Section 3 of SEBI Act protects the
interests of the investors in securities and also promotes the
development of, and regulates, the securities market and related
matters.
The following are the financial products/instruments which the
secondary market deals with
- Equity Shares
- Rights Issue/ Rights Shares
- Bonus Shares
- Preferred Stock/ Preference shares
- Cumulative Preference Shares
- Cumulative Convertible Preference Shares
- Participating Preference Share
- Bond
- Zero Coupon Bond
- Convertible Bond
- Debentures
- Commercial Paper
- Coupons
- Treasury Bills
FAQs on Secondary Market
What is EDIFAR?
In July 2002 SEBI launched Electronic Data Information Filing and
Retrieval System (EDIFAR) in association with National Informatics
Center (NIC) to facilitate filing of certain material information/
documents/statements by the listed companies on line in the EDIFAR web
site - www.sebiedifar.nic.in.
What is a Central Listing Authority?
The Central Listing Authority (CLA) is set up to address the issue of
multiple listing of the same security and to bring about uniformity in
the due diligence exercise in scrutinizing all listing applications on
any stock exchanges. The functions of CLA as enumerated in SEBI (Central
Listing Authority) Regulations, 2003 include:
- processing the application made by any body corporate, mutual
fund or collective investment scheme for the letter of
recommendation to get listed at the stock exchange,
- making recommendations as to listing conditions, and
- any other functions that may be specified by the SEBI Board from
time to time.
What is the exit opportunity available
for investors in case a company gets delisted?
SEBI (Delisting of Securities) Guidelines, 2003 provide an exit
mechanism, whereby the exit price for voluntary delisting of securities
is determined by the promoter of the concerned company which desires to
get delisted, in accordance to book building process. The offer price
has a floor price ,which is average of 26 weeks average of traded price
quoted on the stock exchange where the shares of the company are most
frequently traded preceding 26 weeks from the date public announcement
is made. There is no ceiling on the maximum price.
For infrequently traded securities, the offer price is as per
Regulation20 (5) of SEBI (Substantial Acquisition and Takeover)
Regulations. Regarding this, infrequently traded securities is
determined in the manner as provided in Regulation 20 (5) of SEBI
(Substantial Acquisition and Takeover) Regulations.
What is demutualisation of stock
exchanges?
Demutualisation refers to the transition process of an exchange from a "mutually-owned"
association to a company "owned by shareholders". In other
words, transforming the legal structure of an exchange from a mutual
form to a business corporation form is referred to as demutualisation.
The above, in effect means that after demutualisation, the ownership,
the management and the trading rights at the exchange are segregated
from one another.
How is a demutualised exchange different
from a mutual exchange?
The three functions of ownership, management and trading are intervened
into a single Group in a mutual exchange. The broker members of the
exchange over here are both the owners and the traders on the exchange
and they further manage the exchange as well. A demutualised exchange
has all these three functions clearly segregated.
Currently are there any demutualised
stock exchanges in India?
Yes currently there are two stock exchanges in India
- The National Stock Exchange (NSE)
- Over the Counter Exchange of India
(OTCEI)
These are not only corporatised but
also demutualised with segregation of ownership and trading rights of
members.
What steps have been taken by SEBI to
give a head start to the process of demutualisation in India?
SEBI had formed a Group on Corporatisation and Demutualisation of Stock
Exchanges under the Chairmanship of Justice M H Kania, former Chief
Justice of India, for advising SEBI on corporatisation and
demutualisation of exchanges and to recommend the steps that need to be
taken to implement the same. The Group submitted its Report to SEBI on
August 28, 2002. SEBI has taken up with Central Government to amend the
SC( R) A to effect Corporatisation and Demutualization .
What is the traditional structure of the
stock exchanges in India?
According to legal structure, the stock exchanges in India could be
segregated into
- 2 broad groups
- 20 stock exchanges which were set up as companies, either limited
by guarantees or by shares
- 3 stock exchanges which are functioning as associations of
persons (AOP) viz. BSE, ASE and Madhya Pradesh Stock Exchange
The 20 stock exchanges which are
companies are the stock exchanges of:
- Bangalore
- Bhubaneswar
- Calcutta
- Cochin
- Coimbatore
- Delhi
- Gauhati
- Hyderabad
- Interconnected SE
- Jaipur
- Ludhiana
- Madras
- Magadh
- Managalore
- NSE
- Pune
- OTCEI
- Saurashtra-Kutch
- Uttar Pradesh
- Vadodara
Apart from NSE, all stock exchanges whether established as corporate
bodies or Association of Persons (AOPs), are non-profit making
organizations.
What is meant by corporatisation of
stock exchanges?
Corporatisation of Stock Exchanges is the process of converting the
organizational structure of the stock exchange from a non-corporate
structure to a corporate structure. Traditionally, some of the stock
exchanges in India were established as "Association of persons",
like BSE, ASE and MPSE. Corporatisation of these exchanges is the
process of converting them into incorporated Companies.
What recourses are available to me for
redressing my grievances?
- Investor Grievance Redressal Cell (IGG)
- Arbitration
- Court of Law
What happens if I do not get my money
or share on the due date?
You can file a complaint with the respective stock exchange. The
exchange is required to resolve the complaints. To resolve the dispute,
the complainant can also resort arbitration as provided on the reverse
of contract note /purchase or sale note.
However, if the complaint is not addressed by the Stock Exchanges or is
unduly delayed, then the complaints along with supporting documents may
be forwarded to Secondary Market Department of SEBI. Your complaint
would be followed up with the exchanges for expeditious redressal.
In case of complaint against a sub broker, the complaint may be
forwarded to the concerned broker with whom the sub broker is affiliated
for redressal.
What is the maximum brokerage that a
broker/sub broker can charge?
1.5% of the value mentioned in the respective purchase or sale note.
How do I know whether my order is
placed?
Unique Order Code Number is assigned by Stock Exchanges to each
transaction, which is intimated by broker to his client and once the
order is executed, this order code number is printed on the contract
note. The broker member also maintains the record of time when the
client has placed order and reflect the same in the contract note along
with the time of execution of the order.
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