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PRESENTATION ON
SECONDARY MARKET
PRESENTED BY:
AMIT KUNAL
DEEPIKA MAHESHWARI
GAURAV SHARMA
GUNJIT KAPOOR
ILA MEHROTRA
KARUN DEV SINGH
NEHA JAITHLYA
NEHA KATIYAR
INTRODUCTION
The securities markets in India have witnessed several policy initiatives, which
have refined the market micro-structure, modernized operations and broadened
investment choices for the investors.
Due to rapid changes in volatility in the securities market from time to time,
there was a need felt for a measure of market volatility in the form of an index
that would help the market participants.
Other than the introduction of new products in the Indian stock markets, the
Indian Stock Market Regulator, Securities & Exchange Board of India (SEBI)
allowed the direct market access (DMA) facility to investors in India on April 3,
2008.
As a result of the gradual reform process undertaken over the years, the Indian
G-Sec market has become an active secondary market, electronic trading and
settlement technology ensures safe settlement with Straight through Processing
(STP).
SECURITIES MARKET AND FINANCIAL SYSTEM
The securities market has two interdependent and inseparable segments, the
new issues (primary market) and the stock (secondary) market.
PRIMARY MARKET
• The primary market provides the channel for sale of new securities. Primary
market provides opportunity to issuers of securities; government as well as
corporates, to raise resources to meet their requirements of investment and/or
discharge some obligation.
•The primary market issuance is done either through public issues or private
placement.
SECONDARY MARKET
•Secondary market is the place for sale and purchase of existing securities. It
enables an investor to adjust his holdings of securities in response to changes in
his assessment about risk and return.
•It enables him to sell securities for cash to meet his liquidity needs. It
essentially comprises of the stock exchanges which provide platform for
trading of securities and a host of intermediaries who assist in trading of
securities and clearing and settlement of trades. The securities are traded,
cleared and settled as per prescribed regulatory framework under the
• The secondary market has further two components,
Over-the-counter (OTC) market
Exchange-traded market
• OTC is different from the market place provided by the Over The Counter
Exchange of India Limited. OTC markets are essentially informal markets where
trades are negotiated. Most of the trades in government securities are in the OTC
market.
• A variant of secondary market is the forward market, where securities are
traded for future delivery and payment.
•The versions of forward in formal market are futures and options. In futures
market, standardized securities are traded for future delivery and settlement.
•In case of options, securities are traded for conditional future delivery. There
are two types of options–a put option permits the owner to sell a security to the
writer of options at a predetermined price while a call option permits the owner
to purchase a security from the writer of the option at a predetermined price.
FUNCTIONING OF SECONDARY MARKET:-
• The trading on stock exchanges in India used to take place through open
outcry without use of information technology for immediate matching or
recording of trades.
BUT…….
NOW…..
•It provides full anonymity by accepting orders, big or small, from members
without revealing their identity, thus providing equal access to everybody.
•NSE has main computer which is connected through Very Small Aperture
Terminal (VSAT) installed at its office.
•The main computer runs on a fault tolerant STRATUS mainframe computer at
the Exchange.
•Brokers have terminals installed at their premises which are connected through
VSATs/leased lines/modems.
•An investor informs a broker to place an order on his behalf. The broker enters
the order through his PC, which runs under Windows NT and sends signal to the
Satellite via VSAT/leased line/modem.
•The signal is directed to mainframe computer at NSE via VSAT at NSE's office.
A message relating to the order activity is broadcast to the respective member.
The order confirmation message is immediately displayed on the PC of the
broker.
•This order matches with the existing passive order(s) otherwise it waits for the
active orders to enter the system. On order matching, a message is broadcast to
the respective member.
•All orders received on the system are sorted with the best priced order getting the
first priority for matching i.e., the best buy orders match with the best sell order.
SOFTWARES
NSE: Stocks eligible for inclusion in Nifty must have a six monthly
average market capitalisation of Rs.500 crore or more during the last
six months.
BSE: Companies have been classified as large cap companies and small
cap companies. A large cap company is a company with a minimum
issue size of Rs. 10 crore and market capitalization of not less than Rs.
25 crore. A small cap company is a company other than a large cap
company.
1000 98 1000 99
b. The impact cost is the percentage price movement caused by an order size of Rs.1 Lakh
from the average of the best bid and offer price in the order book snapshot. The impact cost
is calculated for both, the buy and the sell side in each order book snapshot
Floating Stock:
Under the 'full-market capitalization' methodology, the total market capitalization of a
company, irrespective of who is holding the shares, is taken into consideration for
computation of an index. However, if instead of taking the total market capitalization,
only the Free-float market capitalization of a company is considered for index
calculation, it is called the Free-float methodology.
Free-float market capitalization is defined as that proportion of total shares issued by the
company which are readily available for trading in the market. It generally excludes
promoters' holding, government holding, strategic holding and other locked-in shares,
which will not come to the market for trading in the normal course. Thus, the market
capitalization of each company in a Free-float index is reduced to the extent of its Free-
float available in the market.
NSE:
Companies eligible for inclusion in S&P CNX Nifty should have atleast 12% floating
stock. For this purpose, floating stock shall mean stocks which are not held by the
promoters and associated entities (where identifiable) of such companies.
eria,
ke up the Sensex!Second: Add all the “free-float market cap’s” of all the 30 companies!Third: Make
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