
under the provisions of the SEBI Act. As per the provision of this Act, a DP can offer
depository related services only after obtaining a certificate of registration from SEBI.

ADMISSION OF PARTICIPANTS
Any person or institute desiring to become a participant shall file an application with the
SEBI. The applicant should submit form 'E' specified under SEBI (depository and
participants) regulations, 1996 and the annexure specific there under along with the
following documents.
• Business history of the applicant for last three years.
• Net worth as certified by charted accountant as per the latest audited accounts.
• Copies of the annual reports of the last three years.

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ELIGIBILITIES:
• The applicants have a minimum worth of Rs.lcr.
• The applicant should not have been convicted inlays of the five years immediately
preceding the filling of true application in any matter involving misappropriation
of funds and securities, theft, embezzlement of fund fraudulent conversion of
forgery.
• The applicant shall be required to furnish details of its board of
directors/authorized officials, who shall be responsible for acting on behalf of the
participants.
• The depository may conduct entrance examination and or interviews to examine
the knowledge of the participant and its staff related to the depository's
operational, functional and technical aspects.
• The applicant should have adequate office space exclusively for operations and
adequate infrastructure.
• The participant should follow the hardware and software requirements as specified
and the participants which are a CC shall follow the hare ware and software
requirements for the purpose.
• For the purpose of satisfying it self regarding the eligibility of the applicant to
become a participant.

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TYPES OF ACCOUNTS

Beneficially Clearing Member Intermediary


Account Account Account

House Non-House
Beneficiary Account
It is an ownership account the holders of securities in this type of account hold these securities

It has two types:- House & Non house


A DP is allowed to open beneficiary account holding its own shares. These accounts are called
house Accounts. Where in if DP opens some other account with depositary it is known as non-
house accounts.

CLEARING MEMBER ACCOUNT


The entities that are authorized to pay in & receive the payout form a clearing corporation!
clearing house against trades done by them or their clients are known as clearing member
(CM's). All pay in & pay out transaction are carried out through their account.
BOOKERS who are members of a stock exchange connected to NSDL open these accounts. It is further
Divided into 3 parts.

POOL ACCOUNT
Settlement wise balance of all the scrip's regarding the payout securities are maintained in this
account Further, holders of these accounts are not eligible to receive any monetary as well as

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non Monetary benefits like decided & bonus. A member can make only the concerned DP's
generates ODC pool A/C member only & numbers is known as client DP.

VYAJ BADLA ACCOUNTS


Stares received by members against funds loaned in Vyaj Badla trades are to be kept in the
custody of the exchange, as per SEBI guidelines on MCFS, in demat shares. This has been
transaction by opening special C, NC's for all members doing VB transaction. These CM accounts
are referred to as VB accounts of the members. While opening these accounts, a power of
attorney was taken by the exchange giving is authority to operate these accounts.

INTERMEDIARY ACCOUNTS
As per SEBI regulations on stock lending & brown with qualified intermediary can lend &
borrows stocks from clients. The depository intermediary borrows from lenders & leads to
borrow. Intermediary accounts with DP of its choice, for executing stock lending & balance
transaction made through them. An intermediary accounts may issued in only after obtaining
registration from SEBI under an approved lending scheme & getting the approval for the
depository for opening the account. The process of opening an intermediary account is
same as for opening a corporate beneficiary account. The Company Name depository may
transfer to or from an intermediary accounts only as per the procedure prescribed for this
securities.

INTERNET BASED SERVICES


Value Added Services:
Depositor is a facility for holding securities electronically in which securities transactions
are processed by book entry. In addition to the core services of electronic custody and trade
settlement services, NSDL provides special services like pledge, hypothecation of
securities, automatic delivery of securities to clearing corporations, distribution of cash
and non-cash corporate benefits (Bonus, Right, IPOs etc.), stock lending, demat of

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warehouse receipts and Internet-based services such as SPEED-e and IDeAS.

