Notes : Overview of Securities Market Primary Market The primary market issuance is done either through public issues

or private placement. Under Companies Act, 1956, an issue is re erred as public i it results inallotment o securities to 5! investors or more. "hen the issuer makes an issue o securities to a select group o persons not e#ceeding $9 is called a private placement. Secondary Market The secondary market is operated through t"o mediums, namely, the %ver&the&Counter '%TC( market and the )#change&Traded market. %TC markets are in ormal markets "here trades are negotiated. Index *tock market indices are meant to capture the overall behaviour o the e+uity markets. The bluechip inde# o ,*) is *-. C,/ ,i ty. Market Capitalisation = Closing price of share * Number of outstanding shares Market Capitalisation Ratio The market capitali0ation ratio is de ined as market capitali0ation o stocks divided by 12.. 3t is used as a measure o stock market si0e. Turnover

Turnover or a share is computed by multiplying the traded +uantity "ith the price at "hich the trade takes place. Turnover Ratio Turnover Ratio= Turnover at Exchange / Market Capitalisation at Exchange 3t is used as a measure o trading activity or li+uidity in the stock markets. 4securities5 include 'i( shares, bonds, scrips, stocks or other marketable securities o like nature in or o any incorporate company or body corporate, 'ii( government securities, 'iii( derivatives o securities, 'iv( units o collective investment scheme, 'v( interest and rights in securities, and securityreceipt or any other instruments so declared by the central government. Market Participants 3nvestors 3ndividual 3nvestors Corporate 3nvestors 6oreign 7enture Capital 3nvestors 633s 2epositories *tock )#changes 8ith )+uities Trading 8ith 2ebt 9arket Trading 8ith 2erivative Trading 8ith Currency 2erivatives :rokers Corporate :rokers *ub&brokers .ort olio 9anagers Custodians

;egistrars to an issue - *hare Trans er Agents .rimary 2ealers 9erchant :ankers :ankers to an 3ssue 2ebenture Trustees Under"riters 7enture Capital 6unds 9utual 6unds Collective 3nvestment *chemes Wholesale Debt Market (WDM Se!ment< commenced operations in =une 199$. Capital Market (CM Se!ment" commenced its operations in ,ovember 199$. #utures $ %ptions (#$% Se!ment" commenced operations at ,*) in =une >!!!. Currency Derivatives Se!ment (CDS Se!ment" commenced on August >9, >!!?, & launch o U* 2o llar&3ndian ;upee 'U*2&3,;(. @aunch o )uro&3,;, .ound *terling&3,; and =apanese Aen&3,; & 6ebruary >!1!. B3nterest rate uturesC & August D1, >!!9. Market Re!ulator" *):3 & established under *):3 Act 199> Screen &ased Tradin!" ,*) introduced a nation&"ide on&line ully automated screen based trading system '*:T*( on the C9 segment on ,ovember D, 199$.

Tradin! Cycle" 6rom April >!!D on"ards, TE> days settlement cycle is being ollo"ed. '(uity Derivatives Tradin!" )aunch o* Index *utures +, -une ,... The market presently o ers inde# utures, inde# options, single stock utures and single stock options. Demutualisation ,*), has set up "ith a pure demutualised governance structure, having o"nership, management and trading "ith three di erent sets o people. Currently, all the stock e#changes in 3ndia have a demutualised set up. Dematerialisation" ,o", the public listed companies making 3.% o any security or ;s.1! crore or more have to make the 3.% only in dematerialised orm. Clearin! Corporation" ,ational *ecurities Clearing Corporation @td. ',*CC@(, "hich commenced its operations in April 1996. Investor Protection" 3n order to protect the interest o the investors and promote a"areness, the Central 1overnment '9inistry o Corporate A airs ( established the 3nvestor )ducation and .rotection 6und '3).6( in %ctober >!!1. /lobalisation 3ndian companies have been permitted to raise resources overseas through issue o A2;s, 12;s, 6CC:s and )C:s.

