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A stock exchange is an entity which provides "trading" facilities for stock brokers and traders, to
trade stocks and other securities. Stock exchanges also provide facilities for the issue and
redemption of securities as well as other financial instruments and capital events including the
payment of income and dividends. The securities traded on a stock exchange include shares
issued by companies, unit trusts, derivatives, pooled investment products and bonds.

To be able to trade a security on a certain stock exchange, it has to be listed there. Usually there
is a central location at least for recordkeeping, but trade is less and less linked to such a physical
place, as modern markets are electronic networks, which gives them advantages of increased
speed and reduced cost of transactions. Trade on an exchange is by members only.

The initial offering of stocks and bonds to investors is by definition done in the primary market
and subsequent trading is done in the secondary market. A stock exchange is often the most
important component of a stock market. Supply and demand in stock markets is driven by
various factors which, as in all free markets, affect the price of stocks (see stock valuation).

There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be
subsequently traded on the exchange. Such trading is said to be á
 or over-the-counter.
This is the usual way that derivatives and bonds are traded. Increasingly, stock exchanges are
part of a global market for securities.

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In 12th century France the á




 was concerned with managing and regulating the
debts of agricultural communities on behalf of the banks. As these men also traded in debts, they
could be called the first brokers.
Some stories suggest that the origins of the term "bourse" came from the Latin þ
 meaning 

þ because, in 13th century Bruges, the sign of a purse (or perhaps three purses), hung on the
front of the house where merchants met.

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ajor Stock Exchanges: Year ended 31 December 2009

(Source: World Federation of Exchanges - Statistics/onthly)

arket Capitalization Trade Value

Economy Stock Exchange
(USD Billions) (USD Billions)
United States New York Stock Exchange 11838 17521
Japan Tokyo Stock Exchange 3306 3704
United States NASDAQ 3239 13608
Europe Euro next 2869 1935
United Kingdom London Stock Exchange 2796 1772
China Shanghai Stock Exchange 2705 5056
Hong Kong Hong Kong Stock Exchange 2305 1416
Canada Toronto Stock Exchange 1677 1245
Spain BE Spanish Exchanges 1435 1259
Brazil B F Bovespa 1337 645
India Bombay Stock Exchange 1307 264
Germany Deutsche Börse 1292 1517
Australia Australian Securities Exchange 1225 799
India National Stock Exchange of India 1225 792
Switzerland SIX Swiss Exchange 1065 740
China Shenzhen Stock Exchange 868 2772
South Korea Korea Exchange 835 1570
Nordic Countries NASDAQ Exchange 817 697
South Africa JSE Limited 799 271
Taiwan Taiwan Stock Exchange 658 905
Italy Borsa Italiana 656 948

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In the 19th century, exchanges were opened to trade forward contracts on commodities.
Exchange traded forward contracts are called futures contracts. These áá
 later
started offering future contracts on other products, such as interest rates and shares, as well as
options contracts. They are now generally known as futures exchanges.

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The Stock Exchange provides companies with the facility to raise capital for expansion through
selling shares to the investing public.

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When people draw their savings and invest in shares, it leads to a more rational allocation of
resources because funds, which could have been consumed, or kept in idle deposits with banks,
are mobilized and redirected to promote business activity with benefits for several economic
sectors such as agriculture, commerce and industry, resulting in stronger economic growth and
higher productivity levels of firms.
3.
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Companies view acquisitions as an opportunity to expand product lines, increase distribution

channels, hedge against volatility, increase its market share, or acquire other necessary business
assets. A takeover bid or a merger agreement through the stock market is one of the simplest and
most common ways for a company to grow by acquisition or fusion

4.  !

Both casual and professional stock investors, through dividends and stock price increases that
may result in capital gains, will share in the wealth of profitable businesses.

5. $!,  

By having a wide and varied scope of owners, companies generally tend to improve on their
management standards and efficiency in order to satisfy the demands of these shareholders and
the more stringent rules for public corporations imposed by public stock exchanges and the
government. Consequently, it is alleged that public companies (companies that are owned by
shareholders who are members of the general public and trade shares on public exchanges) tend
to have better management records than privately held companies (those companies where shares
are not publicly traded, often owned by the company founders and/or their families and heirs, or
otherwise by a small group of investors).

Despite this claim, some well-documented cases are known where it is alleged that there has
been considerable slippage in corporate governance on the part of some public companies. The
dot-com bubble in the late 1990's, and the subprime mortgage crisis in 2007-08, are classical
examples of corporate mismanagement. Companies like Pets.com (2000), Enron Corporation
(2001), One.Tel (2001), Sunbeam (2001), Webvan (2001), Adelphia (2002), CI WorldCom
(2002), Parmalat (2003), American International Group (2008), Bear Stearns (2008), Lehman
Brothers (2008), General otors (2009) and Satyam Computer Services (2009) were among the
most widely scrutinized by the media.
However, when poor financial, ethical or managerial records are known by the stock investors,
the stock and the company tend to lose value. In the stock exchanges, shareholders of
underperforming firms are often penalized by significant share price decline, and they tend as
well to dismiss incompetent management teams.

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As opposed to other businesses that require huge capital outlay, investing in shares is open to
both the large and small stock investors because a person buys the number of shares they can
afford. Therefore the Stock Exchange provides the opportunity for small investors to own shares
of the same companies as large investors.

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Governments at various levels may decide to borrow money in order to finance infrastructure
projects such as sewage and water treatment works or housing estates by selling another category
of securities known as bonds. These bonds can be raised through the Stock Exchange whereby
members of the public buy them, thus loaning money to the government. The issuance of such
bonds can obviate the need to directly tax the citizens in order to finance development, although
by securing such bonds with the full faith and cr of the government instead of with collateral, the
result is that the government must tax the citizens or otherwise raise additional funds to make
any regular coupon payments and refund the principal when the bonds mature.

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At the stock exchange, share prices rise and fall depending, largely, on market forces. Share
prices tend to rise or remain stable when companies and the economy in general show signs of
stability and growth. An economic recession, depression, or financial crisis could eventually lead
to a stock market crash. Therefore the movement of share prices and in general of the stock
indexes can be an indicator of the general trend in the economy.
 !1*& 

Listing requirements are the set of conditions imposed by a given stock exchange upon
companies that want to be listed on that exchange. Such conditions sometimes include minimum
number of shares outstanding, minimum market capitalization, and minimum annual income.

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Companies have to meet the requirements of the exchange in order to have their stocks and
shares listed and traded there, but requirements vary by stock exchange:

? Bombay Stock Exchange: Bombay Stock Exchange (BSE) has requirements for a
minimum market capitalization of Rs.250 illion and minimum public float equivalent
to Rs.100 illion.
? London Stock Exchange: The main market of the London Stock Exchange has
requirements for a minimum market capitalization (£700,000), three years of audited
financial statements, minimum public float (25 per cent) and sufficient working capital
for at least 12 months from the date of listing.
? NASDAQ Stock Exchange: To be listed on the NASDAQ a company must have issued at
least 1.25 million shares of stock worth at least $70 million and must have earned more
than $11 million over the last three years.
? New York Stock Exchange: To be listed on the New York Stock Exchange (NYSE) a
company must have issued at least a million shares of stock worth $100 million and must
have earned more than $10 million over the last three years.

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India Stock Exchanges can either be a conglomerate/ firm or mutual group. The affiliates act as
intermediaries to their patrons or as key players for their own accounts.

