Unit 2 Capital Market Operations

Functions of New Issue Market Contents of Offer Document Methods of Floating New Issue Procedure for Initial Public Offer (IPO) SEBI Guidelines Players in New Issue Market Book Building Process Secondary Market Operations NSE,BSE,OTCEI SEBI and Its Role in the capital market Depository Services

SEBI and Its Role in the Capital Market

SEBI and Its Role in the Capital Market

Securities and Exchange Board of India was set up on April 12,1988

As an Apex Body to Develop And Regulate

the Stock Market In India

Objectives:
1. To Protect The Interest Of Investors so that

there is steady flow of savings into the capital

market

2. To regulate the Securities market and ensure

fair practices by the issuers of securities.

3. To Promote efficient services by brokers ,

merchant bankers and other intermediaries

Functions:
Section 11 of the SEBI act specifies the functions as follows:

1. Regulatory Functions:

a) Regulation of stock exchange b) Registration and Regulation of Stock Brokers, Sub Brokers, Registrar to all Issue, Merchant Bankers, Underwriters, Portfolio Managers and such Other Intermediaries who are associated with Securities Market

c) Prohibition of fraudulent and unfair trade

practices relating to securities market

e) Regulating substantial acquisition of shares and

take over of companies.

2. Developmental Functions:

a) Promoting Investors Education

b) Training of Intermediaries
c) Conducting research and publish information useful to all market participants d) Promotion of fair practices and code of conduct

Powers:

1. To call periodical returns from recognized stock

exchanges

2. To call any information or explanation from

recognized stock exchanges or their members

3. To make or amend bye-laws of recognized stock

exchanges 4. To control and Regulate Stock Exchanges

Depository Services
(Introduction, Role and Importance),

Definition:
The term Depository is defined as a central location for keeping securities on deposit

Depository is a place where securities are stored , recorded in the books on behalf of the investors.

A depository can be compared with a bank, which holds the funds for depositors.
Bank
Hold Funds in an account

Depository
Hold Securities in an account

Transfers funds between accounts on Transfers securities between the instruction of the account holder accounts on the instruction of the account holder. Facilitates transfers without having to handle money Facilitates transfers of ownership without having to handle securities

Facilitates safekeeping of Money

Facilitates safekeeping of shares

A depository can be defined as ,

an institution which transfers the ownership of

securities in electronic mode on behalf of its

members

Activities of the Depository:

The main activities of the depository are as follows:

1. Accepting deposit of securities for custody. 2. Making computerized book entry of deliveries of securities 3. Providing for withdrawal of securities 4. Undertaking corporate actions like distribution of dividend and interest 5. Redemption of securities on maturity.

Benefits of Depository System

1. Immediate Transfer of Securities: it reduces the time for transfer of securities (as it eliminates paper work) 2. Reduce cost of Transaction for the investor: 3. Elimination of risk : it avoids the risk associated with physical certificates such as bad delivery , fraud and misplaced, lost share certificates etc.

Home Work:
Benefits of Depository System to: 1. to Investors 2. to Companies 3. to Capital Market

Which are the Depositories In India?

There are Two depositories in India:

1. National Securities Depository Limited (NSDL) 2. Central Depository Services Limited (CDSL)

National Securities Depository Limited (NSDL)

The first Depository in India
It was established in 1996

It has been promoted by the :

Industrial Development Bank of India (IDBI) Unit Trust of India (UTI) National Stock Exchange (NSE)

NSDL performs a wide range of securities related

functions: 1. Maintenance of individual investors holdings in an electronic form. 2. Dematerialization of securities 3. Allotments in the electronic form in case of Initial Public offerings, etc.

Central Depository Services Limited (CDSL)

The CDSL has been set up by Bombay Stock Exchange and cosponsored by SBI, Bank of India, Bank of Baroda and HDFC Bank and HDFC bank. It commenced its operations on March 1999.

Depository System in India

The stock exchanges in India were characterized by Lack of Transparency Complex trading procedure and age old settlement system Resulting in delays and various risks

The settlement system called for physical movement of share certificates in recording ownership changes in the company books. The serious risks associated with the paper based settlement system were : i) bad deliveries, ii) delays in transfer and registration iii) loss, forgery and theft of certificate etc.

The share transfer in India used to take place on an average about two months The inadequacies of the settlement mechanism resulted into a pressing demand to modernize the infrastructure and

To introduce automated trading to bring Indian Capital

Market at par with world standards
Announcement of the Depository Act, 1996 is one of the series of steps taken by the govt. for removing the shortcomings of the present system.

The Depository system aims at replacing the Manual System of share transfer Settlement of transactions and physical delivery of shares by a method of Simple Book Entries.
The system is for To Reduce The Total Time taken to Complete A Transaction And To Ensure Greater Liquidity