SPEED-e:
NSDL launched SPEED-e (pronounced as speedy) in September, 2001. Any Participant of
NSDL can subscribe to SPEED-e, the common infrastructure of NSDL. SPEED-e enables
demat account holders (including Clearing Members) to submit delivery instructions
directly on the Internet through SPEED-e website https://speed-e.nsdl.com. SPEED-e is
available only to those participants who have subscribed to it and the users sign an
agreement with the participant.

IDEAS:
IDEAS (Internet based Demat Account Statement) is the facility for viewing balances and
transaction in the demat account updated on an online basis with a delay of maximum 30
minutes. This facility is available to the Users of SPEED-e, Clearing Members who have
subscribed to IDEAS and to those clients whose Participants are registered for IDEAS. A
demat account holder or a Clearing Member will have the option to access IDEAS either
as a Password or as Smart Card User.

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NSDL
ABOUT NSDL
NSDL, the first depository in India, established in August 1996 and promoted by
institutions of national stature responsible for economic development of the country has
since established a national infrastructure of international standards that handles most of
the securities held and settled in dematerialized form in the Indian Capital Market.
Although India had a vibrant capital market which is more than a century old, the paper-
based settlement of trades caused substantial problems like bad delivery and delayed
transfer of title till recently. The enactment of Depositories Act in August 1996 paved the
way for establishment of NSDL, the first depository in India. This depository promoted by
institutions of national stature responsible for economic development of the country has
since established a national infrastructure of international standards that handles most of
the securities held and settled in dematerialized form in the Indian capital market.

JOINING NSDL.........
NSDL carries out its activities through service providers like Depository Participants
(DPs). Issuing companies and their Registrars and Share Transfer Agents,
Clearing corporations / Clearing Houses of Stock Exchanges. These entities are called
business 'partners in NSDL terminology. These entities need to get integrated into NSDL
depository system to be able to provide various services to the investors and Clearing
Members.
The investor can obtain depository services through a depository participant of
NSDL, Just as one opens a bank account in order to avail of the services of a bank, an
investor opens a depositors7 account with a depository participant in order to avail of
Depository facilities. A clearing member can open a special account in the depository
system for the purpose of settling trades done on stock exchanges. The clearing account
enables the clearing member to receive securities from its clients for delivery to the

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Clearing House / Clearing Corporation as pay-in, and to distribute the pay-out to its clients
received from the Clearing House / Clearing Corporation.
Issuer can make dematerialization services available to their shareholders by
signing an agreement to that effect with NSDL. After the agreement is entered into, and
electronic link is established NSDL, Issuer or its R & T Agent. The clearing
corporations / houses of stock exchanges also have to be electronically linked to the
depository in order to electronically receive securities delivered by clearing members
towards pay-in and to give out securities to clearing towards pay-out.

DEPOSITORY SYSTEM - BUSINESS PARTNERS


NSDL carries out its activities through various functionaries called "Business Partners"
who include Depository Participants (DPs), Issuing companies and their Registrars and
Share Transfer Agents, Clearing Corporations / Clearing Houses of Stock Exchanges.
NSDL is electronically linked to each of these business partners via a satellite link
through Very Small Aperture Terminals (VSATs) or through Leased land lines. The entire
integrated system (including the electronic links and the software at NSDL and each
business partner's end) is called the "NEST" (National Electronic Settlement & Transfer)
System.

DEPOSITORY PARTICIPANT (DP)


The investor obtains Depository Services through a DP of NSDL. A DP can be a bank,
financial institution, a custodian, a broker, or any entity eligible as per SEBI
(Depositories and Participants) Regulation, 1996. The SEBI regulations and NSDL bye
laws also la\ down the criteria for any of these categories to become a DP.

Just as one opens a bank account in order to avail of the services of a bank, an investor
opens a depository account with a DP in order to avail of depository facilities. Though
NSDL commenced operations with just three DPs, Depository Participant Services are
no\* available in most of the major cities and towns across the country.