Stock Exchanges in India also assist the issue and release of securities and other monetary tools
incorporating the fortification of revenues and dividends. The book keeping of the trade is
centralized but the buying and selling is associated to a particular place as advanced
marketplaces are mechanized. The buying and selling on an exchange is only open to its
affiliates and brokers.

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(a)National Stock Exchange (NSE) of India

Integrated in November 1992, the National Stock Exchange of India (NSE) was initially a tariff
forfeiting association. In 1993, the exchange was certified under Securities Contracts
(Regulation) Act, 1956 and in June 1994 it started its business functioning in the Wholesale Debt
arket (WD). The Equities division of NSE began its operations in 1994 while in 2000 the
corporation incorporated its Derivatives division.

(b) Bombay Stock Exchange (BSE) of India

The oldest stock market in Asia, BSE stands for Bombay Stock Exchange and was initially
known as "The Native Share Stock Brokers Association." Incorporated in the 1875, BSE
became the first exchange in India to be certified by the administration. It attained a permanent
authorization from the Indian government in 1956 under Securities Contracts (Regulation) Act,
1956.

Over the year, the exchange company has played an essential part in the expansion of Indian
investment market. At present the association is functioning as corporatized body integrated
under the stipulations of the Companies Act, 1956.

(c) Regional Stock Exchanges (RSE) of India

The Regional Stock Exchanges in India started spreading its business operation from 1894. The
first RSE to start its functioning in India was Ahmadabad Stock Exchange (ASE) followed by
Calcutta Stock Exchange (CSE) in 1908.

The stock exchange in India witnessed a flourishing phase in 1980s with the incorporation of
many exchanges under it. In early 60s, it has only few certifies RSEs under it namely Hyderabad
Stock Exchange, Indore Stock Exchange, adras Stock Exchange, Calcutta Stock Exchange and
Delhi Stock Exchange. The recent to join the list was eerut Stock Exchange and Coimbatore
Stock Exchange.

*   !

Functions done by the stock exchange market in favor of the investor:

w? It permits him the access to the profitable activities of the big companies.
w? It offers liquidity to the security investments, through a place in which to sell or buy
securities.
w? It permits for the investor to have a political power in the companies in which he invests
its savings due that the acquisition of ordinary shares gives him the right (among other
things) to vote in the general shareholders meetings of the company in question.
w? It offers the possibility of diversifying your portfolio by enlarging the field of strategy of
investments due to alternative options, as could be the derived market, the money market,
etc.

The function done by the stock exchange market in favor of the companies:

w? It supplies them with the obtaining of long-term funds that permits the company to make
profitable activities or to do determine projects that otherwise wouldn¶t be possible to
develop for lack of financing. Also, this funding signifies a less cost than if obtained at
other channels.
w? The securities quoted at the stock exchange market usually have more fiscal purpose
advantages for the companies.
w? It offers to the company¶s free publicity, which in other way would suppose considerable
expenses. The institution is objecting of attention of the media (television, radio, etc.) in
case any important change in its owners (the share holders).

The Functions of the stock exchange market as an organization are:

w? To guarantee the legal and economic security of the agreed contracts.

 w? To provide official information about the quantities that are negotiated and of the quoted
prices.
w? To fix the prices of the securities according to the fundamental law of the offer and the
demand.

 ! c /

Traditionally, a stock exchange has been an association of individual members called

member brokers (or simply members or brokers), formed for the express purpose of regulating
and facilitating buying and selling of securities by the public and institution at large.

A stock exchange in India operates with due recognition from the government under the
Securities and Contracts (Regulations) Act, 1956. the member brokers are essentially the
middlemen who carry out the desired transactions in securities on behalf of the public(for a
commission) or on their own behalf. New membership to a Stock Exchange is through election
by the governing board of that stock exchange.

At present, there are 23 stock exchanges in India, the largest among them being the
Bombay Stock Exchange. BSE alone accounts for over 80% of the total volume of transactions
in shares.

Typically, a stock exchange is governed by a board consisting of directors largely elected

by the member brokers, and a few nominated by the government. Government nominee include
representatives of the ministry of finance, as well as some public representatives, who are
expected to safeguard the public interest in the functioning of the exchanges. A president, who is
an elected member, usually nominated by the government from among the elected members,
heads the board. The executive director, who is usually appointed by the by the stock exchange
with the government approval is the operational chief of the stock exchange. His duty is to
ensure that the day to day operations the Stock Exchange are carried out in accordance with the
various rules and regulations governing its functioning.

The overall development and regulation of the securities market has been entrusted to the
Securities and Exchange Board of India (SEBI) by an act of parliament in 1992. All
companies wishing to raise capital from the public are required to list their securities on at least
one stock exchange. Thus, all ordinary shares, preference shares and debentures of the publicly
held companies are listed in the stock exchange.

 !& !& 

ade some attempts in this direction, but this did not materially alter the situation. In view of the
less than satisfactory quality, of administration of broker-managed exchanges, the finance
minister in march 2001 proposed demutualisation of exchanges by which ownership,
management and trading membership would be segregated from each other. The regulators are
working towards implementing this. Of the 23 stock exchanges in India, two stock exchanges
viz., OTCEI and NSE are already demutualised. Board of directors, which do not include trading
members, manages these. Theses are purest form of demutualised exchanges, where ownership,
management and trading are in the hands of three sets of people. The concept of demutualisation
completely eliminates any conflict of interest and helps the exchange to pursue market efficiency
and investors interest aggressively
  
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The SEBI, that is, the Securities and the Exchange Board of India, is the national regulatory body
for the securities market, set up under the securities and Exchange Board of India act, 1992, to
³protect the interest of investors in securities and to promote the development of, and to regulate
the securities market and for matters connected therewith and incidental too.´

SEBI has its head office in umbai and it has now set up regional offices in the metropolitan
cities of Kolkata, Delhi, and Chennai. The Board of SEBI comprises a Chairman, two members
from the central government representing the ministries of finance and law, one member from
the Reserve Bank of India and two other members appointed by the central government.

As per the SEBI act, 1992, the power and functions of the Board encompass the regulation of
Stock Exchanges and other securities markets; registration and regulation of the working stock
brokers, sub-brokers, bankers to an issue (a public offer of capital), trustees of trust deeds,
registrars to an issues, merchant bankers, under writers, portfolio managers, investment advisors
and such other intermediaries who may be associated with the stock market in any way;
registration and regulations of mutual funds; promotion and regulation of self- regulatory
organizations; prohibiting Fraudulent and unfair trade practices and insider trading in securities
markets; regulating substantial acquisition of shares and takeover of companies; calling for
information from,undertking inspection, conducting inquiries and audits of stock exchanges,
intermediaries and self- regulatory organizations of the securities market; performing such
functions and exercising such powers as contained in the provisions of the Capital Issues
(Control) Act,1947 and the Securities Contracts (Regulation) Act, 1956, levying various fees and
other charges, conducting necessary research for above purposes and performing such other
functions as may be prescribes from time to time.
SEBI as the watchdog of the industry has an important and crucial role in the market in ensuring
that the market participants perform their duties in accordance with the regulatory norms. The
Stock Exchange as a responsible Self Regulatory Organization (SRO) function to regulate the
market and its prices as per the prevalent regulations. SEBI and the Exchange play
complimentary roles to enhance the investor protection and the overall quality of the market.

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The trading platform of a stock exchange is accessible only to brokers. The broker enters into
trades in exchanges either on his own account or on behalf of clients. The clients may place their
order with them directly or a sub-broker indirectly. A broker is admitted to the membership of an
exchange in terms of the provisions of the SCRA, the SEBI act 1992, the rules, circulars,
notifications, guidelines, etc. prescribed there under and the byelaws, rules and regulations of the
concerned exchange. No stockbroker or sub-broker is allowed to buy, sell or deal in securities,
unless he or she holds a certificate of registration granted by SEBI. A broker/sub-broker
compiles with the code of conduct prescribed by SEBI.

