Functions of Stock Exchange functions that are performed by

Following are some of the

most important stoc
exchange: Stock exchange serves as an
1. Role of an Economic
barometer that is
Barometer:
indicative of the state of econornic,
the economy. It recorde
minor changes in the share prices. It is rightly said to be
the major and the state of the econormy
the economy, which reflects
the pulse ofof Securities: Stock market helps in the valuation of securities
Valuation
2.
supply and demand. The securities offered
based
companies the factors
on that of
are profitable and growth-oriented tend to be valued higher.
Valuation of securities helps creditors, investors and government in performing
their respective functions.
securities tha
3. Transactional Safety: Transactional safety is ensured as the
of securitiee
are traded in the stock exchange are listed, and the listing
listed haye
is done after verifying the company's position. All companies
to adhere to the rules and regulations as laid out by the governing body
4. Contributor to Economic Growth: Stock exchange offers a platform for
trading of securities of the various companies. This process of trading
involves continuous disinvestment and reinvestment, which offers
opportunities for capital formation and subsequently, growth of the economy.
5. Making the public aware of equity investment: Stock exchange helps in
providing information about investing in equity markets and by rolling out
new issues to encourage people to invest in securities.
6. offers scope for speculation: By permitting healthy speculation of the
traded securities, the stock exchange ensures demand and supply of
securities and liquidity.
7. Facilitates liquidity: The most important role of the stock exchange is in
ensuring a ready platform for the sale and purchase of securities. This
gives investors the confidence that the existing investments can be converted
into cash, or in other words, stock exchange offers liquidity in terms 0r
investment.
8. Better Capital Allocation: Profit-making companies wilI have their
traded actively, and so such companies are able to raise shares
the equity market. Stock market helps in better fresh capital rom
the investors so that allocation of capital o
maximum profit can be earned.
9.
Encourages investment and savings: Stock market
SOurce of investment in various securities which offer as an important
serves greater returns.
Investing in the stock market makes for a better
gold and silver. investment option u
Major Stock Exchanges in India
The major stock exchanges in India are stated below:
National Stock Exchange
The National, Stock Exchange was founded in 1992. It was recognized as a
stock exchange by SEBI under the Securities Contracts (Regulation) Act, 1956 and
the operation commenced in 1994. VikramLimaye is the Managing Director & Chief
Executive Officer of National Stock Exchange of India Ltd (NSE).
It was the first exchange in India to provide fully computerized electronic trading.
NSE is one of the pioneers in technology and innovation which ensured the high
end performance of its systems. The exchange supports more than 3,000 VSAT
terminals, making the NSE the largest private wide-area network in the country.
Its automated system makes it more reliable and efficient in comparison to
the Bombay Stock Exchange(BSE).
Bombay Stock Exchange
The Bombay Stock Exchange was founded on July 9, 1875. It is Asia's first
stock exchange.
In 1875, eminent businessman PremchandRoychand officially founded the Native
Share and Stock Brokers Association which was later renamed the Bombay Stock
Exchange.
It is also the world's fastest exchange with a median trade speed of six
microseconds.
The Indian government recognized it officially as per the Securities Contracts
Reguiation Act in August 1957.
 - Trading and Settlement
Stock Exchange Operations
securities throuche stock
Before the companies start selling the
they have to first get their securities listèd on the stock
exchange. The name
stock
exchange
E
listed securities only when the authorities of the
company is included in listed
are satisfied with the
financial soundness and various other aspects of the exchange
Cormpary.
Earlier, the buying and selling of securities were done on the trading fioor.
the stock exchange. However, in present times, it is done through computers
consists of the following steps:
1. Selection of Broker
One can buy and sell securities only through the brokers registered under SFRT
and who are members of the stock exchange. A broker can be a partnershíp firm
an individual, or a corporate body. Hence, the first step of the trading procedure is
the selection of a broker who will buy/sell securities on the behalf of a speculator
or investor. Before placing an order to the registered broker, the investor has to provide
some information, including PAN Number, Date of Birth and Address, Educational
Qualification and Occupation, Residential Status (Indian/NRI), Bank Account Details.
Depository A/c details, Name of any other brokers with whom they have registered.
and Client code number in the client registration form. After getting information
regarding all the said things, the broker opens a trading. account in the name of
the investor.