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ISSUING COMPANIES / THEIR REGISTRAR &


TRANSFER AGENTS
Securities issued by issuer who have entered into an agreement with NSDL can be
dematerialized in the NSDL depository. As per this agreement, issuer aggress to verify the
certificates submitted for dematerialization before they are dematerialized and to maintain
electronic connectivity with NSDL. Electronic connectivity facilitates dematerialization,
rematerialisation, daily reconciliation and corporate actions.

CLEARING CORPORATION / HOUSE


The clearing corporations / houses of stock exchanges also have to be electronically linked
to the repository in order to facilitate the settlement of the trades done on the stock
exchanges for rematerialized shares. At present, all the major clearing corporations /
houses of stock exchanges are electronically connected to NSDL.

ACCOUNT OPENING:
In order to avail of depository facilities, an investor has to open a beneficiary account with
a depository participant of his choice. This is similar to opening a bank account to use the
banking services. Just as one can hold funds in a bank account and transfer funds across
accounts without actually handling cash; one can hold securities in a depository account
and transfer securities across depository accounts without actually handling share
certificates.
The account holder is called 'beneficial owner' in a depository system and the account is
known as 'beneficiary account'.

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CERTIFICATION PROGRAMME:
NSDL HAS LAUNCHED CERTIFICATION PROGRAMME ON
DEPOSITORY.

This programme helps the candidate to understand and assimilate the procedures to be
followed in conducting various transactions in the NSDL depository system. NSDL has
made it mandatory for all branches of Depository Participants (DPs) to have atleast one
person qualified in the Certification Programme. For the benefit of- the staff of the DPs,
NSDL conducts training programmes which cover all aspects of depository services.
NSDL is using the National Stock Exchange of India Limited's (NSEIL) Certification in
Financial Markets (NCFM) infrastructure for conducting the "NSDL-Depository
Operations Module". NSE"s Certification in Financial Markets (NCFM) is an on-line
testing system. The entire process of testing, assessing and scores reporting in the NCFM
is fully automated. The test is conducted on weekdays at all six NSE Offices.

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CHARGES:
NSDL provides depository, services to investors through Depository Participants Ps).
NSDL does not charge investors directly but charges its DPs, who in turn charge
investors. DPs have their own charge structure for services rendered by them to the
investors, charges that NSDL lies on DPs are as under:

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CDSL
ABOUT CDSL.......

The Central Depository Services India Limited (CDSL) was established in 1999 and is
the second securities depository in India. Its objective is to provide convenient, dependable
and depository services and facilitates holdings of Demat (securities in electronic form.
It5 network covers 100 cities always-on connectivity to around 500 centers nationwide.
The company has handled Demat for over 8000 million securities settlements. The
number is still growing and will continue since the government plans to phase out
physical trading of shares. This will exchange to be processed at an online depository.

CDSL was promoted by Bombay Stock Exchange Limited (BSE) jointly with leading
banks such as State Bank of India, Bank of India, Bank of Baroda, HDFC Bank, Standard
Chartered Bank, Union Bank of India and Centurion Bank.

CDSL connects to 372 depository participants (DPs) nationwide through its network.
Every branch has access to the company's online database. A minute's downtime will
severally affect the daily operations of the capital market. To ensure efficient operations
which is reliable, free from downtime and able to support the growing number of users.
CDSL had to strengthen its network elements like connectivity applications and hardware.

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CLEARING BANKS;

During the year, Indusind Bank was admitted as a new clearing bank to provide wider
choice in clearing and settlement service to the clearing members. This brings the number
of clearing banks to four.
Professional clearing membership: NSCCL started professional clearing membership and
stock holding clearing corporation limited has been admitted as the first professional
clearing membership on CM segment.

1. Account opening-.
To open your Demat Account, you first need to select a Depository Participant, or DP. of
your convenience. CDSL has a host of top-notch DP's spread across the length and breadth
of the country. Use our search engine below to find a D? who is located closest to your
home or place of work.
Once you make your selection, you will be taken to an informative page of your chosen
DP. If you are satisfied with what you read, use my of the two options in the top-right of
the DP page to open your demat account.