633s can invest in a company under port olio investment route upto >$F o the paid up capital o the company. The 3ndian stock e#changes have been permitted to set up trading terminals abroad. The trading plat orm o 3ndian e#changes is no" accessible through the 3nternet rom any"here in the "orld. )aunch o* India 0I1 7olatility inde# is a measure o marketCs e#pectation o volatility over the near term. 3t measures the amount by "hich an underlying 3nde# is e#pected to luctuate in the near term, based on the order book o the underlying inde# options. 3ndiaCs irst volatility inde#, India 0I1 'based on the ,i ty 5! 3nde# %ption prices( "as launched by ,*) in April >!!?. Direct Market 2ccess" April >!!? 29A allo"s brokers to o er their respective clients, direct access to the )#change trading system through the brokerCs in rastructure "ithout manual intervention by the broker. )aunch o* Securities )endin! $ &orro3in! Scheme" 3n April >!!?4 3t allo"s market participants to take short positions 2S&2" Application *upported by :locked Amount 'A*:A( is a maGor primary market

re orm. enables investors to apply or 3.%s H 6.%s and rights issues "ithout making a payment. the amount is blocked in investorsC o"n account and only an amount proportionate to the shares allotted goes out "hen allotment is inali0ed. )aunch o* Interest Rate #utures" %n August D1, >!!9, Issue o* Capital and Disclosure Re(uirements (ICDR Re!ulations ,..5 governs all disclosure norms regarding issue o securities.

NOTES : TRADING MEMBERSHIP According to ;ule > 'e( o *):3 '*tock :rokers and *ub& :rokers( ;ules, 199>, A stockbroker means a member o a recogni0ed stock e#change.

 ,o stockbroker is allo"ed to buy, sell or deal in securities, unless he or she holds a certi icate o registration granted by *):3. *):3 shall take into account the ollo"ing namely, "hether the stock broker applicant I is eligible to be admitted as a member o a stock e#changeJ has the necessary in rastructure like ade+uate o ice space, e+uipment and man po"er to e ectively discharge his activitiesJ has any past e#perience in the business o buying, selling or dealing in securitiesJ is being subGected to any disciplinary proceedings under the rules, regulations and bye&la"s o a stock e#change :ene its to the trading membership o ,*) include< access to a nation&"ide trading acility or e+uities, derivatives, debt and hybrid instruments H products, ability to provide a air, e icient and transparent securities market to the investors, use o state&o &the&art electronic trading systems and technology, a demutualised )#change managed by independent and e#perienced pro essionals, Types o 9embership 829 *egment '8holesale 2ebt 9arket(

 C9 and 829 segments C9 and 6-% segments C9, 829 and 6-% segment

Clearing 9embership o ,*CC@ as a .C9 )ligibility or ac+uiring ne" membership o ,*) 3ndividuals .artnership irms 3nstitutions, including subsidiaries o banks engaged in inancial services. :ody Corporates including companies as de ined in the Companies Act, 1956. ,ote< 3ndividual and .artnership irm are not eligible to apply or membership on 829 segment. CRIT'RI2 I6DI0ID72 )S A1) 9in< >1 9a#< 6! *TATU* 3ndian Citi0en )2UCAT3% At least a graduate or e+uivalent +uali ication )/.);3), > Ars C%RP%R2T 'S 9in<>1 6or directors Corporate registered under The Companies Act, 1956 '3ndian( T"o 2irectors should be at least graduate or e+uivalent +uali ication

C) 9in paid up e+uity capital

,ot applicable

;s D! lakh

2DMISSI%6 PR%C'D7R' #%R 6'W M'M&'RS8IP *ubmission o application orm %nline e#amination ',C69( 9embership ;ecommendation Committee '9;C( 9;CH:oard approval *):3 ;egistration 6ormalities or enablement Submission o* application *orm application orm complete in all respects in the prescribed ormat along "ith other relevant documents and accompanied by a demand dra t or ;s. 1!,!!!H& dra"n in avour o ,ational *tock )#change o 3ndia @imited, payable at 9umbai. %nline examination At any point o time the applicant has to ensure that at least the sole proprietorHone o the designated partnerHone o the designated directorHcompliance o icer "ould have a valid certi icate or at least one o the ollo"ing ,C69 9odules < i. *ecurities 9arket ':asic( 9odule ii. Compliance % icer ':roker( 9odule iii. Capital 9arket '2ealers( 9odule iv. 2erivatives 9arket '2ealers( 9odule