The stock exchanges are free to stipulate stricter requirements for its members than those
stipulated by SEBI. The minimum standards stipulated by NSE for membership are in excess of
the minimum norms laid down by SEBI. The standards for admission of members laid down by
NSE stress on factors, such as, corporate structure, capital adequacy, track record, education,
experience, etc. and reflect the conscious endeavors to ensure quality broking services.

 !

Listing means formal admission of a security to the trading platform of a stock exchange,
invariably evidenced by a listing agreement between the issuer of the security and the stock
exchange. ; Listing of securities on Indian Stock Exchanges is essentially governed by the
provisions in the companies act, 1956, SCRA, SCRR, rules, bye-laws and regulations of the
concerned stock exchange, the listing agreement entered into by the issuer and the stock
exchange and the circulars/ guidelines issued by central government and SEBI
c /,

Stock index uses a set of stocks that are representative of the whole market, or a specified sector
to measure the change in overall behavior of the markets or sector over a period of time. India
Index Services Products Limited (IISL), promoted by NSE and CRISIL, is the only
specialized organization in the country to provide stock index services.

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All stock exchanges in India follow screen-based trading system. NSE was the first stock
exchange in the country to provide nation-wide order-driven, screen-based trading system. NSE
model was gradually emulated by all other stock exchanges in the country. The trading system at
NSE known as the National Exchange for Automated Trading (NEAT) system is an anonymous
order-driven system and operates on a strict price/time priority. It enables members from across
the countries to trade simultaneously with enormous ease and efficiency. NEAT has lent
considerable depth in the market by enabling large number of members all over the country to
trade simultaneously and consequently narrowed the spreads significantly. A single consolidated
order book for each stock displays, on a real time basis, buy and sell orders originating from all
over the country. The bookstores only limit orders, which are orders to buy or sell shares at a
stated quantity and stated price. The limit order is executed only if the price quantity conditions
match. Thus, the NEAT system provides an open electronic consolidated limit order book
(OECLOB). The trading system provides tremendous flexibility to the users in terms of kinds of
orders that can be placed on the system. Several time-related (Good-Till-Cancelled, Good-
TillDay, Immediate-or-Cancel), price related (buy/sell limit and stop-loss orders) or volume
related (All-or-None, inimum Fill, etc.) conditions van be easily built into an order. Orders are
sorted and match automatically by the computer keeping the system transparent, objective and
fair. The trading system also provides complete market information on-line, which is updated on
real time basis. The trading platform of the C segment of NSE is accessed not only from the
computer terminals from the premises of brokers spread over 420 cities, but also from the
personal computers in the homes of investors through the internet and from the hand-held
devices through WAP. The trading platform of BSE is also accessible from 400 cities.
Internet trading is available on NSE and BSE, as of now. SEBI has approved the use of Internet
as an order routing system, for communicating clients¶ orders to the exchanges through brokers.
SEBI- registered brokers can introduce internet-based trading after obtaining permission from
the respective Stock Exchanges. SEBI has stipulated the minimum conditions to be fulfilled by
trading members to start internet-based trading and services.

BSE /NSE

utual Funds Commodity

Listed Schemesutual Funds News
Open EndedLatest NAV's
Close Endedmore...
 Scheme Code
NCDEX Agro Products
CX etals
NCEIL more...
Bullion

NSE was the first exchange in the country to provide web-based access to investors to trade
directly on the exchange. It launched Internet trading in February 2000. It was followed by the
launch of Internet trading by BSE in arch 2001. The orders originating from the personal
computers (PCs) of investors are routed through the Internet tot eh trading terminals of the
designated brokers with whom they have relations and further to the exchange of trade
execution. Soon after these orders get matched and result into trades, the investors get
confirmation about them on their PCs through the same Internet routes.
SEBI approved trading through wireless medium or WAP platform. NSE is the only exchange to
provide access to its order book through the hand held devices, which use WAP technology. This
serves primarily retail investors who are mobile and want to trade from any place when the
market prices for st0ocks of their choice are attractive.

Demat Trading

A depository holds securities in dematerialized form. It maintains ownership records of securities

in a book entry form and also effects transfer of ownership through book entry. SEBI has
introduced some degree of compulsion in trading and settlement of securities in dematerialized
form. While the investors have a right to hold securities in either physical or demat form, SEBI
has mandated compulsory trading and settlement of securities in dematerialized form. This was
initially introduced for institutional investors and was later extended to all investors. Starting
with 12 scrips on January 15, 1998, all investors are required to mandatorily trade in
dematerialized form in respect of 2,335 securities as at end-June, 2001.
Since the introduction of the depository system, dematerialization has progressed at a fast pace
and has gained acceptance among the participants in the market. All actively traded scrips are
held, traded and settled in demat form. The details of progress in dematerialization in two
depositories, viz., NSDL and CDSL., are presented as below:

In a SEBI working paper titled µDematerialization: A Silent Revolution in the Indian Capital
arket¶ released in April 2000, it has been observed that India has achieved a very high level of
dematerialization in less than three years¶ time, and currently more than 99%of trades settle in
demand form. Competition and regulatory developments facilitated reduction in custodial
charges and improvements in qualities of service standards. The paper observes that one
imminent and apparent immediate benefit of competition between the two depositories is fall in
settlement and other charges. Competition has been driving improvement in service standards.
Depository facility has effected changes in stock market microstructure. Breadth and depth of
investment culture has further got extended to interior areas of the country faster. Explicit
transaction cost has been falling due to dematerialization. Dematerialization substantially
contributed to the increased growth in the turnover. Dematerialization growth in India is the
quickest among all emerging markets and also among developed markets excepting for the U.K
and Hong Kong.

CAPITAL LISTED AND ARKET CAPITALIZATION.

The Stock Exchange, Bombay (BSE) is the premier Stock Exchange in India. The BSE
accounted for 46 per cent of listed companies on an all India basis as on 31st arch 1994. It
ranked first in terms of the number of listed companies and stock issues listed. The capital listed
in the BSE as on 31st arch 1994 accounted for 50% of the overall capital listed on all the stock
exchanges. Its share of the market capitalization was around 74% as on the same date. The
paidup capital of equity, debentures/bonds and preference were 73%, 31%, 44% respectively of
the overall capital listed on all the Stock Exchanges as on the same date.
On the BSE, the Steel Authority of India had the largest market capitalization of Rs.19, 908
crores as on the 31st arch, 1994 followed by the State Bank of India with the market
capitalization of Rs.16, 702 crores and ahanagar Telephone Nigam Limited with the market
capitalization of Rs.11, 700 crores.

BSE SENSEX

The BSE SENSEX, short form of Sensitive Index, first compiled in 1986 is a ³market
Capitalization-Weighted´ index of 30 component stocks representing a sample of large,
wellestablished and financially sound companies. The index is widely reported in both, the
domestic international, print electronic media and is widely used to measure the used to measure
the performance of the Indian stock markets.

The BSE SENSEX is the benchmark index of the Indian capital market and one, which has the
longest social memory. In fact the SENSEX is considered to be the pulse of the Indian stock
markets. It is the oldest index in India and has acquired a unique place in collective
consciousness of the investors. Further, as the oldest index of the Indian Stock arket, it
provides time series data over a fairly long period of time. Small wonder that the SENSEX has
over the years has become one of the most prominent brands of the Country.

