Financial Markets – 03
It is a market where assets are resold and purchased. In secondary market, where existing or already-issued securities are traded between investors. Issuing companies do not have a part in the secondary market. The main purpose of this market is to provide liquidity to securities. The secondary market can be divided into stock exchange and over the counter exchange.
E.g.: Bombay stock Exchange (i.e.) shares sold at Primary market is resold at Secondary Market. Here prices of shares are determined by Market (i.e. Demand & Supply). This is commonly known as Share Market or Stock exchange. Like underwriter in IPO offering, here Brokers works in Secondary Market.
It is an institution for orderly buying and selling of listed securities. Listed securities are those that are approved by the stock exchange. Stock Exchanges are companies who bought licenses to perform as a platform for exchange. It includes an association of persons or firms to regulate and supervise all transactions, rules, regulations and standard practices to govern all market transactions, authorised stock brokers meet to buy or sell securities. It has up to date information about the prices of trading, and publishes its index as an indicator of stock market situation. The main stock exchanges are:
- BSE – Bombay stock Exchange: it is India’s oldest stock exchange of India established in 1887. It became a national exchange in 2002. It became a corporate entity in 2005. It has indices such as Sensex, BSE-200, BSE-500, and DOLLEX.
- NSE – National stock Exchange: it was set up in 1992. The index of NSE is NIFTY. The NSE is the first stock exchange in India to admit overseas shareholders.
SENSEX: The BSE SENSEX (also known as Sensitive Index is a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on Bombay Stock Exchange. It was started in 1978.
The NIFTY 50 index National Stock Exchange of India’s benchmark broad based stock market index for the Indian equity market. Full form of NIFTY is National Stock Exchange Fifty. It represents the weighted average of 50 Indian company stocks in 13 sectors. It was started in 1993
- Over the counter Exchange of India (OTCEI): It deals in securities that are not listed on the stock exchange. It is basically the securities of small companies and for MSME Industries. MSMES will get credit facility from MUDRA Bank but with higher interest rates. So they can’t interest to take loan from MUDRA Banks. So for those, OTCEI is a platform to sell their equity and raise funds easily. It is the India’s 1st exchange for small companies as well as 1st screen based national wide stock exchange in India.
4.SEBI – Securities and Exchange Board of India
The Securities and Exchange Board of India (SEBI) is the Regulator for the Securities market in India owned by Government of India. It was established in 1988 and given Statutory Powers on 30 January 1992 through the SEBI Act, 1992. It regulates process of issuing securities using the Securities Contracts Regulation act, 1956.
Regulates places (Depositories, stock exchanges, commodity exchanges etc), persons (Individual investor, brokers, etc), collective investment scheme (Chit fund scam, etc.). SEBI has to protect the Investors and increase their participation.
All the stock exchange of the country is brought under annual inspection of SEBI to ensure growth of stock market and protect investors’ interest. It regulates the mutual funds also. Merchant banking is also brought under the purview of SEBI.
Various aspects of Securities market
Whenever company launches new products, wins unique patents (or) undergoes merger and acquisition – its share prices will increase. If a person associated with company uses such confidential information for buying / selling shares to make wind fall gains. Such insider trading is illegal.
Some large brokers / companies use algorithmic trading, computer programmes to automatically buy / sell securities at a speed and frequency that is impossible by human. This can be misused for manipulating the share prices. So, SEBI issued technical measure like a investor, broker can’t place more than 100 on line orders per second.
A commodity market/exchange is a Place where buyers and sellers trade goods in lot such as food grains, oil / gas, etc. These associations’ determine rules and set procedures for trading commodities. The main objective is to protect the participants from adverse movement of prices.
Commodity futures – types of contract for future delivery and settlement of commodity. It was under Forward Market Commission but now merged with SEBI. There are 91 commodities notified for future trading in India. (SEBI, 2019). There are 21 national and regional exchanges for commodity in the country.