Membership Recommendation Committee The 9embership ;ecommendation Committee '9;C( consists o seven persons rom various disciplines, including the 9anaging 2irector o the )#change. The 9;C conducts intervie"s "ith the applicants or trading membership The ollo"ing persons have to appear or the intervie"< 'i( Corporates & A dominant shareholder and a 8hole&time 2irector 'ii( 3ndividuals I individual himsel 'iii( .artnership 6irms I T"o partners MRC9&oard approval The :oard o 2irectors a ter taking into consideration the recommendations o the 9embership ;ecommendation Committee either approve or reGect the applications. The applicants are re+uired to remit the necessary eesHdeposits as per the demand advice ailing "hich the applications may not be sent to *):3 or registration. S'&I Re!istration %nce admission is granted to an entity as a *tock broker, provisional o er letters are sent to the applicant. 3n this o er letter, the re+uirements to be complied "ith by the trading member or or"arding their application to *):3 are listed, important among them being< *):3 Application orm along "ith 22 o ;s. 5!!!H& avouring *):3 or Capital 9arket, ;s. 1!,!!!H& or 6-%

trading only and ;s. 5!,!!!H& or Trading cum ClearingH *el clearing member on 6-% segment. Audited inancial statements, ,et"orth certi icate, 2etails o 2irectors and shareholders, etc. 9emorandum or Articles o association or .artnership deed #ormalities *or enablement 6or installation o 7*AT the ollo"ing has to be submitted Application or installation as per Anne#ure D o Circular ,o.16D 7*AT Undertaking duly notarised ,%C rom the o"ner o .remises "here 7*AT is going to be installed .ayment o ;s. > lakh avouring K,ational *tock )#change o 3ndia @imitedK payable at 9umbai, to"ards 3nterest& ree 7*AT 2eposit )very Trading 9ember has to necessarily take 3nsurance cover "ith either ,e" 3ndia Assurance Company @td. or %riental 3nsurance Company @td. or ,ational 3nsurance Company @td. Trading 9embers are re+uired to submit a :roker 2atabase speci ied by *):3. %ne so t copy and t"o hard copies o the same are to be submitted to the )#change. Trading 9embers have to submit the ollo"ing documents duly certi ied by the statutory auditor in the prescribed ormat< Audited accounts ,et"orth certi icate

 2etails o 2irectors 2etails o shareholding 2etails o dominant promoter group

Continuin Me!"ers#i$ The Trading 9embers are re+uired to comply "ith various re+uirements or continuing membership. These include< *ubmission o the ollo"ing documents in the prescribed ormat duly certi ied by a chartered accountant< a( Audited Annual Accounts 'b( ,et "orth Certi icate 'c( *hareholding pattern 'd( 2ominant .romoter 1roup details '>( 9embers have to annually rene" their 3nsurance policies ailing "hich, disciplinary action "ould be initiated by the )#change. 3n the application or ne" membership, the applicant shall identi y the holding company, "hich is a member o the e#change. :oard resolution rom the e#isting trading member corporate or applying or ne" membership in the name o the subsidiary.

Mu%ti$%e Me!"ers#i$s 9ultiple memberships may be permitted by the )#change only in cases "here the e#isting trading member corporate orms a subsidiary. 9ultiple 9embership o the )#change "ill be permitted "ith the ollo"ing conditions< The applicant shall be re+uired to identi y the )#isting trading member "ith "hom they are associated at the time o making an application. 6or the purpose o taking any disciplinary actions etc., the associated entities shall be considered as one single unit. 6or ensuring inancial linkage bet"een the associated entities, the ne" applicant should be a subsidiary o the e#isting trading member Company, "ith at least 51F shareholding. &$ ra'ation of Me!"ers#i$ Upgrading trading membership rom 3ndividual or .artnership irm to a Corporate. 3n case o an upgradation rom individual to Corporate, the individual should hold atleast 51F o the paid up capital o the proposed corporate '$!F in case o listed corporates(. 3n case o an upgradation rom partnership irm to Corporate, the original partners should hold atleast 51F o the paid up capital o the proposed corporate '$!F in case o listed corporates(. There should be atleast > +uali ied directors "ho should be graduates "ith minimum > years e#perience in stock broking related activities.