BSE AS THE SERVICE PROVIDER


CDSL uses BSE - The Stock Exchange Mumbai, as its service provider. CDSL has been
promoted by BSE along with a few Indian banks. This prompts BSE to have a
considerate view of the operations at CDSL. The two organizations work hand-in-glove
in their daily activities. The other reasons are:
• BSE already has a sound nationwide network infrastructure that CDSL can
piggyback on. There's no need to re-invent the wheel.
• BSE's network infrastructure is in the same building and the physical proximity
helps in coordination.
• BSE has an efficient team of technical personnel who perform 24x7.

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EASI FACILITY:

CDSL has introduced Electronic Access to Securities Information (easi) facility. Easi
enables Beneficial Owners / Clearing Members having demat account with CDSL system
to view their holdings and obtain transaction status through the internet. Easi is accessible
from anywhere. anytime through CDSL website - vvvw.cdslindia.com which is a self-
service channel accessible 24x7.

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For Main DPs : Rs. 3,000 per month or the amount of the actual bill for a given month
Whichever is higher.

For DP-Branches: Rs. 2,000 per month or the amount of the actual bill for a given
month whichever is higher
Fees for Clearing Members:
CDSL collects only Rs. 500/- per month from its DPs for a CM except for CM Investor
Securities Account. Further, a fee of Rs. 6/- will be payable:- For transfer from a CM a/c
to any CM a/c For credit of securities in pay-out declared by an exchange into a CM a/c
meant for other exchange.

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RESEARCH METHODOLOGY

INTRODUCTION:

Research is an organized and systematic way of finding answers to questions.

SYSTEMATIC because there is a definite set of procedures and steps which we will
follow. There are certain things in the research process which are always done in order to
get the most accurate results.

ORGANIZED is that there is a structure or method in going about doing research. It is a


planned procedure, not a spontaneous one. It is focused and limited to specific scope.

FINDING ANSWERS is the end of all research. Whether it is the answer to a hypothesis
or even a simple question, research is successful when we find answers. Sometimes the
answer is no, but it is still an answer.

QUESTIONS are central to research. If there is no question, then the answer is of no use.
Research if focused on relevant, useful, and important questions. Without a question,
research has no focus, drive, or purpose.

RESEARCH DESIGN:
Research design provides the glue that holds the glue that holds the research project
together. A design is used to structure the research, to show how all of the major parts of
the research project - the samples or groups, measures, treatments or programs, and
methods of assignment -work together to try to address the central research questions.

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DATA COLLECTION:
Utmost care must be energized while collecting data because data constitute the
foundation on which the superstructure of statistical analysis is built. The result obtained
from the analysis are properly interpreted and policy decisions are taken. Data may be
obtained either from the primary source or the secondary source.
Primary Data: Primary data are obtained by a study specifically designed to fulfil the
data needs of the problem at hand. Such data are original in character and are generated
in large number of surveys conducted mostly by government and also by some
individuals, institutions and research bodies.
Secondary Data: Data which are not originally collected but rather obtained from
published or unpublished sources are known as secondary data. The secondary data
constitute the chief material on the basis of which statistical work is carried out in many
investigations.

RESEARCH INSTRUMENTS:
The main research instrument in collection the primary data is "The Questionnaire". This
is by for the most common instrument in collection primary data which has been used for
fulfilling our objectives for obtaining further information. Secondary information has
been obtained from websites, magazines, bulletins, books etc.

SAMPLING DESIGN:
Where secondary data is not available for the problem under study or decision may be
taken to collect primary data. The required information may be obtained by following the
sample methods.

SAMPLING PLAN:
Sampling is an effective step in collection primary data and has a great influence on the
quality of results. The sampling plan includes the population, sample size, sample unit
and sampling technique.

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POPULATION:
Population is our study is all the investors.

SAMPLE SIZE:
Sample size for research is 100 investors.

SAMPLE UNIT:
The sample unit or research is taken as the single individual investor.