Objectives of SENSEX
The BSE SENSEX is the benchmark index with wide acceptance among individual investors,
institutional investors, foreign investors, foreign investors and fund managers. The objectives of
the index are:

To measure market movements Given its long history and its wide acceptance, no other index
matches the BSE SENESX in the reflecting market movements and sentiments. SENSEXis
widely used to describe the mood in the Indian stock markets.

Benchmark for funds performance The inclusion of blue chip companies and the wide and
balanced industry Representation in the SENSEX makes it the ideal benchmark for fund
managers to compare the performance of their funds.

For index based derivatives products Institutional investors, money managers and small
investors, all refer to the BSE

SENSEX for their specific purposes. The BSE SENSEXis in effect the proxy for the Indian stock
markets. Since SENSEXcomprises of the leading companies in allthe significant sectors in the
economy, we believe that it will be the most liquid contract in the Indian market and will garner
a predominant market share.

Companies represented in the SENSEX

Company name (As on 15.06.01) Hindustan lever Reliance limited Infosys technologies
Reliance petroleum ITC State bank of India TNL Satyam computers Zee telefilms Ranbaxy
labs ICICI Larsen toubro Cipla Hindalco HPCL TISCO Nestle Sector FCG Chemicals and
petrochemicals Information technology Oil and gas FCG Finance Telecom Information
technology edia Healthcare Finance Diversified Healthcare etals and mining etal and
mining etal and mining FCG

Trading System

Till Now, buyers and sellers used to negotiate face-to-face on the trading floor over a security
until agreement was reached and a deal was struck in the open outcry system of trading, that used
to take place in the trading ring. The transaction details of the account period (called settlement
period) were submitted for settlement by members after each trading session.

The computerized settlement system initiated the netting and clearing process by providing on a
daily basis statements for each member, showing matched and unmatched transactions.
Settlement processing involves computation of each member's net position in each security, after
taking into account all transactions for the member during the settlement period, which is 10
working days for group 'A' securities and 5 working days for group 'B' securities.

Trading is done by members and their authorized assistants from their Trader Work Stations
(TWS) in their offices, through the BSE On-Line Trading (BOLT) system. BOLT system has
replaced the open outcry system of trading. BOLT system accepts two-way quotations from
jobbers, market and limit orders from client-brokers and matches them according to the matching
logic specified in the Business Requirement Specifications (BRS) document for this system.

The matching logic for the Carry-Forward System as in the case of the regular trading system is
quote driven with the order book functioning as an "auxiliary jobber".
TRADING

The Exchange, which had an open outcry trading system, had switched over to a fully automated
computerized mode of trading known as BOLT (BSE on Line Trading) System. Through the
BOLT system the members now enter orders from Trader Work Stations (TWSs) installed in
their offices instead of assembling in the trading ring. This system, which was initially both order
and quote driven, was commissioned on arch 14, 1995. However, the facility of placing of
quotes has been removed w.e.f., August 13, 2001 in view of lack of market interest and to
improve system-matching efficiency. The system, which is now only order driven, facilitates
more efficient processing, automatic order matching and faster execution of orders in a
transparent manner.

Earlier, the members of the Exchange were permitted to open trading terminals only in umbai.
However, in October 1996, the Exchange obtained permission from SEBI for expansion of its
BOLT network to locations outside umbai. In terms of the permission granted by SEBI and
certain modifications announced later, the members of the Exchange are now free to install their
trading terminals at any place in the country. Shri P. Chidambaram inaugurated the expansion of
BOLT network the then Finance inister, Government of India on August 31, 1997.

In order to expand the reach of BOLT network to centers outside umbai and support the
smaller Regional Stock Exchanges, the Exchange has, as on arch 31, 2002, admitted subsidiary
companies formed by 13 Regional Stock Exchanges as its members. The members of these
Regional Stock Exchanges work as sub-brokers of the member-brokers of the Exchange.

The objectives of granting membership to the subsidiary companies formed by the Regional
Stock Exchanges were to reach out to investors in these centers via the members of these
Regional Exchanges and provide the investors in these areas access to the trading facilities in all
scrips listed on the Exchange.

Trading on the BOLT System

Trading on the BOLT System is conducted from onday to Friday between 9:55 a.m. and 3:30
p.m. The scrips traded on the Exchange have been classified into 'A', 'B1', 'B2', 'F' and 'Z' groups.
The number of scrips listed on the Exchange under 'A', 'B1 ', 'B2' and 'Z' groups, which represent
the equity segment, as on arch 31, 2002 was 173, 560,1930 and 3044 respectively. The 'F'
group represents the debt market (fixed income securities) segment wherein 748 securities were
listed as on arch 31, 2002. The 'Z' group was introduced by the Exchange in July 1999 and
covers the companies which have failed to comply with listing requirements and/or failed to
resolve investor complaints or have not made the required arrangements with both the
Depositories, viz., Central Depository Services (I) Ltd. (CDSL) and National Security
Depository Ltd. (NSDL) for dematerialization of their securities by the specified date, i.e.,
September 30, 2001. Companies in "Z" group numbered 3044 as on arch 31, 2002. Of these,
1429 companies were in "Z" group for not complying with the provisions of the Listing
Agreement and/or pending investor complaints and the balance 1615 companies were on account
of not making arrangements for dematerialization of their securities with both the Depositories.
1615 companies have been put in "Z" group as a temporary measure till they make arrangements
for dematerialization of their securities. Once they finalize the arrangements for
dematerialization of their securities, trading and settlement in their scrips would be shifted to
their respective erstwhile groups.

The Exchange has also the facility to trade in "C" group which covers the odd lot securities in
'A', 'B1', 'B2' and 'Z' groups and Rights renunciations in all the groups of scrips in the equity
segment. The Exchange, thus, provides a facility to market participants of on-line trading in odd
lots of securities and Rights renunciations. The facility of trading in odd lots of securities not
only offers an exit route to investors to dispose of their odd lots of securities but also provides
them an opportunity to consolidate their securities into market lots.

The 'C' group can also be used by investors for selling upto 500 shares in physical form in
respect of scrips of companies where trades are to be compulsorily settled by all investors in
demat mode. This scheme of selling physical shares in compulsory demat scrips is called as Exit
Route Scheme.

With effect from December 31, 2001, trading in all securities listed in equity segment of the
Exchange takes place in one market segment, viz., Compulsory Rolling Settlement Segment.

Permitted Securities The Exchange has since decided to permit trading in the securities of the
companies listed on other Stock Exchanges under " Permitted Securities" category which meet
the relevant norms specified by the Exchange. Accordingly, to begin with the Exchange has
permitted trading in scrips of five companies listed on other Stock Exchanges w.e.f. April 22,
2002/ Computation of closing price of scrips in the Cash Segment: The closing prices of scrips
are computed on the basis of weighted average price of all trades in the last 15 minutes of the
continuous trading session. However, if there is no trade during the last 15 minutes, then the last
traded price in the continuous trading session is taken as the official closing price.

A) Compulsory Rolling Segment (CRS):

Compulsory Rolling Settlement (CRS) Segment:
With a view to introduce the best international trading practices and to achieve higher settlement
efficiency, as mandated by SEBI, trades in all the equity shares listed on the Exchange in CRS
Segment were to be settled on T+5 basis w.e.f. December 31, 2001. SEBI has further directed the
Stock Exchanges that trades in all scrips w.e..f. April 1, 2002 should be settled on T+3 basis.
Accordingly, all transactions in all groups of securities in the equity segment and fixed income
securities listed on the Exchange are settled on T+3 basis w.e.f. April 1, 2002

Under a rolling settlement environment, the trades done on a particular day are settled after a
given number of business days rather than settling all trades done during a period at the end of an
'account period'. A T+3 settlement cycle means that the final settlement of transactions done on
T or trade day by exchange of monies and securities, occurs on fifth business day after the trade
day.