Mer er(A!a% a!ation of Me!"ers#i$ The merged entity shall at all times consist o at least one or more members o the dominant promoter group o the merging Tradin 9embers "ho "ould hold at least 51F o its total paid up capital '$!F in case o listed companies( H pro it sharing ratio. The emerging entity "ould be allo"ed to trade on the registration o the e#tinguishing entity or a period o $5 days. The emerging entity should apply to *):3 at the earliest and give an undertaking to be liable or the act o the e#tinguishing entity *uch applications in any case should be made not later than D! days o the registration granted by the ;egistrar o companies to the emerging entity. Reconstitution(Transfer of Me!"ers#i$ ;econstitutionHTrans er o 9embership takes place "hen the shareholdingHpro it sharing ratio o e#isting 2ominant .romoterH*[Link] group alls belo" 51F '$!F in case o listed corporates( "hich means that e ectively they are no more in control o the trading member entity. A processing ee o ;s.1 lakh "ould be payable on approval o proposal or trans er. The trans er proposal "ould be subGect to recommendation by the 9embership ;ecommendation Committee '9;C( and approval by the :oard o the )#change, and, or this purpose, the )#changeKs re+uirements o online test and an intervie" by 9;C, "ill apply. Surren'er of Me!"ers#i$

A Trading 9ember desirous o surrendering its membership o the )#change is re+uired to send its re+uest in "riting in the prescribed 6ormat An application or surrender is not allo"ed to be "ithdra"n unless permitted by the )#change at its discretion. Sus$ension ) E*$u%sion of Me!"ers#i$ (+ Miscon'uct" raud! "iolation! #mproper Conduct, $reach of Rules! $%e &a's and Regulations, ailure to compl% 'ith Resolutions, ailure to submit to or abide b% (rbitration, ailure to testif% or give information, ailure to submit )pecial Returns, ailure to submit (udited (ccounts, ailure to compare or submit accounts 'ith *efaulter, alse or misleading Returns, "exatious complaints, ailure to pa% dues and fees+ (, &n+"usiness%ike Con'uct" ictitious Names, ictitious *ealings, Circulation of rumours, ,re-udicial $usiness, Market Manipulation and Rigging, .n'arrantable $usiness, Compromise, *ishonoured Che/ue, ailure to carr% out transactions 'ith Constituents (: &n$rofessiona% Con'uct" $usiness in )ecurities in 'hich dealings not permitted, $usiness for *efaulting Constituent, $usiness for #nsolvent, $usiness 'ithout permission 'hen under suspension, $usiness for or 'ith suspended! expelled and defaulter trading members, $usiness for Emplo%ees of other trading members, $usiness for Exchange Emplo%ees, (dvertisement, Evasion of Margin Re/uirements, $rokerage Charge, *ealings 'ith entities prohibited to bu% or sell or deal in securities market+ (; Sus$ension of Business" ,re-udicial $usiness, .n'arrantable $usiness, .nsatisfactor% inancial Condition,

(< Conse,uence of Sus$ension" )uspension of Membership Rights, Rights of creditors unimpaired, ulfillment of Contracts, urther business prohibited, Trading members not to deal Conse,uences of E*$u%sion" Trading membership rights forfeited, 0ffice vacated, Rights of Creditors unimpaired, The e#pelled trading member shall be bound to ul il transactions outstanding at the time o his e#pulsion Trading members not to deal< ,o trading member shall transact business "ith the e#pelled trading member ,o trading member shall transact business or or "ith or share brokerage "ith the e#pelled trading member Aut#orise' Persons Trading members o the )#change may appoint authorised persons "ho are individuals, registered partnership irms, bodies corporate or companies as de ined under the Companies Act, 1956 in the Capital 9arket 'C9( segment or 6utures - %ptions '6-%( segment or in both C9 and 6-% segments. An authorised person may introduce clients to the trading member or "hom they may receive remuneration H commission H compensation rom the trading member and not rom the clients. The clients introduced by the authorised person "ould be re+uired to deliver securities and make payments directly in the trade name o the trading member S7&=&R%>'RS Trading members desirous o appointing sub&brokers are re+uired to submit the ollo"ing documents to the 9embership 2epartment o the )#change<