SAMPLE TECHNIQUE:
Selection of the investor is done on the basis of convenience sampling.

AREA OF STUDY:
The study is limited to LSE only. The main reason behind this is convenience in
conducting the research.

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OBJECTIVES OF THE STUDY

• To know about the appropriate organisational structure of Ludhiana Stock

Exchange.

• To study about various departments of Ludhiana Stock Exchange and their

performance.

• To know the financial aspect of the Ludhiana Stock exchange.

• To know about the awareness of people about Demat .

• To study the overall functionary of depository.

• To study investors perceptions forwards NSDL and CDSL depository.

• To know about the services provided by NSDL and CDSL.

• To know the satisfaction level provided by NSDL and CDSL.

• To know the option of investor regarding the services of NSDL and CDSL

• To know the benefits derived by investor from NSDL and CDSL.

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ANALYSIS AND INTERPRETATION

1. Since how long you are transacting on stock exchange

Options responses percentage %


0-1 years 10 10%
1-2 year 7 7%
more than 2 year 83 83%
total 100 100

Interpretation:
From the above analysis. it is clear that most of the respondents like long period
transaction at stock exchange as 83% respondents have & like ore than 2 years

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2. Under which depository you are maintaining your demat account?


Options responses percentage %
CDSL 15 15%
NSDL 60 60%
Both 25 25%
total 100%

Interpretation
The above diagram shows that most of the respondents like the demat account
under NSDL depository as 60^ respondents shows their willingness towards NSDL, 25%
towards both & 15% towards CDSL

3. What type of services you are availing from your DP?

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Services respondent

percentage %
Demat 50 50%
Pledge 8 8%
Stock lending & Borrowing 3 3%

Traders 33 33%
All of Above 6 6%
total 100 100%

Interpretation
From the above it is clear that dematerialization of securities is the most favourable
among the respondents as it includes 50% of the shares followed by traders which has
33% share. Stock lending & borrowing has the minimum share of 3%

4. Who much satisfied are you with the services provided by DP?
levels response s percentage %

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highly satisfied 18

18%
satisfied 78 78%
neutral 4 4%
dissatisfied 0 0
highly dissatisfied 0 0
total 100 100

Interpretation
From the above it is clear that major respondents are satisfied from the
services provided by DP, 18l% respondents are highly satisfied from the services
provided by DP, 18% respondents are highly satisfied 4% are neutral 7 no any
respondents is dissatisfied from the services provided by DP

5. Period of receipt of statement of account (holding statement)


period response s percentage %
fortnightly 1 1%
monthly 75 75%
quarterly 23 23

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half yearly 1

1%

Interpretation
Most of the respondents they receive the statement of their account every
month

6. How much do you rate your DP?


levels responses percentage %
excellent 8 8%
good 80 80%
average 10 10%
Bad 2 2%
total 100 100

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Interpretation
Majority respondents are the view that their DP is good as their consent is
8% towards good, 8% towards excellent 10% average and 2% bad.

7. What are your views’ about the amount charged by your DP?
Level response s percentage %

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high charges 18

18%
reasonable charges 82 82%
low charges 0 0
total 100 100

Interpretation
As 82% respondent says that charges which are charged by theirs DP is
reasonable 7 18l% says high charges.

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8. Why do you like the depository in which you have the account?
Options responses percentage %
less demat charges 10 10%
quick feedback 10 10%
efficient services 80 80%
any other 0 0%
total 100 100

Interpretation
80% respondents like the depository because of efficient services provided
by DP 10% respondents like DP because of lesser demat charges & 10% because of
quick feed back

9. To the investor which depository services you suggest?

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Depository response s

percentage %
NSDL 40 40%
CDSL 60 60%
total 100 100

Interpretation
Majority of respondents suggest CDSL as a bet depository as the decision
of 60^% respondents towards CDSL 40% towards NSDL

