LSE SUBSIDIARIES LTD.

AT LUDHIANA STOCK EXCHANGE

A training report submitted in partial fulfillment of the requirement for the degree of

MASTER OF BUSINESS ADMINISTRATION (2010-2012)

Submitted by: Gurbakhash kaur

ACKNOWLEDGEMENT

Our personalities are based on the foundation of education imparted by our teachers who are next to god. I acknowledge our deepest sense of gratitude and sincere feeling of indebtedness to my major advisor, Mr. Sadhuram (Coordinator), under whose guidance I was able to complete my project. Without their immaculate and intellectual guidance, sustained efforts and encouraging attitude, it would have been difficult to achieve the results in such a short span of time. I want to express our sincere gratitude to Mrs. Pooja M. Kohli (Executive Director & Training In charge) and all the staff members of LSE for spending time and valuable information they have shared with me and helped me in my project to be a success. The acknowledgment would not be completed without expressing my thanks to the faculty of my college for showing me the right path and guided me to solve my problems. I extent to my gratitude to our Director Mr. Vivek Aggerwal and all the related teachers. The help and cooperation they offered at each stage of my study is ineffable. Their valuable suggestions and constant encouragement made this study interesting and useful. Finally, I would like to acknowledge the support I got from my parents and god. It was their blessing that kept me motivated throughout till the completion of the project.

STUDENT DECLARATION
I here by Declare that study of LSE SUBSDIARIES has been exclusively done by us for the SUMMER TRAINING CERTIFICATE.This is our own study done under the guidance of staff of the company. I here Declare that the contents of this reort are true and best of my knowledge.

(GURBAKHASH KAUR)

PREFACE

One should always work with an objective in its mind. To accomplish that objective efficient management of material, time and financial resources is very important. Above this coordination is must that determines the degree of success. Awareness of each level of life is necessary for a human being keeping all this is view in this report on Study of LSE Subsidiaries Ltd. The rounded encouraging support by Mrs. Pooja M. Kohli towards this report has created in me confidence regarding the approval of the subject matter. I feel that it was a great opportunity for me to spend time in LSE and getting myself aware of the ups and downs of capital market. So would like to say that this report is a result of an assignment, to improve myself and gain confidence.

CONTENTS

CHAPTER 1 INTRODUCTION TO ORGANISATION 1 . STOCK EXCHANGE 2 . LUDHIANA STOCK EXCHANGE 3 . LSE SECURITIES LIMITED CHAPTER 2 A PROJECT OBJECTIVES LEARNING OBJECTIVES 1 INTRODUCTION OF LSE SEC.LTD. 2 PROFILE OF LSE SECURITIES LTD. 3 DEPARTMENTS OF LSE SEC.LTD. 4 DERIVATIVES 5 IPOS 6 COMPARISON OF CDSL AND NSDL B ANALYSIS OF DERIVATIVES

CHAPTER 3 RESEARCH METHODOLOGY CHAPTER 4 DATA ANALYSIS AND INTERPRETATION CHAPTER 5 CONCLUSIONS CHAPTER 6 BIBLIOGARPHY CHAPTER 7 ANNEXURE

LIST OF TABLES

Table No.

Title Of Tables

Page No.

TABLE 1.1 LIST OF VARIOUS STOCK EXCHANGES IN INDIA TABLE 1.2 BOARD OF DIRECTORS TABLE 1.3 ACHIEVEMENTS OF LUDHIANA STOCK EXCHANGE

Introduction

The stock market can be a great source of confusion for many people. The average person generally falls into one of two categories. The first believe investing is a form of gambling; they are certain that if you invest, you will more than likely end up losing your money. Often these fears are driven by the personal experiences of family members and friends who suffered similar fates or lived through the Great Depression. These feelings are not ground in facts and are the result of personal experience. Someone who believes along this line of thinking simply does not understand what the stock market is or why it exists. The second category consists of those who know they should invest for the long-run, but dont know where to begin. Many feel like investing is some sort of black-magic that only a few people hold the key to. More often than not, they leave their financial decisions up to professionals, and cannot tell you why they own a particular stock or mutual fund. Their investment style is blind faith or limited to this stock is going up. We should buy it. This group is in far more danger than the first. They invest like the masses and then wonder why their results are mediocre (or in some cases, devastating). Private companies initially sell their stock to the public through a process called an initial public offering. But what if you want to buy and sell shares of a company that is already public? How would you go about finding someone who owns the stock that you wish to buy? And when you're ready to sell, how would you find someone who wants to buy the stock that you own? Obviously, buying and selling public stock would be very difficult

without a centralized system for buyers and sellers. Fortunately, there are stock exchanges that provide just such a system, whether it be in a physical building or on a virtual network. This section takes at look at how some of these exchanges operate, how they differ from one another, and the important characteristics of each.

