What is a stock exchange all about?

 
The institution where buying and
selling of shares essentially takes place
is the Stock exchange.
 
• What are the broad characteristics of
stock exchanges in India?

Association of individual members

called member brokers formed for the
express purpose of regulating and
facilitating the buying and selling of
securities by the public and institutions
at large.
• 1. What are primary and secondary markets?

• Primary market comprises the companies

making the security issues and the public at
large subscribing to them.

• Secondary market comprises the buyers and

sellers of securities subsequent to the original
issue.
 
• 1. What are capital and money markets?
• Capital market is a broad term which
includes primary and secondary markets,
Term lending institutions, banks, investors
and just about everybody and anybody who
is engaged in providing long time capital to
the industrial sector.

• Money market however includes all the

agencies providing short time capital.
   SEBI”s over all role in the securities
market?

• “Protect the interests of investors in

securities and to promote the development
of and to regulate the securities market and
for matters connected therewith or
incidental to “
• What is an ordinary share?
 
• An ordinary share represents the form of
fractional ownership in which a share holder
as a fractional owner undertakes maximum
entrepreneurial risk associated with a
business venture.
• Dividends are paid out of operational surplus
and shareholders have a voting right in
proportion to the no. of shares held by them.
• 1. What does an issue of a share at par
and at a premium mean?
 
• At par value means at Face value.
• Subscription price greater than face
value means Issued at a Premium.
• What are the other kinds of shares?
 
• Preference Share- Cumulative, Non-
cumulative, Irredeemable, redeemable,
Convertible. Cumulative convertible.
• Savings share (nonvoting share)
• Golden Share (shares with large voting
rights)
       What are market lots and odd lots?
 
• Each company specifies the min.
number of securities, which make an
even or market lot.
• All transactions have to be done in
integral number of market lots.
       What is a share warrant?
 
• Share warrant is an option to buy a
specified no. of a firm’s share at a
specified price(Excise price) over a
specified period of time.
         What exactly are debentures? How
do debenture holders differ from
shareholders?

• Debenture is a form of a secured loan.

• They participate in the financial risk of
the company
• Interest payments to them are made
from the pre-tax operating profits of
the company.
        Who are Bulls, Bears and Stags?
• Those who buy shares in anticipation of
increase in prices are commonly referred to
as Bulls.
• Those who sell shares anticipating fall in
prices are referred to as Bears.
• The Stags are those in general do not invest
in the secondary market. Instead they prefer
to invest in the primary market when new
issues are made.
• What is underwriting of issues?

• Buying the stock under issue to the

extent they are not subscribed to fully
by the public is underwriting.
         What are the different types of stock
market orders, which we may place on a
broker?
• An order without specifying the price at
which a transaction is to be done is known
as a market order. The broker uses his best
judgment. also called Open order.
• Second kind is the Limit order in which an
investor specifies the price acceptable to
him. That is Max price buy min price sell
• What does the broker do after receiving the
order?

• He tries to execute the order. As soon as the

order is executed the broker issues a
contract note indicating quantity price and
name of the security bought or sold.
BSE and NIFTY
 BSE- Introduction 
• Bombay Stock Exchange is the oldest stock exchange in Asia
• 133 years of existence.
• BSE was established as "The Native Share & Stock Brokers'
Association" in 1875.
• BSE is the first stock exchange in the country which obtained
permanent recognition (in 1956) from the Government of India under
the [SCRA] Securities Contracts (Regulation) Act 1956.
• BSE's pivotal and pre-eminent role in the development of the Indian
capital market is widely recognized.
• It migrated from the open outcry system to an online screen-based order
driven trading system in 1995.
• Earlier an Association Of Persons (AOP), BSE is now a corporatised
and de-mutualised entity incorporated under the provisions of the
Companies Act, 1956, pursuant to the BSE (Corporatisation and De-
mutualisation) Scheme, 2005 notified by the Securities and Exchange
Board of India (SEBI). With de-mutualisation, BSE has two of world's
best exchanges, Deutsche Börse and Singapore Exchange, as its
strategic partners.
 Contd…
• BSE has facilitated the growth of the Indian corporate sector by providing
it with an efficient access to resources.
• BSE is the world's number 1 exchange in terms of the number of listed
companies and the world's 5th in transaction numbers.
• The market capitalization as on December 31, 2007 stood at USD 1.79
trillion.
• Large number of companies listed more than 4,700, which for easy
reference, are classified into A, B, S, T and Z groups.
• The BSE Index, SENSEX,
– is India's first stock market index that enjoys an iconic stature, and
– is tracked worldwide.
– It is an index of 30 stocks representing 12 major sectors.
– The SENSEX is constructed on a 'free-float' methodology, and is
sensitive to market sentiments and market realities.
• BSE offers 21 indices, including 12 sectoral indices. BSE has entered into
an index cooperation agreement with Deutsche Börse. This agreement has
made SENSEX and other BSE indices available to investors in Europe
and America.
 Contd…
• BSE has tied up with U.S. Futures Exchange (USFE) for U.S. dollar-denominated futures
trading of SENSEX in the U.S. The tie-up enables eligible U.S. investors to directly
participate in India's equity markets for the first time, without requiring American
Depository Receipt (ADR) authorization.
• The first Exchange Traded Fund (ETF) on SENSEX, called "SPIcE" is listed on BSE. It
brings to the investors a trading tool that can be easily used for the purposes of investment,
trading, hedging and arbitrage. SPIcE allows small investors to take a long-term view of
the market.
• BSE provides an efficient and transparent market for trading in equity, debt instruments
and derivatives.
• It has a nation-wide reach with a presence in more than 450 cities and towns of India.
• BSE has always been at par with the international standards.
• The systems and processes are designed to safeguard market integrity and enhance
transparency in operations.
• BSE is the first exchange in India and the second in the world to obtain an ISO 9001:2000
certification.
• It is also the first exchange in the country and second in the world to receive Information
Security Management System Standard BS 7799-2-2002 certification for its BSE On-line
Trading System (BOLT).
• It has become the first national level stock exchange to launch its website in Gujarati and
Hindi to reach out to a larger number of investors.
• It has successfully launched a reporting platform for corporate bonds in India christened
the ICDM or Indian Corporate Debt Market and a unique ticker-cum-screen aptly named
'BSE Broadcast' which enables information dissemination to the common man on the
street.
Contd…
• BSE also has a wide range of services to empower investors and facilitate smooth
transactions:
• Investor Services: The Department of Investor Services redresses grievances of
investors.
• BSE was the first exchange in the country to provide an amount of Rs.1 million
towards the investor protection fund; it is an amount higher than that of any exchange
in the country.
• BSE launched a nationwide investor awareness programme- 'Safe Investing in the
Stock Market' under which 264 programmes were held in more than 200 cities
• The BSE On-line Trading (BOLT): BSE On-line Trading (BOLT) facilitates on-line
screen based trading in securities. BOLT is currently operating in 25,000 Trader
Workstations located across over 450 cities in India.
• BSEWEBX.com: In February 2001, BSE introduced the world's first centralized
exchange-based Internet trading system, BSEWEBX.com. This initiative enables
investors anywhere in the world to trade on the BSE platform.
• Surveillance: BSE's On-Line Surveillance System (BOSS) monitors on a real-time
basis the price movements, volume positions and members' positions and real-time
measurement of default risk, market reconstruction and generation of cross market
alerts.
• BSE Training Institute: BTI imparts capital market training and certification, in
collaboration with reputed management institutes and universities. It offers over 40
courses on various aspects of the capital market and financial sector. More than
20,000 people have attended the BTI programmes
 NSE
• The National Stock Exchange of India Limited has genesis in the report of
the High Powered Study Group on Establishment of New Stock
Exchanges, which recommended promotion of a National Stock Exchange
by financial institutions (FIs) to provide access to investors from all across
the country on an equal footing.
• NSE was promoted by leading Financial Institutions November 1992 as a
tax-paying company unlike other stock exchanges in the country.
• On its recognition as a stock exchange under the Securities Contracts
(Regulation) Act, 1956 in April 1993, NSE commenced operations in the
Wholesale Debt Market (WDM) segment in June 1994.
• The Capital Market (Equities) segment commenced operations in
November 1994 and operations in Derivatives segment commenced in
June 2000.
 Contd…