LCopy o sub&broker & broker agreement duly certi ied by the trading members LApplication orm or registration as a sub&broker "ith *ecurities and )#change :oard o 3ndia '6orm :( L;ecommendation letter to be given by the trading member "ith "hom the sub&broker is a iliated '6orm C( The sub&broker "ill be re+uired to adhere to ,*)Cs Bkno" your clientsC re+uirements. The important documents relating to dealing through a subbroker are given belo"< L3ndividual client registration application orm L,on&individual client registration application orm L*ub&broker client agreement [Link]*ale ,ote issued by *ub&brokers acting or constituents 'li!ibility '1( They shall not be less than >1 years o ageJ '>( not have been convicted o any o ence involving raud or dishonestyJ 'D( passed 1>th standard e+uivalent e#amination '$( should not have been debarred by *):3 '5( The corporate entities applying or sub&brokership shall have minimum paid up capital o ;s. 5 @akh '6( and it shall identi y a dominant shareholder "ho holds a minimum o 51F shareseither singly or "ith the unconditional support o hisHher spouse &R%>'R=C)I'6TS R')2TI%6S 1no' %our client the T9 shall seek in ormation rom the client in the KClient ;egistration Application 6ormK obtaining in ormation like< investor risk pro ile, inancial pro ile, investor identi ication details, address details, income, .A, number, employment, age, investments, other assets and inancial liabilities.

.ni/ue Client Code *):3 made it mandatory or all brokers to use uni+ue client codes or all Clients. Margins from the Clients 9argin collected rom the client shall be kept separately in the client bank account and utili0ed or making payment to the clearing house or margin and settlement "ith respect to that client. Contract Note Contract note is a con irmation o trade's( done on a particular day or and on behal o a client. A contract note shall be issued to a client "ithin >$ hours o the e#ecution o the contract duly signed by the T9 or his Authori0ed *ignatory. The T9 shall ensure that< 'a( contract notes are in the prescribed ormat, 'b( stamp duty is paid, 'c( all statutory levies are sho"n separately in the contract note, and 'd( contract notes are signed by the T9 or by an authorised signatory T9. ,a%ments/*eliver% of )ecurities to the Clients )very T9 shall make payments to his clients or deliver the securities purchased "ithin one "orking day o pay&out unless the client has re+uested other"ise. $rokerage The ma#imum brokerage chargeable by T9 in respect o trades e ected in the securities admitted to dealing on the C9 segment o the )#change is i#ed at >.5F o the contract price, e#clusive o statutory levies.

This ma#imum brokerage is inclusive o sub&brokerage. )egregation of $ank (ccounts The T9 should maintain separate bank accounts or clientCs unds and o"n unds. )egregation of *emat 2$eneficiar%3 (ccounts The Trading 9embers shall keep the dematerialised securities o Constituents in a separate bene iciary account distinct rom the bene iciary account maintained or holding their o"n dematerialised securities. DISP7T'4 2R&ITR2TI%6 26D 2PP'2) 3nvestor complaints received against the trading members H companies in respect o claimsHdisputes or transactions e#ecuted on the )#change are handled by the 3nvestor *ervice Cell '3*C(. The sole arbitrator or panel o arbitrators to "hom the highest pre erence has been given by both the parties isHare appointed by the )#change to conduct the arbitration proceeding and pass the a"ard in the respective arbitration matter. 3 no common personHs are identi iable rom the list submitted by both the parties, the sole arbitrator or panel o Arbitrators isHare appointed by the )#change rom the list o persons eligible to act as Arbitrators a ter e#cluding the names o Arbitrators given by the parties. *ole Arbitrator is appointed i the claim amount is upto ;s.>5 lakhs and panel o Arbitrators comprising o three persons are appointed i the claim amount is more than ;s.>5 lakhs based on the list o Arbitrators submitted by the parties.

The sole ArbitratorHpanel o Arbitrators "ould i# a hearing in the matter unless both parties "aive their right or such hearing in "riting. 3n cases the claim amount is ;s. >5,!!!H& or less, it is not mandatory to hold a hearing o the parties and the matter is decided based on the documents and submissions made by the parties.