2. Opening Demat Account with Depository

An account that must be opened with the Depository Participant (including stodk
brokers or banks) by an Indian citizen for trading in the listed securities in electronic
form is known as Demat (Dematerialised) Account or Beneficial Owner (BO)
Account.
The second step of the trading procedure is the opening of a Demat Account.
The Depository holds the securities in electronic form. ADepository is an organisation
or institution, which holds securities like bonds, shares, debentures, etc. At present
there are two Depósitories; namely, NSDL (National Securities Depository Ltd.) and
 CDSL (Central Depository Securities Ltd.). The Depository and the investor do hot
have direct contact with each other and interact with each other through Depository
Participants only. The Depository Participant wil have to maintain the securities account
balances of the investor and intimate investor from time to time about the status
of their holdings.
3. Placing the Order
The next step after the opening of a Demat Account is the placing of an order
by the investor. The investor can place the order to the broker either personally or
through email, phone, etc. The investor must make sure that the order placed clearly
specifies the range or price at which the securities can be sold or bought. For example,
an order placed by Kashish is, "Buy 200 eguity shares of Nestle for no more than
200 per share,"

4. Match the Share and Best Price

The broker after receiving an order from the investor will have to then go online
and connect to the main stock exchange to match the share and best price available.
5. Executing Order
When the shares can be bought or sold at the price mentioned by the investor,
it will be-communicated to the broker terminal, and then the order will be executed
electronically. Once the order has been executed, the broker will issue a trade
confirmation slip to the investors.
6. Issue of Contract Note
Once the trade has been executed within 24 hours, the broker will issue a
contract note. A contract note consists of the details of the number of shares bought
or sold, the date, time of the deal, price of securities, and brokerage charges. A contract
note is an essential legal document. It helps in settling disputes claims between the
investors and the brokers. A contract note also consists of a printed unique order
code number assigned to each transaction by the Stock Exchange.
7. Delivery of Share and making Payment
In the next step, the investor has to deliver the shares sold or has to pay
cash for the shares bought. The-investor has to do so immediately after receiving
the contract note or before the day when the broker shall make delivery of shares
to the exchange or make payment. This is known as Pay in Day.
8. Settlement Cycle
The payment of securities in cash or delivery of securities is done on Pay in
Day, which is before T+2 Day. It is because the settlement cycle is T+2 days on w.e.f
April 2003 rolling settlement basis. For example, if the transaction took place on
Tuesday, then the payment must be done before Thursday, i.e., T+2 days (Transaction
plus two more days).

9. Delivery of Shares or Making Payment

On the T+2 Day, the Stock Exchange will then deliver the share or make payment
to the other broker. This is known as Pay out Day. Once the shares have been
 payment to tthe
payment has been made, the broker has to make
delivered of
within 24 hours of the pay out day, as he/she has alroady receiver payrnent invesor
the exchange.

10. Delivery of Shares in Demat Form

The last step of the trading procedure is making delivery or shares in Dermat
form by the broker directly to the Demat Account of the investor. The investor is
instruct his Depository
obligated to gve details of his Demat Account and
(DP) for taking delivery of securities directly in his
beneficial owner acCOunt Participar
DEMAT ACCOUNT
Demat account is also known as a Demateraed account. The prirnary .
It hole
of Demat account is to hold shares and securities in an electronic forrmat.
you in online trading like buying or selling shares, or converting physical shares inte
electronic form. All the shares, mutual funds, bonds, government securities, and other
investments are saved in a dematerialized account. Also, through it investors can
perform intraday trades.
Dematerialization is the term used to define the process of transferring physical
certificates into electronic ones. The main motto of dematerialization is to avoid holding
physical shares and help you with seamless tracking and monitoring. It helps convert
physical shares to electronic form.
A demat account is necessary when an investor wants to trade in securities
on a delivery basis. If the investor just wants to trade in futures and options, a
demat is not necessary. It is necessary to store and monitor all financial securities
in one place.