The transactions in securities of companies which have made arrangements for dematerialization
of their securities by the stipulated date are settled only in Demat mode on T+3 on net basis, i.e.,
buy and sale positions in the same scrip are netted and the net quantity is to be settled. However,
transactions in securities of companies, which have failed to make arrangements for
dematerialization of their securities or /are in "Z" group, are settled only on trade to trade basis
on T+3 i.e., the transactions are settled on a gross basis and the facility of netting of buy and sale
transactions in a scrip is not available. For example, if one buys and sells 100 shares of a
company on the same day which is on trade to trade basis, the two positions will not be netted
and he will have to first deliver 100 shares at the time of pay-in of securities and then receive
100 shares at the time of pay-out of securities on the same day. Thus, if one fails to deliver the
securities sold at the time of pay-in, it will be treated as a shortage and the position will be
auctioned/ closed-out.

In other words, the transactions in scrips of companies which are in compulsory demat are settled
in demat mode on T+3 on netting basis and the transactions in scrips of companies, which have
not made arrangements for dematerialization of their securities by the stipulated date or are in
"Z" group for other reasons, are settled on trade to trade basis on T+3 either in demat mode or in
physical mode.

The settlement of transactions in 'F' group securities representing Fixed Income Securities is also
on Rolling Settlement Cycle of T+3 basis.

The following tables summarizes the steps in the trading and settlement cycle for scrips under
CRS:

DAY ACTIVITY

Trading on BOLT and daily downloading of statements showing details of transactions and
margins at the end of each trading day.

6A/7A entry by the member-brokers.

T+1
Confirmation of 6A/7A data by the Custodians. Downloading of securities and funds obligation
statement by members.

T+3 Pay-in of funds and securities by 11:00 a.m. and pay-out of funds and securities by 2:00 p.m

T+4 Auction on BOLT.

T+5 Auction pay-in and pay-out.

* 6A/7A : A mechanism whereby the obligation of settling the transactions done by a

memberbroker on behalf of a client is passed on to a custodian based on his confirmation.

Thus, the pay-in and pay-out of funds and securities takes places on the 3rd working day of the
execution of the trade.
The Information Systems Department of the Exchange generates the following statements, which
can be downloaded by the members in their back offices on a daily basis.

Statements giving details of the daily transactions entered into by the members.

Statements giving details of margins payable by the members in respect of the trades executed by
them.

The settlement of the trades (money and securities) done by a member on his own account or on
behalf of his individual, corporate or institutional clients may be either through the member
himself or through a SEBI registered Custodian appointed by him or the respective client. In case
the delivery/payment is to be given or taken by a registered Custodian, he has to confirm the
trade done by a member on the BOLT System through 6A-7A entry. For this purpose, the
Custodians have been given connectivity to BOLT System and have also been admitted as
members of the Clearing House. In case a transaction is not confirmed by a registered Custodian,
the liability for pay-in of funds or securities in respect of the same devolves on the concerned
member.

The introduction of settlement on T+3 basis has resulted in reduction in settlement risk, provided
early receipt of securities and monies to buyers and sellers respectively and brought Indian
Capital arkets at the international standard of settlements

Settlement
Pay-in and Pay-out for 'A', 'B1', 'B2', 'C', "F" 'Z' group of securities

As discussed earlier, the trades done by members in all the securities in CRS are now settled by
payment of money and delivery of securities on T+3 basis. All deliveries of securities are
required to be routed through the Clearing House, except for certain off-market transactions
which, although are required to be reported to the Exchange, may be settled directly between the
members concerned.
The Clearing House is an independent company promoted jointly by Bank of India and Stock
Exchange, umbai for handling the clearing and settlement operations of funds and securities on
behalf of the Exchange. For this purpose, the Clearing Settlement Dept. of the Exchange
liaises with the Clearing House on a day to day basis.

The Information Systems Department (ISD) of the Exchange generates Delivery and Receive
Orders for transactions done by the members in A, B1, B2 and F group scrips after netting
purchase and sale transactions in each scrip whereas Delivery and Receive Orders for "C" and
"Z" group scrips are generated on trade to trade basis, i.e., without netting of purchase and sale
transactions in a scrip.

The Delivery Orders provide information like scrip, quantity and the name of the receiving
member to whom the securities are to be delivered through the Clearing House. The oney
Statement provides scrip wise/item wise details of payments/receipts for the settlement. The
Delivery/Receive Orders and money statements can be downloaded by the members in their back
offices

The bank accounts of members maintained with the eight clearing banks, viz., Bank of India,
HDFC Bank Ltd., Global Trust Bank Ltd., Standard Chartered Bank, Centurion Bank Ltd., UTI
Bank Ltd., ICICI Bank Ltd., and Indusind Bank Ltd., are directly debited through computerized
posting for their settlement and margin obligations and credited with receivables on accounts of
pay-out dues and refund of margins.

The securities, as per the Delivery Orders issued by the Exchange, are required to be delivered
by the members in the Clearing House on the day designated for securities pay-in, i.e., on T+3
day. In case of the physical securities, the members have to deliver the securities in special
closed pouches (supplied by the Exchange) along with the relevant details (distinctive numbers,
scrip code, quantity, and receiving member) on a floppy. The data submitted by the members on
floppies is matched against the master file data on the Clearing House computer systems. If there
are no discrepancies, then a scroll number is generated by the Clearing House and a scroll slip is
issued. The members can then submit the securities at the receiving counter in the Clearing
House.

Auto D.O. facility:

Instead of issuing Delivery Out instructions for their delivery obligations in a settlement /auction,
a facility has been made available to the members of automatically generating Delivery-Out
(D.O.) instructions on their behalf from their C Pool A/cs by the Clearing House w.e.f., August
10, 2000. This Auto D.O. facility is available for CRS (Normal Auction) and for trade-to-trade
settlements. This facility is, however, not available for delivery of non-pari passu shares and
shares having multiple ISINs. The members wishing to avail of this facility have to submit an
authority letter to the Clearing House. This Auto D.O facility is currently available only for
Clearing ember (C) Pool accounts/Principal Accounts maintained by the members with
National Securities Depository Ltd. (NSDL) and Central Depositories Services Ltd. (CDSL)
Demat pay-in:

The members can effect demat pay-in either through Central Depository Services (I) Ltd.
(CDSL) or National Securities Depository Ltd. (NSDL). In case of NSDL, the members are
required to give instructions to their Depository Participant (DP) specifying settlement no.,
settlement type, effective pay-in date, quantity, etc. The securities are transferred to the Pool
Account. The members are required to give delivery-out instructions so that the securities are
considered for pay-in.

As regards CDSL, the members give pay-in instructions to their DP. The securities are
transferred to Clearing ember (C) Principal Account. The members are required to give
confirmation to their DP, so that securities are processed towards pay-in obligations.
Alternatively, members may also effect pay-in from clients' beneficiary accounts for which
member are required to do break-up on the front-end software to generate obligation and
settlement ID.