STOCK EXCHANGE Meaning Stock Exchange (also called Stock Market or Share Market) is one important constituent of capital market. Stock Exchange is an organized market for the purchase and sale of industrial and financial security. It is convenient place where trading in securities is conducted in systematic manner i.e. as per certain rules and regulations. It performs various functions and offers useful services to investors and borrowing companies. It is an investment intermediary and facilitates economic and industrial development of a country. Stock exchange is an organized market for buying and selling corporate and other securities. Here, securities are purchased and sold out as per certain well-defined rules and regulations. It provides a convenient and secured mechanism / platform for transactions in different securities. Such securities include shares and debentures issued by public companies which are duly listed at the stock exchange and bonds and debentures issued by government, public corporations and municipal and port trust bodies. Stock exchanges are indispensable for the smooth and orderly functioning of corporate sector in a free market economy. A stock exchange need not be treated as a place for speculation or a gambling den. It should act as a place for safe and profitable investment, for this, effective control on the working of stock exchange is necessary. This will avoid

misuse of this platform for excessive speculation, scams and other while Bombay stock exchange (BSE) is the oldest in India, undesirable and anti-social activities. London stock exchange (LSE) is the oldest stock exchange in the world. While Bombay stock exchange (BSE) is the oldest in India. Similar Stock exchanges exist and operate in large majority of countries of the world.

Definition According to Husband and Dockerary "Stock exchanges are privately organized markets which are used to facilitate trading in securities." The Indian Securities Contracts (Regulation) Act of 1956, defines Stock Exchange as "an association, organization or body of individuals, whether incorporated or not, established for the purpose of assisting, regulating and controlling business in buying, selling and dealing in securities."

History of Stock Market of India

Introduction Stock markets refer to a market place where investors can buy and sell stocks. The price at which each buying and selling transaction takes is determined by the market forces (i.e. demand and supply for a particular stock). Let us take an example for a better understanding of how market forces determine stock prices. ABC Co. Ltd. enjoys high investor confidence and there is an anticipation of an upward movement in its stock price. More and more people would want to buy this stock (i.e. high demand) and very few people will want to sell this stock at current market price (i.e. less supply). Therefore, buyers will have to bid a higher price for this stock to match the ask price from the seller which will increase the stock price of ABC Co. Ltd. On the contrary, if there are more sellers than buyers (i.e. high supply and low demand) for the stock of ABC Co. Ltd. in the market, its price will fall down. In earlier times, buyers and sellers used to assemble at stock exchanges to make a transaction but now with the dawn of IT, most of the operations are done electronically and the stock markets have become almost paperless. Now investors dont have to gather at the Exchanges, and can trade freely from their home or office over the phone or through Internet.

History of the Indian Stock Market - The Origin One of the oldest stock markets in Asia, the Indian Stock Markets have a 200 years old history. 18th Century 1830's 1840's 1850's 1860's 1860-61 East India Company was the dominant institution and by end of the century, business in its loan securities gained full momentum Business on corporate stocks and shares in Bank and Cotton presses started in Bombay. Trading list by the end of 1839 got broader Recognition from banks and merchants to about half a dozen brokers Rapid development of commercial enterprise saw brokerage business attracting more people into the business The number of brokers increased to 60 The American Civil War broke out which caused a stoppage of cotton supply from United States of America; marking the beginning of the "Share Mania" in India The number of brokers increased to about 200 to 250 A disastrous slump began at the end of the American Civil War (as an example, Bank of Bombay Share which had touched Rs. 2850 could only be sold at Rs. 87)

1862-63 1865

Pre-Independence Scenario - Establishment of Different Stock Exchanges

1874

With the rapidly developing share trading business, brokers used to gather at a street (now well known as "Dalal Street") for the purpose of transacting business. "The Native Share and Stock Brokers' Association" (also known as "The

1875

Bombay Stock Exchange") was established in Bombay 1880's 1894 1880 - 90's 1908 1920 1923 1934 1936 1937 Development of cotton mills industry and set up of many others Establishment of "The Ahmadabad Share and Stock Brokers' Association" Sharp increase in share prices of jute industries in 1870's was followed by a boom in tea stocks and coal "The Calcutta Stock Exchange Association" was formed Madras witnessed boom and business at "The Madras Stock Exchange" was transacted with 100 brokers. When recession followed, number of brokers came down to 3 and the Exchange was closed down Establishment of the Lahore Stock Exchange Merger of the Lahore Stock Exchange with the Punjab Stock Exchange Re-organization and set up of the Madras Stock Exchange Limited (Pvt.) Limited led by improvement in stock market activities in South India with establishment of new textile mills and plantation companies Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited was established Establishment of "The Hyderabad Stock Exchange Limited" "Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks and Shares Exchange Limited" were established and later on merged into "The Delhi Stock Exchange Association Limited"

1940 1944 1947

Post Independence Scenario The depression witnessed after the Independence led to closure of a lot of exchanges in the country. Lahore E stock Exchange was closed down after the partition of India, and later on merged with the Delhi Stock Exchange. Bangalore Stock Exchange Limited was registered in 1957 and got recognition only by 1963. Most of the other Exchanges were in a miserable state till 1957 when they applied for recognition under Securities Contracts (Regulations) Act, 1956. The Exchanges that were recognized under the Act were:

1. 2. 3. 4. 5. 6. 7. 8.