• NSE's IT set-up is the largest by any company in India. It uses

satellite communication technology to energise participation
from around 320 cities spread all over the country.
• With upgradation of trading hardware, NSE can handle up to 6
million trades per day in Capital Market segment.
• In order to capitalise on in-house expertise in technology, NSE
set up a separate company, NSE.IT, in October 1999.
• NEAT [National exchange for automated trading.]is a state-of-
the-art client server based application.
• The trading server software runs on a fault tolerant STRATUS
main frame computer while the client software runs under
Windows on PCs.
• The telecommunications network uses X.25 protocol and is the backbone of the
automated trading system. The trading members on the various market segments such as
CM / F&O, WDM are linked to the central computer at the NSE through dedicated
64Kbps leased lines and VSAT terminals.
• The Exchange uses powerful RISC -based UNIX servers, procured from Digital and HP
for the back office processing. The latest software platforms like ORACLE 7 RDBMS,
GUPTA - SQL/ORACLE FORMS 4.5 Front - Ends, etc. have been used for the
Exchange applications.
• NSE is one of the largest interactive VSAT based stock exchanges in the world.
• Today it supports more than 3000 VSATs.
• The NSE- network is the largest private wide area network in the country and the first
extended C- Band VSAT network in the world.
• Currently more than 9000 users are trading on the real time-online NSE application.
• There are over 15 large computer systems which include non-stop fault-tolerant
computers and high end UNIX servers, operational under one roof to support the NSE
applications.
• This coupled with the nation wide VSAT network makes NSE the country's largest
Information Technology user.
• In an ongoing effort to improve NSE's infrastructure, a corporate network has been
implemented, connecting all the offices at Mumbai, Delhi, Calcutta and Chennai. This
corporate network enables speedy inter-office communications and data and voice
connectivity between offices.
• In keeping with the current trend, NSE has gone online on the Internet. Apart from
having a 2mbps link to VSNL and our own domain for internal browsing and e-mail
purposes, we have also set up our own Web site. Currently, NSE is displaying its live
stock quotes on the web site (www.nseindia.com) which are updated online.
 Terms :
• Pig - While not an official term,  being called a pig in the stock market is
not a good thing. It usually means that you have no clue what you are
doing, and just blindly make and execute trades.
• Chicken: We’ll never know if the worst is yet to come. So we may have
tighten our belts, bolster our emergency funds, cancel any planned
vacations or purchase any item of a substantial amount. But when it comes
to investing, we must not become like the chicken little who acted out of
fear of an impending storm….and pray that we’ll see the light at the end of
the tunnel soon….
• The Black Swan theory (in Nassim Nicholas Taleb 's version) refers to a
large-impact, hard-to-predict, and rare event beyond the realm of normal
expectations. Unlike the philosophical "black swan problem", the "Black
Swan" theory (capitalized) refers only to events of large consequence and
their dominant role in history. He gives the rise of the Internet, the personal
computer, World War I, as well as the September 11, 2001 attacks as
examples of Black Swan events.