The Clearing House arranges and tallies the securities received against the receiving member
wise report generated on the Pay-in day. Once this reconciliation is complete, the bank accounts
of members with seven clearing banks having pay-in positions are debited on the scheduled
payin day. This procedure is called Funds Pay-in. In case of the demat securities, the securities
are credited in the Pool Account of the members or the Client Accounts as per the client details
submitted by the members. In case of Physical securities, the Receiving embers collect
securities from the Clearing House on the payout day and the accounts of the members having
payout are credited on Friday. This is referred to as Payout. In case of the Rolling Settlements,
pay-in and payout of both funds and securities is on the same day, in case of Weekly settlements,
pay-in of funds and securities is on Thursday and payout is on Friday.

The auction is conducted for those securities which members fail to deliver/short deliver during
the Pay-in. In case the securities are not received in an auction, the positions are closed out as per
the closeout rate fixed by the Exchange in accordance with the prescribed rules. The close out
rate is calculated as the highest rate of the scrip recorded in the settlement in which the trade was
executed and in the subsequent settlement upto the day prior to the day of auction, or 20% above
the closing price on the day prior to the day of auction, whichever is higher. However, in case of
close-out for shares under objection or traded in "C" group, 10% instead of 20% above the
closing price on the day prior to the day of auction and the highest price recorded in the
settlement in which trade took place upto a day prior to auction is considered.

The Exchange has strictly adhered to the settlement schedules for various groups of securities
and there has been no case of clubbing of settlements or postponement of pay-in and pay-out
during the last six years.
The Exchange is also maintaining a database of fake/forged, stolen, lost and duplicate securities
with the Clearing House so that distinctive numbers submitted by members on delivery may be
matched against the database to weed out bad paper from circulation at the time of introduction
of such securities in the market. This database has also been made available to the members so
that delivering and receiving members can check the entry of fake, forged and stolen shares in
the market

SHORTAGES AND OBJECTIONS

Shortages consequent actions The members download Delivery/Receive Orders based on their
netted positions for transactions entered into by them during a settlement in 'A', 'B1', 'B2', and 'F'
group scrips and on trade to trade basis, i.e., without netting buy and sell transactions in scrips in
"C" 'Z' groups and scrips in B1 and B2 groups which have been put on trade to trade basis as a
surveillance measure.

The seller members have to deliver the shares in the Clearing House as per the Delivery Orders
downloaded. If a seller member is unable to deliver the shares on the Pay-in day for any reason,
his bank account is debited at the standard rate (which is equal to the closing price of the scrip on
the day of trading) fixed by the Exchange for the quantity of shares short delivered. The Clearing
House arrives at the shortages in delivery of various scrips by members on the basis of their
delivery obligations and actual delivery.

The members can download the statement of shortages on T+3 in Rolling Settlements. After
downloading the shortage details, the members are expected to verify the same and report
discrepancy , if any, to the Clearing House by 1:00 p.m. If no discrepancy is reported within the
stipulated time, the Clearing House assumes that the shortage of a member is in order and
proceeds to auction the same. However, in 'C' group, i.e., Odd Lot segment the members are
themselves required to report the shortages to the Clearing House.
The Exchange issues an Auction Tender Notice to the members informing them about the names
of the scrips, quantity slated for auction and the date and time of the auction session on the
BOLT. The auction for the undelivered quantities is conducted on T+4 for all the scrips under
compulsory Rolling Settlements. The auction offers received in batch mode are electronically
matched with the auction quantities so as to award the 'best price'. The members who participate
in the auction session can download the Delivery Orders on the same day, if their offers are
accepted. The members are required to deliver the shares in the Clearing House on the auction
Pay-in day, i.e, T+5. Pay-Out of auction shares and funds is also done on the same day, i.e., T+5.
The various auction sessions relating to shortages, and bad deliveries are now conducted during
normal trading hours on BOLT. Thus, it is possible to schedule multiple auction sessions on a
single trading day.

In auction, the highest offer price is allowed upto the close-out rate and the lowest offer price can
be 20% below the closing price on a day prior to day of auction. A member who has failed to
deliver the securities of a particular company on the pay-in day is not allowed to offer the same
in auction. He can, however, participate in auction of other scrips.

In case no offers are received in auction for a particular scrip, the sale transaction is closed-out at
a close-out price, determined by higher of the following:-

- Highest price recorded in the scrip from the settlement in which the transaction took place upto
a day prior to the day of the auction.

OR

- 20% above the closing price on a day prior to the day of auction.
However, in case of the close-out of the shares under objection and shortages in "C" or "Z"
group, 10% above the closing prices of the scrips on the pay-out day of the respective settlement
are considered instead of 20%.

Further, if the auction price/close-out price of a scrip is higher than the standard price of the scrip
in the settlement in which the transaction was done, the difference is recovered from the seller
who failed to deliver the scrip. However, in case, auction/ close-out price is lower than standard
price, the difference is not given to the seller but is credited by the Exchange to the Customers
Protection Fund. This is to ensure that the seller does not benefit from his failure to meet his
delivery obligation. Further, if the offeror member fails to deliver the shares offered in auction,
then the transactions is closed-out as per the normal procedure and the original selling member
pays the difference below the standard rate and offer rate and the offeror member pays the
difference between the offer rate and close-out rate.

Self Auction As has been discussed in the earlier paragraphs, the Delivery and Receive Orders
are issued to the members after netting off their purchase and sale transactions in scrips where
netting of purchase and sale positions is permitted. It is likely in some circumstances that a
selling client of a member has failed to deliver the shares to him. However, this did not result in
a member's failure to deliver the shares to the Clearing House as there was a purchase transaction
of some other buying client of the member in the same scrip and the same was netted off for the
purpose of settlement. However, in such a case, the member would require shares so that he can
deliver the same to his buying client, which otherwise would have taken place from the delivery
of shares by the seller. To provide shares to the members, so that they are in a position to deliver
them to their buying clients in case of internal shortages, the members have been given an option
to submit floppies for conducting self-auction (i.e., as if they have defaulted in delivery of shares
to the Clearing House). Such floppies are to be given to the Clearing House on the pay-in day.
The internal shortages reported by the members are clubbed with the normal shortages in a
settlement and the Clearing House for the combined shortages conducts the auction. A member
after getting delivery of shares from the Clearing House in self-auction credits the shares to the
Beneficiary account of his client or hand over the same to him in case securities received are in
physical form and debits his seller client with the amount of difference, if any, between the
auction price and original sale price

B) Objections
When receiving members collect the physical securities from the Clearing House on the Payout
day, the same are required to be checked by them for good delivery as per the norms prescribed
by the SEBI in this regard. If the receiving member does not consider the securities good
delivery, he has to obtain an arbitration award from the arbitrators and submit the securities in
the Clearing House on the following day of the Pay-Out (T+4). The Clearing House returns these
securities to the delivering members on the same day, i.e., (T+4). If a delivering members feels
that arbitration awards obtained against him is incorrect, he is required to obtain arbitration
award for invalid objection from the members of the Arbitration Review Committee. The
delivering members are required to rectify/replace the objections and return the shares to the
Clearing House on next day (T+5) to have the entry against them removed. The rectified
securities are delivered by the Clearing House to the buyer members on the same day (T+5). The
buyer members, if they are not satisfied with the rectification, are required to obtain arbitration
awards for invalid rectification from the Bad Delivery Cell on T+6 day and submit the shares to
the Clearing House on the same day.

If a member fails to rectify/replace the objections then the same are closed-out. This is known as
"Objection Cycle" and the entire process takes 3 days.

The following table summarizes the activities involved in the Patawat Objection Cycle of CRS.

DAY ACTIVITY T + 3 Pay-out of securities of Rolling Settlement T + 4 Patawat Arbitration

session : Arbitration awards to be obtained from officials of the Bad Delivery Cell.