Importance of Demat Account

1. Digitally secure way of holding shares and securities
2. Eliminates theft, forgery, loss and damage to the physical certificates
3. Quick transfer of shares

Advantages of Demat Account

Here are some advantages of opening a Demat account:
When the securities are being transferred, there is no
stamp duty
There is a faster and more immediate transfer of
securities
The elimination of wrong deliveries is seen
The elimination of risk by loss, theft, damage,
mutilation, etc. is seen
They benefit us with the disbursement of corporate
dividends, bonuses, etc. and faster settlement benefits like rights,
Elimination of personal information mjsmatches like bank accounts and
addresses
The nomination facilities are more
convenient
In the case of the death of a Demat account
holder, the transmissiol
formalities are done more conveniently
 There is no TDS deduction, meaning tax deduction, which is deducted at
the source for Demat securities
The account information and statement of the Demat A/c are regularly sent
to the account owner

Opening a Demat AccOunt

Demat Account cannot open directly with the Central Depository Services Ltd
(CDSL). Need to approach an authorized Depository Participant (DP), who will open
the account, and facilitate further transactions.
Firstly, choose a DP you. want to open the Demat account with. You can
find many financial institutions and brokerages offering this service.
Fill up the account opening form and submit it along with the copies of
all the necessary documents and a passport size photo.
Have original documents handy for verification.
You will receive a copy of the terms and conditions agreement.. Go through
it.
A member of DP will get in touch with you and verify the details you have
submitted.
If the application is processed, you will get a Demat account number along
with a client ID which you can use for the account online.
You need to pay some account opening charges such as annual maintenance
charge änd the transaction fee (monthly basis).
There is no limit on the minimum number of securities to keep your account
active.
You don't need to compulsorily have shares to open a Demat Account. In
fact, you can have zero balance in the account.
As there is no restriction on the number of Demat Accounts which can
be opened by any investor, you can have multiple Demat Accounts.
Know Your Client (KYC)
SEBI has prescribed KYC (Know Your Client) requirements for all security market
investors. SEBI has allowed the use of technological innovations which can facilitate
online KYC (e-KYC). The use of technology would facilitate the investors to complete
the KYC without the requirement of physically visiting the office of the intermediary.
Depositories and Depository Participants
A depository is an entity responsible for the maintenance of securities electronically
and the facilitation of trading of these [Link] empower investors to own,
maintain and exchange securities online. Depository participants are the agents of
depositories such as - The National Securities Depository Limited (NSDL) and The
Central Depository Services Limited (CDSL). DP are given license to operate by a
depository, under the provisions of Depositories Act, 1996
(Depository Participants (DP), on the other hand, act as a link between depositories
and the investors who hold securities JA DP is an entity registered with the Securities
and Exchange Board of India (SEBI) and is associated with either the CDSL or the
 74
investors with depositories.
NSDL or both. DPs
play a crucial role in linking
other financial
Entitles
institutions serve as
firms, Banks and similar
act as DP.
and broking firms
like big brokerage
Typically, banks,
financial institutions depository
for services such as
participants.
charging fees to their clients
may also charge an
account
DP earn income by pledging of shares. Some annual
shares and
opening, transfer of
maintenance charge.
Participant
Role of a Depository format.
shares into electronic
1. DPs convert physical transactions linked to
securities.
track trade
2. DPs monitor and investors.
the Depositories and
3. Act as a link between seCure.
electronically are safe and
4. Ensure investments held
and trade transfers.
5. Securely facilitate transactions
record related to ownership and pledging of shares.
6 Meiptain the

PROTECTION AND GRIEVANCE REDRESSAL

ANVESTORS
due to dishonest practices, frauds and
In India investment risks are very high
sense of helplessness and insecurity.
unethical investment culture. Investors experience amarkets. Investors are cheated by
financial
they have hardly any confidence in who is capable of cheating
companies, by lead managers, by brokers and by everybody,SEBI, in recent years have
them. The Government, the Company Law Board and the
term, it encompasses
made efforts to protect the investors. "Investors protection is a wide
brokers, companies
all the measures designed to protect investors from malpractices of
main complaints
managers to isSue, merchant bankers, registrar to issues etc. The
funds.
are against brokers of stock exchanges, against listed companies and mutual
Usual grievances of investors
Against Companies.
Against Brokers.
Against depositories.
Usual grievances against companies
Delay in registering transfer of securities: Registration of transfers should
be done by the companies within 30 days of receipt of share transter
instrument but usually it takes many months.
Non-payment or delay in paýment of dividend: Dividends should be
distributed within 30 days from the date of declaration but by manipulado
of procedures dividends may not be received for months.
Non-repayment or delayed repayment of public deposits: Thousanos
depositors are involved in litigation to get back their deposits from companies
Non-receipt of rights issue offer: The letter of offer of rights shares snou
be sent to all eligible shareholders by registered post but Shareholoe
quite often are not informed of rights issue.
 Investment Mahagement 75