10. What are the reasons for selecting particular DP?


Medium response s percentage %
Convince 28 28%
safety 12 12%

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good infrastructure 9

9%
minimum processing time 19 19%
loss service charges 32 32%
total 100 100

Interpretation
From the above analysis most of the respondents refer low service charges
as the first parameters fro selecting their depository as it has been rated 32% of the
respondents 28% of the respondents choose the particular DP for their convenience.
Good infrastructure 7 safety factors have the minimum criteria

11. Do you want to open now demat accounts


a) Yes b) No
If yes or planning then with which depository
Options responses percentage %
CDSL 32 32%
NSDL 56 56%

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Both 12

12%
total 100 100

Interpretation
Most of the respondents want to open more new demat accounts as 56^
respondents are willing to open new demat accounts in NSDL depositary & 32%
respondent like CDSL.

12. No. of respondents who want to change their DP


medium response s percentage %
same DP 96 96%
new DP 4 4%
total 100 100

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Interpretation
It is clear from the above analysis that there are very few respondents who
are not satisfied with their DP 7 want to shift to new DP. as 96% respondents want to be
with the same DP.

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LIMITATIONS OF THE STUDY

No study is complete in itself however good it may be 7 every study has some limitations
some of the limitations are as follows:
• Due to shortage of time as well as resources the survey was stickled only to
Ludhiana & due to small number of investors the study may not represent the
accurate data.
• The respondent’s bias might have crept in while filling the questionnaire
• Some of the respondents of the survey were unwilling to share the information so
some of the information may have been left due to time shortage.

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SUGGESTIONS /
RECOMMENDATIONS

• The priority of depository participant should be setting the investors grievances


because investor plays a significant role in making a DP successful.
• NSDL should try to reduce the charges in order to satisfy the investor a more and
more of the investors are of the opinion that dealing in NSDL is costlier over
dealing in physical shares
• More awareness among the public should be created by advertising campaigns.
• reduction in time taken for sending holding statement as well as transaction
purposes.
• The seminar should be conducted by CDSL representatives at different stock
• Exchanges 7 places to provide knowledge about it services

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CONCLUSION

From the study conducted at it is concluded that the introduction of depository in India
in 1996 has totally transformed the Indian market from dull land slow market to speedy
and computerized market.

Depository established under the depository act can provide various services connected
with recording of allotment of securities or transfer of ownership of securities in the
record of a depository

Moreover, with the introduction of Demat facility the investor as well as brokers are not
finding and difficulty in the sale and purchase of shares. Today’s investors are more
conscious and intelligent about he services begin provided by DP’s therefore paper
working of DP plays an important role in the choice of selecting a DP by investor.

As far as the working of the LSE security ltd. is concerned, the investors are enjoying the
services of LSE security ltd. they feel and perceive that they are in safe hands.

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QUESTIONAIRE

1. Since how long, you are transacting on stock exchange?


A) 0 To 1 Year B) 1 To 2 Year C) More Than 2 Years

2. Under which depository you are maintaining your demat account


A) CDSL B) NSDL C) BOTH

3. What types of services you are availing from your DP?


A) Demat
B) Pledge
C) Stock lending & borrowing
D) Trades
E) If anyone, please specify _____________

4. How much satisfied are you with the series provided by DP


A) Highly Satisfied
B) Satisfied
C) Neutral
D) Dissatisfied
E) Highly Dissatisfied

5. Do you receive regular statement about your account ?


A) YES B) NO

6. If yes, then specify the period

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A) Fortnightly b) Monthly
C) Quarterly d) Half Yearly

7. How do you rate your DP?


A) Excellent b) Good C) Average
D) Bad

8. What are you views about the amount charged by your DP?
A) High Charges B) Reasonable Charges C) Low charges

9. Why do you like the depository in which you have the account?
A) Lesser Demat Charges
B) Quick Feed Back
C) Efficient Services
D) Any Other ________

10. To the investor which depository service you suggest?


A) NSDL B) CDSL

11. What are the reasons for selecting particular DP?


A) Convenience B) Safety C) Good Infrastructure
D) Minimum Processing Time E) Low Services Charges

12. Do you want to open more new Demat accounts ?


A) Yes B) No
if yes or planning then with which depository
A) NSDL B) CDSL C) BOTH

13) Any suggestion regarding improvement of services in your DP?