Securities under objection to be submitted in the Clearing House

Arbitration awards for invalid objection to be obtained from members of the Arbitration Review
Committee

T+5 embers and institutions to submit rectified securities, confirmation forms and invalid
objections in the clearing house

Rectified securities delivered to the receiving members

T+6 Arbitration Awards for invalid rectification to be obtained from officials of the Bad
Delivery Cell

Securities to be lodged with the clearing house

The un-rectified and invalid rectification of securities are directly closed-out by the Clearing
House instead of first inviting the auction offers for the same.

The shares in physical form returned under objection to the Clearing House are required to be
accompanied by an arbitration award (Chukada) except in certain cases where the receiving
members are permitted to submit securities to the Clearing House without "Chukada".

These cases are as follows: Transfer Deed is out of date. Cheques for the dividend adjustment for
new shares where distinctive numbers are given in the Exchange Notice is not enclosed. Stamp
of the Registrar of Companies is missing. Details like Distinctive Numbers, Transferors' Names,
etc. are not filled, in the Transfer Deeds. Delivering broker's stamp on the reverse of the Transfer
Deed is missing. Witness stamp or signature on Transfer Deed is missing. Signature of the
transferor is missing. Death Certificate (in cases where one or more of the transferors are
deceased) is missing.

A penalty at the rate of Rs.100/- per Delivery Order is levied on the delivering member for
delivering shares, which are not in order. In the event a receiving member misuses the facility of
submitting shares under objection without "Chukada", a penalty of Rs.500/- per case is charged
and the penalty of Rs.100/- per Delivery Order levied on the delivering member is refunded to
him by debiting the receiving member's account Close Out: There are cases when no offer for
particular scrip is received in an auction or when members who offer the scrips in auction, fail to
deliver the same. In the former case, the original seller member's account is debited and the
buyer member's account is credited at the closeout rate. In the latter case, the offeror member's
account is debited and the buyer member's account is credited at the close-out rate. The closeout
rates for closing the positions in different segments are as under:

For 'A' + 'B1' + 'B2' + 'Z', 'Rolling demat' and 'F' group

The closeout rate is higher of the following rates:

The highest rate of the scrip from the first day (trading day in case of Rolling demat segment)
to the day prior to the day on which the auction is conducted for the respective settlement.
20% above the closing rate as on the day prior to the day of auction of the respective settlement.

For 'C' group segment

The close-out rate is higher of the following rates : The highest rate of the scrip from the first
day to the day prior to the day of auction of 'A', 'B1', 'B2, and 'Z' group segment of the respective
settlements; or 10% above the closing rate as on the day prior to the day of auction of 'A', 'B1',
'B2, and 'Z' group; or Transaction price.

In the 'C' group, i.e., Odd Lot Segment, no auction session is conducted. The shortages are
directly closed out.

DOES AND DONTS :-


0c$$,  *2

It is to be distinctly understood that submission of offer document to SEBI

should not in any way be deemed or construed that the same has been cleared or approved by
SEBI. The Lead manager certifies that the disclosures made in the offer document are generally
adequate and are in conformity with SEBI guidelines for disclosures and investor protection in
force for the time being. This requirement is to facilitate investors to take an informed decision
for making investment in the proposed issue.

0c!&&#& #2

The investors should make an informed decision purely by themselves based

on the contents disclosed in the offer documents. SEBI does not associate itself with any
issue/issuer and should in no way be construed as a guarantee for the funds that the investor
proposes to invest through the issue. However, the investors are generally advised to study all the
material facts pertaining to the issue including the risk factors before considering any investment.
They are strongly warned against any 'tips' or news through unofficial means.

-/0c *&$% -
c2

The erchant Banker are the specialized intermediaries who are required to do due diligence and
ensure that all the requirements of DIP are complied with while submitting the draft offer
document to SEBI. Any non compliance on their part, attract penal action from SEBI, in terms of
SEBI (erchant Bankers) Regulations. The draft offer document filed by erchant Banker is
also placed on the website for public comments. Officials of SEBI at various levels examine the
compliance with DIP guidelines and ensure that all necessary material information is disclosed in
the draft offer documents.

With the presence of the Central Listing Authority (CLA), what would be the role of SEBI in the
processing of Offer docume nts for an issue?

  %  ! *#3 45 *   , )  /%/ * /
!*%  6  0c 4 %  ! *#5 !*% 7 899: 4 !*% 5
*/ *!*8'7899: /& //*$ )';7899:(

In brief, it covers processing applications for letter precedent to listing from

applicants; to make recommendations to the Board on issues pertaining to the protection of the
interest of the investors in securities and development and regulation of the securities market,
including the listing agreements, listing conditions and disclosures to be made in offer
documents; and; to undertake any other functions as may be delegated to it by the Board from
time to time.

SEBI as the regulator of the securities market examines all the policy matters
pertaining to issues and will continue to do so even during the existence of the CLA.
Since the CLA is not yet operational, the reply to this question would be updated thereafter.

<//$ *2

Indian primary market ushered in an era of free pricing in 1992. Following this, the guidelines
have provided that the issuer in consultation with erchant Banker shall decide the price. There
is no price formula stipulated by SEBI. SEBI does not play any role in price fixation. The
company and merchant banker are however required to give full disclosures of the parameters
which they had considered while deciding the issue price. There are two types of issues one
where company and L fix a price (called fixed price) and other, where the company and L
stipulate a floor price or a price band and leave it to market forces to determine the final price
(price discovery through book building process).

-/ &//*& 2 -)** 2 /

&- c!$

SEBI issues press releases every week regarding the draft offer documents received and
observations issued during the period. The draft offer documents are put up on the website under
Reports/Documents section. The final offer documents that are filed with SEBI/ROC are also put
up for information under the same section. Copies of the draft offer documents in hard copy form
may be obtained from the office of SEBI
<%!)%)02

A erchant banker possessing a valid SEBI registration i

n accordance with the SEBI (erchant Bankers) Regulations, 1992 is eligible to act as a Book
Running Lead anager to an issue.

< /-/c /&2

The SEBI anual is SEBI authorized publication that is a compre hensive

databank of all relevant Acts, Rules, Regulations and Guidelines that are related to the
functioning of the Board. The details pertaining to the Acts, Rules, Regulations, Guidelines and
Circulars are placed on the SEBI website under the "Legal Framework" section.
<%%0c -&#1* %  /*) /% 2

The "Feedback" section on the SEBI website has a provision for the visitors
to the site to ask questions on clarifications on smaller issues pertaining to the availability of
information and a facility for users to provide feedback on the same. However, if the queries are
legalistic and deep in nature, they are to be referred to SEBI under the SEBI (informal Guidance)
Scheme, 2003.

)3 * & ((((

Nebody knows about the Sebi's latest Announce .....?

CNBC-TV18 has learnt from sources that Sebi is likely to propose short swing rule
in India. The move restricts company insiders from making short-term profit at the company¶s
expense.

It is a move that could potentially have a big impact on promoters of listed

companies. arket regulator Sebi is proposing to put in place a new rule-the short swing rule- in
India. This is similar to one that exists in the USA.
The rule prevents company insiders, who have greater access to material information, from
taking advantage of the information to make short-term profits. So, Sebi proposes that company
insiders buying and selling their company's stock within a 6-month period return the money they
make to the company. As of now, this is just a consultative paper and the regulator has invited
feedback to this proposal.
 Sources added that the move proposes insiders return profits from buying and selling
the company¶s stock. It proposes a tenor of six months for the short swing rule.It has circulated a
paper on short swing profit regulations.