Non-receipt of duplicate share certificate: A company is bound to isSue

duplicate share certificates if the shares are lost or misplaced by the
shareholder, after receiving a request along with the requisite fee and on
completion of formalities.
Transmission of shares: After the death of a shareholder the ownership
of shares passes to his legal heirs which is called transmission of shares.
The company is bound to transfer the shares in the name of legal heir
of the deceased.
Non-receipt of notice of meeting: Every shareholder whose name appears
in the register of members is entitled to receive 21 days advance notice
of meeting of shareholders. Non-dispatch of notice of meeting to shareholder
is common but serious lapse.
Usual grievances against brokers
Delay or default in payment of securities sold: Abroker has to make payment
funds
to client who has sold securities through him within in 48 hours of payout of
by clearing house of stock exchange or the Clearing Corporation. But brokers, as a
ule, retain the sale proceed as long as they can.
broker
Delay or default in delivery of purchased security to the client: A
hours of payout of
has to deliver the purchased securities to his client within 48
securities by the stock exchange. It never happens so, in practice.
prescribed
Non-Issue of contract note: Brokers have to issue a contract note in
but they avoid doing so
form to all their clients within 24 hours of the transaction
to earn secret profits.
brokerage from clients.
Excess brokerage: Brokers Charge excess
bound to pass all the
Non-passing of corporate benefits: A broker is duty
shares, dividends etc. to the client he
Corporate benefits like rights shares, bonus this regard.
is dealing with but, many a times brokers play tricks in
that amount of sale or
Overcharging: The broker should charge or pay only
overcharge for purchases or pay less for the
purchase of securities. He should not
tricks about it.
sales. In practice, most brokers play
Grievances against Depository Participant
Participant is an institution which holds securities either in certificated
Depository Various
uncertificated form, help in dematerialization of securities etc. of the holder.
or
institutions are doing this work. Every depository participant must
banks and other
the dematerialization or materialization requests of his clients to the
forward all
company within 7 days of the receipt of the request but delays are quite
Concerned
Common.

Main Depositories are:

Depositories Limited (1996)
NSDL: National Securities
Limited (1999)
CDSL: Central Depositories Services
 grievances
Methods of redressal of investor's
grievances from, the
An investor can seek redressal of his
Grievance cells in stock exchanges
following agencies:
SEBI
Company Law Board
Courts
Press