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_______________________________________________________
_______________________________________________________

14. Give an opportunity where would you like to open a new demat account?
A) With Same Old DP (specify name ) ______________
B) Any Other DP (specify name) _________________

Name :
Age
Occupation

Thanks for your cooperation

Signature

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GLOSSARY

STOCK EXCHANGE- A stock exchange, (formerly a securities exchange) is a


corporation or mutual organization which provides "trading" facilities for stock brokers
and traders, to trade stocks and other securities.

MARGIN is the amount, which is collected from tile brokers for the safety of
transactions.

SPECULATOR is a person who trades derivatives, commodities, bonds, equities or


currencies with a higher-than-average risk in return for a higher-than-average profit
potential. Speculators take large risks, especially with respect to anticipating future price
movements, in the hope of making quick, large gains.

DERIVATIVE is a financial instrument that is derived from some other asset, index,
event, value or condition (known as the underlying)

HEDGING is a technique designed to eliminate or reduce risk. HEDGE is a position


established in one market in an attempt to offset exposure to price fluctuations in some
opposite position in another market with the goal of minimizing one's exposure to
unwanted risk. An example of a hedge would be if you owned a stock, then sold a futures
contract stating that you will sell your stock at a set price, therefore avoiding market
fluctuations.

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TRANSACTION is an agreement, communication, or movement carried out between


separate entities or objects, often involving the exchange of items of value, such as
information, goods, services, and money.

DEPOSITORY is defined as an organization where the securities of a shareholder are


held in the form of electronic accounts in the same way as the bank holds money.

DEMATERIALIZATION- Dematerialization is the process by which a client can get


physical certificates converted into electronic balances.

REMATERIALIZATION- Rematerialization is the process by which a client can get


his electronic holdings converted in to physical certificates.

SECURITIES- A security is a fungible, negotiable instrument representing financial


value.

BROKER- A broker is a party that mediates between a buyer and a seller. A broker who
also acts as a seller or as a buyer becomes a principal party to the deal.

EQUITY-Ownership interest in a corporation in the form of common stock or preferred


stock. It also refers to total assets minus total liabilities, in which case it is also referred to
as shareholder's equity or net worth or book value.

DEBENTURE- A debenture (also called a note) is a certificate issued by a company


acknowledging that it has borrowed money on which interest is being paid. It is an
unsecured corporate bond or a corporate bond that does not have a certain line of income
or piece of property or equipment to guarantee repayment of principal upon the bond's
maturity.

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IPO- The first sale of stock by a private company to the public. IPOs are often issued by
smaller, younger companies seeking the capital to expand, but can also be done by large
privately owned companies looking to become publicly traded.

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ABBREVIATIONS

ABC - Additional Base Capital


ADR - American Depository Receipt
AGM - Annual General Meeting
ATM - At the Money
BBO - Best Buyer Orders
BMC - Base Minimum Capital
BO - Beneficial Owner
BOA - Basis of Allotment
BOLT - BSE Online Trading
BRLM - Book Running Lead Manager
BSE - Bombay Stock Exchange
CARE - Credit Analysis and Research Limited
CC - Clearing Corporation
CCI - Controller of Capital Issues
CDSL - Central Depository Services Ltd.
CH - Clearing House.
CIMC - Collective Investment Management Company
CIS - Collective Investment Scheme
CLA - Central Listing Authority
CLB - Company Law Board
CM - Clearing Member
CME - Chicago Mercantile Exchange
CRISIL - Credit Rating and Information Services of India Limited
DCA - Department of Company Affairs
DEA - Department of Economic Affairs
DI - Delivery Instruction

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DIP - Disclosure and Investors Protection