Sebi has proposed last-in-first-out method to determine the six month period and
the move is intended to check insider trading. The designated insider will include all key
management personnel and directors of companies as well as officials who own above 10% stake
in the company.

Sebi says that any officer who buys and sells shares of a company within six-
months will have to return those profits to the company, which means that he cannot buy and sell
shares within six months and make a profit on them. If he makes, he will return the profit.

Who cannot do these transactions or who will be brought under the ambit of this short swing
rule?

It is a designated insider and a designated insider goes beyond the threshold of

any person who holds 10%. An insider is basically defined as a person who would own more
than 10% shares in a company. But here it says a designated insider would include all key
management personnel.

It would include all directors of the company, all officers of the company who are
beneficial owners of 10% or more stake in that company. So, a designated insider concept seems
to be a far wider definition. They have given it a far wider definition than what an insider would
be who owns only 10% in that company. It is a draft proposal. They have invited suggestions to
these proposals.

The future of stock exchanges

The future of stock trading appears to be electronic, as competition is continually growing

between the remaining traditional New York Stock Exchange specialist system against the
relatively new, all Electronic Communications Networks, or à
s. ECNs point to their speedy
execution of large block trades, while specialist system proponents cite the role of specialists in
maintaining orderly markets, especially under extraordinary conditions or for special types of
orders.

The ECNs contend that an array of special interests profit at the expense of investors in even the
most mundane exchange-directed trades. achine-based systems, they argue, are much more
efficient, because they speed up the execution mechanism and eliminate the need to deal with an
intermediary.

Historically, the 'market' (which, as noted, encompasses the totality of stock trading on all
exchanges) has been slow to respond to technological innovation, thus allowing growing pure
speculation to continue. Conversion to all-electronic trading could erode/eliminate the trading
profits of floor specialists and the NYSE's "upstairs traders", who, like in September and October
2008, earned billions of dollars selling shares they did not have, and days later buying the same
amount of shares, but maybe 15 % cheaper, so these shares could be handed to their buyers,
thereby making the market fall deeply.
William Lupien, founder of the Instinet trading system and the Optiark system, has been
quoted as saying "I'd definitely say the ECNs are winning... Things happen awfully fast once you
reach the tipping point. We're now at the tipping point."

One example of improved efficiency of ECNs is the prevention of front running, by which
manual Wall Street traders use knowledge of a customer's incoming order to place their own
orders so as to benefit from the perceived change to market direction that the introduction of a
large order will cause. By executing large trades at lightning speed without manual intervention,
ECNs make impossible this illegal practice, for which several NYSE floor brokers were
investigated and severely fined in recent years. Under the specialist system, when the market
sees a large trade in a name, other buyers are immediately able to look to see how big the trader
is in the name, and make inferences about why s/he is selling or buying. All traders who are
quick enough are able to use that information to anticipate price movements.

ECNs have changed ordinary stock transaction processing (like brokerage services before them)
into a commodity-type business. ECNs could regulate the fairness of initial public offerings
(IPOs), oversee Hambrecht's OpenIPO process, or measure the effectiveness of securities
research and use transaction fees to subsidize small- and mid-cap research efforts.

Somehowever, believe the answer will be some combination of the best of technology and
"upstairs trading" ² in other words, a hybrid model.

Trading 25,000 shares of General Electric stock (recentquote: $7.54; recent[] volume:
216,266,000) would be a relatively simple e-commerce transaction; trading 100 shares of
Berkshire Hathaway Class A stock (recent quote: $72,625.00; recent volume: 877) may never be.
The choice of system should be clear (but always that of the trader), based on the characteristics
of the security to be traded.

Even with ECNs forming an important part of a national market system, opportunities
presumably remain to profit from the spread between the bid and offer price. That is especially
true for investment managers that direct huge trading volume, and own a stake in an ECN or
specialist firm. For example, in its individual stock-brokerage accounts, "Fidelity Investments
runs 29% of its undesignated orders in NYSE-listed stocks, and 37% of its undesignated market
orders through the Boston Stock Exchange, where an affiliate controls a specialist post."

REPORT OF THE EXPERT GROUP HEADED BY R. JUSTICE . H. KANIA (FORER

CHIEF JUSTICE OF INDIA) FOR SUGGESTING AENDENTS TO SECURITIES AND
EXCHANGE BOARD OF INDIA ACT, 1992
Background
The Securities and Exchange Board of India Act, 1992 (the SEBI
Act) has been enacted for the establishment of the Board with the
object of protecting the interests of investors in securities and to
promote the development and to regulate the securities market
and for matters connected therewith or incidental thereto.
Securities market is very dynamic and the laws governing it have to
be responsive to the market needs. The SEBI Act was amended in
the years 1995, 1999 and 2002 to meet the requirements of
changing needs of the securities market and responding to the
development in the securities market.
The World Bank and the International onetary Fund (IF) have
introduced a benchmark i.e., Financial Services Assessment
Programme (FSAP) to strengthen the monitoring of financial
systems in the context of the IF¶s bilateral surveillance and the
World Bank¶s financial sector development work. The FSAP is
designed to help countries enhance their resilience to crisis and
cross-border contagion, and to foster growth by promoting
financial system soundness and financial sector diversity. The
mission of SEBI is to make India as one of the best securities
market of the world and SEBI as one of the most respected
regulator in the world. SEBI endeavors to achieve the standards of
IOSCO/FSAP. Amendments will be required to be made in the
Securities Laws especially the SEBI Act, which will facilitate India
and SEBI to achieve above objective.
The Report of Joint Parliamentary Committee (JPC) dated
December 02, 2002 on stock market scam also made several
recommendations in respect of the securities market. These
recommendations include provisions for compensation to
aggrieved investors, the concept of Ombudsman in the capital
market, establishment of special courts for financial crimes,
regulation of listed companies by SEBI, shifting of Investor
Education and Protection Fund established under section 205C of
the companies Act to SEBI, etc. any of the above
recommendations would require changes in the SEBI Act.
The amendments effected in 2002 have sought to address certain
shortcomings in the provisions of the SEBI Act, 1992, particularly
with respect to matters relating to inspection, investigation and
enhancement of penalties to serve as effective deterrants.
However, it was felt that some of the amendments effected in
2002 may also require amendments to remove ambiguities, if any.
Constitution of the Group
It is in this background, the SEBI Board had decided to constitute
an Expert Group to identify the deficiencies / inconsistencies in
the existing provisions of the SEBI Act and also to suggest new
provisions that can be incorporated in the SEBI Act to make it
more effective and investor friendly, taking into account
recommendations of the JPC as also recommendations of other
expert groups constituted by SEBI from time to time in this
regard.
The SEBI Board in its meeting held on August 05, 2004
constituted the Expert Group with the following members.
Sr.No. Name of the ember
1 r. Justice . H. Kania, ( Former Chief Justice of India)
Chairman
2 r. Justice A. N. ody ( Retd.)
3 r. Justice S. . Jhunjhunwala (Retd.)
4 s. P. . Umerji, Principal Secretary (Retd.) (Legislation),
Govt. of aharashtra
5 Shri. Jitesh Khosla*, Joint Secretary ±
Representative of the Department of Company Affairs
(Govt. of India)
6 Shri. Prashant Saran , Chief General anager,
Representative of the Reserve Bank of India
7 s Parimala Rao, Principal, Govt. Law College, umbai
8 Shri. PGR Prasad, anaging Director,
SBI Funds anagementPvt. Ltd.,
Representative of the Association of utual Funds of
India(AFI)
9 Shri. N. K. Jain**, Secretary and Chief Executive Officer,
the Institute of Company Secretaries of India