1. Grievance cell/ investor service cell in stock exchanges

Al! the recognised stock exchanges have established Investors services
to redress the grievances of investors. These cells have played an important cells
ta
in settlement of grievances and have infused confidence among investor.
approach these investors grievance cells to lodge complaints against companies anInvestors
members of the stock exchange acting as brokers. Both BSE and NSE too have their
gievance cells.
Method of redressal of grievance against companies in investor service cel
After receiving the complaint from investors, these are forwarded to the
Concerned company which is directed to solve the matter within 15 days
progress is monitored.
If, in spite of reminder, the company fails to resolve the complaints and
the total number of pending complaints against the company exceeds 25
and if these complaints are pending for more than 45 days, the cell issues
a show cause notice of 7 days to the company.
If the company still fails to resolve the complaint within 7 days of issue
of show cause notice the scrip of the company is suspended from
trading.
Investors grievance cell can also transfer scrips of defaulting company to
Z category for non-resolution of investors complaints
Companies which have a long history of not resolving
and have a large number of pending complaints are investors to grievances
instructed
special personnel to clear pending complaints on a priority basis. employ
Method of redressal investors grievances against stock broker by
service cell investor
When a complaint is lodged with the stock
exchange authorities, they
forward it to the investor service cell which refers the complaint to the
concerned broker and asks him to settle the complaint and
within 7 days. send a reply
If no reply is received or the
is placed before the Investors
received reply is not satisfactory the matte
the stock exchange.
Grievance Redressal Committee (IGRC) O
This committee hears both, the
made the solve the matter failing complainant, the broker and efforts a
which, it is referred for arbitration wnio
is a quasi-judicia! process.
A sole arbitrator is appointed if the sum is
for less than 25 lakhs,
claims above 25 lakhs, a penal of 3
arbitrators is appointed.
 An aggrieved party can file an appeal against the award given by the
arbitrator in appropriate court.
other measures taken by investor
service cell
Other measures taken for Investor protection by stock
the grievances of the investors and exchanges and resolve
members of the exchange
Calling company re resentatives to the stock exchange to interaction.
Calling registrars and transfer agents to the stock exchange to
interact.
Issuing monthly press releases,
listing top 25 companies against whom maximurm cornplaints are
for resolution, this is also released on the website of the pending
exchange.
In the case of Bombay Stock Exchange, it can pursue Mumbai
based
companies to depute their representatives to the exchange to take up
the pending list of complaints and resolve them without delay.
2. Redressal of grievances through SEBI
Complaints arising out of activities that are cOvered under SEBI Act, 1992;
Securities Contract Requlation Act, 1956; Depositories Act, 1996 and Rules
and Requlations made thereunder and provisions that are covered under
Section 55A of Companies Act, 1956 are handled by SEBI.
SEBI SEBI has a dedicated department viz., Office of Investor Assistance
and Education (01AE) to receive investor grievances and to provide assistance
to investors by way of education.
Grievances pertaining to stock brokers and depository participants are
taken up with respective stock exchange and depository for redressal and
monitored by SEBI through periodic reports obtained from
fro them.
Grievances pertaining to other intermediaries are taken up with them
directly for redressal and are continuously monitored by SEBI.
Grievances against listed company are taken up with the respective listed
company and are continuously monitored. The company is required to
respond in prescribed format in the form of Action Taken Report (ATR). Upon
the receipt, of ATR, the status of grievances is updated.
 is
SEBI peruses the ATR and closes the complaint if it satisfied
complaint has been redressed adequately. that the
The concerned investor can view the status of the complaint online
the above website by logging in the unique complaint registration from
3. REDRESSAL BY COMPANY LAW BOARD
number,
Company law Board which was constituted in May 1991 has been
with many powers which were previously exercised by high courts. Every bench entrusted
company Law Board is deemed to be a civil court and every proceeding before it
is deemed as judicial proceeding.
To protect the interests of investors it has the power of inspection of recra
and documents and enforcing attendance. of witnesses.
An aggrieved investor can apply to the Company Law Board
To investigate the affairs of the company.
() For relief in case of oppression of management and/or mismanagement
Investors can also lodge complaints about delay and non-payment of fixed
deposits and interest thereon with the Company Law Board.
Representations about desired changes in the Companies Act for investors
protection can also be made to the Company Law Board.
4. Redressal of investors grievances through courts
When an investor has tried all other ways of getting his grievance settled there
is no other way left with him except to proceed. against the company or the intermediary
by way of civil and criminal proceedings.
Suits against companies can be filed in the high courts of the states. Every
high court has special designated benches about company affairs and all complaints
against companies in breach of Companies Act are heard there.
An aggrieved party can file cases in high courts against the
companies to get
justice but the process of law is quite time-consuming and costly and hence
the reach of small investors. beyond

5. Redressal of investors grievances through press

If an investor
fails to get his grievance remedied from
authorities, he thinks of bringing bad publicity to the companyconcerned company or
or to the authorities
not listening to him, by reporting the
matter to the press.
Investors form unfavourable opinion about such
may happen to them also. So, they avoid company and think that th
can prove suicidal for the
investing in this company. Such a situatio
Company
To avoid bad publicity, the
or the government agency like concerned company or the stock
SEBI settle his grievance and exchange
management
newspaper as to what they have done about the report back to u
complaint.