DP - Depository Participant
DPM - Depository Participant Module
DRF - Demat Request Form
DRN - Demat Request Number
DRR - Debenture Redemption Reserve
DvP - Delivery v/s Payment
EDIFAR - Electronic Data Information Filling and Retrieval
EFT - Electronic Fund Transfer
EVA - Economic Value Added
EXIM - Export-Import
FCCB - Foreign Convertible Currency Bond
FDI - Foreign Direct Investment
FEMA - Foreign Exchange Management Act, 1999
FERA - Foreign Exchange Regulation Act, 1973
F&O - Futures & Options
GS - Government Securities
GDP - Growth Domestic Product
GDR - Global Depository Receipt
GIC - General Insurance Corporation of India
ICAI - Institutes of Chartered Accountant of India
ICICI - Industrial Credit and Investment Corporation of India
ICRA - Investment Information and Credit Rating Agency of India
ICSI - Institute of Company Secretaries of India
IDBI - Industrial Development Bank of India
IDFC - Infrastructure Development Finance Corporation
IDR - Indian Depository Receipt
IEPF - Investor Education and Protection Fund
IFCI - Industrial Finance Corporation of India
IGC - Investors Grievance Cell

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IL & FS - Infrastructure Leasing & Financing Services


IOSCO - International Organization of Securities Commission
IPF - Investors Protection Fund
IPO - Initial Public Offer
ISF - Investors Service Fund
ISIN - International Securities Index Number
ITM - In-the-money Option
LEAPS - Long-term Equity Anticipation Securities
LIC - Life Insurance Corporation of India
MF - Mutual Fund
MRTP - Monopolies and Restrictive Trade Practices
MTM - Market to Market
NABARD - National Bank of Agricultural and Rural Development
NAV - Net Asset Value
NEAT - National Exchange for Automated Trading
NOPAT - Net Operating Profit after Tax
NRI - Non-Resident Indian
NSCCL - National Securities Clearing Corporation Limited
NSDL - National Securities Exchange Board of India
NSE - National Stock Exchange
NTM - Near- the- money Option
NT - Negotiated Trade
ONICRA - Onida Individual Credit Rating Agency Of India Ltd
OL - Odd Lot
OTM - Out-of-the Money Option
PAN - Permanent Account Number
PFC - Power Financial Corporation
PRISM - Parallel Risk Management System
QIB - Qualified Institutional Buyers
RBI - Reserve Bank of India

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ROC - Registrar of Companies


RTA - Registrar & Transfer A gent
RTGS - Real Time Gross Settlement
RTI - Registrar & Transfer to the Issues
S & P - Standard & Poor
SAST - Substantial Acquisition of Shares & Takeovers
SAT - Securities Appellate Tribunal
SBTS - Screen Based Trading System
SC(R)A- Securities Contract (Regulation) Act, 1956
SC(R)R - Securities Contract (Regulation) Act, 1957
SEBI - Securities Exchange Board of India
SFC - State Financial Corporation
SGF - Settlement Guarantee Fund
SIDC - State Industrial Development Corporation
SL - Stop Loss
SMD - Secondary Market Department
SMAC - Secondary Market Awareness Campaign
SPAN(R) – Standard Portfolio Analysis of Risk
STT - Securities Transaction Tax
SURCON – Surveillance and Control
TFCI - Trade Fairs & Conferences International
TGF - Trade Guarantee Fund
TM - Trading Member
UTI - Union Trust of India
VAR - Value At Risk Margin
VCF - Venture Capital Fund
VCU - Venture Capital Undertaking
V-SAT - Very Small Aperture Terminal

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BIBLIOGRAPHY

Books
• Aggarwal Sanjiv , Bharati Guide to Indian capital market, Bharat law house
printers, 2000
• Chandra Prasanna financial management theory & practice Tata mc. Graw Hill
publishing company ltd. 2005

Websites
• www.nsdl.co.in
• www.nsdlindia.com
• www.cdsl.co.in
• www.sebigov.com

Magazines
• LSE Bulletin
• Home Book for NSDL depository

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