Bombay Calcutta Madras Ahmadabad Delhi Hyderabad Bangalore Indore

Many more stock exchanges were established during 1980's, namely: 1. Cochin Stock Exchange (1980) 2. Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982) 3. Pune Stock Exchange Limited (1982) 4. Ludhiana Stock Exchange Association Limited (1983) 5. Gwuahati Stock Exchange Limited (1984) 6. Kanara Stock Exchange Limited (at Mangalore, 1985) 7. Magadha Stock Exchange Association (at Patna, 1986) 8. Jaipur Stock Exchange Limited (1989) 9. Bhubaneswar Stock Exchange Association Limited (1989) 10. Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989) 11. Vadodara Stock Exchange Limited (at Baroda, 1990) 12. Coimbatore Stock Exchange 13. Meerut Stock Exchange At present, there are twenty one recognized stock exchanges in India which does not include the Over the Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL). Government policies during 1980's also played a vital role in the development of the Indian Stock Markets. There was a sharp increase in number of Exchanges, listed companies as well as their capital, which is visible from the following table:

S. No. 1 2 3

As on 31st December No. of Stock Exchanges No. of Listed Cos. No. of Stock Issues of Listed Cos.

1946 1961 1971 1975 1980 1985 7 7 8 8 9 14

1991 20 6229 8967

1995 22 8593 11784

1125 1203 1599 1552 2265 4344 1506 2111 2838 3230 3697 6174

4 5 6

Capital of Listed Cos. (Cr. Rs.) Market value of Capital of Listed Cos. (Cr. Rs.) Capital per Listed Cos. (4/2)(Lakh Rs.) Market Value of Capital per Listed Cos. (Lakh Rs.) (5/2) Appreciated value of Capital per Listed Cos. (Lakh Rs.)

270 971 24

753

1812 2614 3973 9723

32041

59583

1292 2675 3273 6750 25302 110279 478121 63 113 168 175 224 514 693

86

107

167

211

298

582

1770

5564

358

170

148

126

170

260

344

803

Trading Pattern of the Indian Stock Market Indian Stock Exchanges allow trading of securities of only those public limited companies that are listed on the Exchange(s). They are divided into two categories:

Types of Transactions The flowchart below describes the types of transactions that can be carried out on the Indian stock exchanges:

Indian stock exchange allows a member broker to perform following activities: 1. 2. 3. 4. Act as an agent, Buy and sell securities for his clients and charge commission for the same, Act as a trader or dealer as a principal, Buy and sell securities on his own account and risk.

Over The Counter Exchange of India (OTCEI) Traditionally, trading in Stock Exchanges in India followed a conventional style where people used to gather at the Exchange and bids and offers were made by open outcry. This age-old trading mechanism in the Indian stock markets used to create much functional inefficiency. Lack of liquidity and transparency, long settlement periods and became transactions are a few examples that adversely affected investors. In order to overcome these inefficiencies, OTCEI was incorporated in 1990 under the Companies Act 1956. OTCEI is the first screen based nationwide stock exchange in India created by Unit Trust of India, Industrial Credit and Investment Corporation of India, Industrial Development Bank of India, SBI Capital Markets, Industrial Finance Corporation of India, General Insurance Corporation and its subsidiaries and Can Bank Financial Services.

Advantages of OTCEI 1. Greater liquidity and lesser risk of intermediary charges due to widely spread trading mechanism across India 2. The screen-based scrip less trading ensures transparency and accuracy of prices 3. Faster settlement and transfer process as compared to other exchanges 4. Shorter allotment procedure (in case of a new issue) than other exchanges National Stock Exchange In order to lift the Indian stock market trading system on par with the international standards. On the basis of the recommendations of high powered Pherwani Committee, the National Stock Exchange was incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of India, all Insurance Corporations, selected commercial banks and others. NSE provides exposure to investors in two types of markets, namely: 1. Wholesale debt market 2. Capital market Wholesale Debt Market - Similar to money market operations, debt market operations involve institutional investors and corporate bodies entering into transactions of high value in financial instruments like treasury bills, government securities, commercial papers etc.

Trading at NSE 1. 2. 3. 4. 5. Fully automated screen-based trading mechanism Strictly follows the principle of an order-driven market Trading members are linked through a communication network This network allows them to execute trade from their offices The prices at which the buyer and seller are willing to transact will appear on the screen 6. When the prices match the transaction will be completed 7. A confirmation slip will be printed at the office of the trading member Advantages of trading at NSE 1. 2. 3. 4. Integrated network for trading in stock market of India Fully automated screen based system that provides higher degree of transparency Investors can transact from any part of the country at uniform prices Greater functional efficiency supported by totally computerized network

Features of Stock Exchange:1. Market for securities: Stock exchange is a market, where securities of corporate bodies, government and semi-government bodies are bought and sold. 2. Deals in second hand securities: It deals with shares, debentures bonds and such securities already issued by the companies. In short it deals with existing or second hand securities and hence it is called secondary market. 3. Regulates trade in securities: Stock exchange does not buy or sell any securities on its own account. It merely provides the necessary infrastructure and facilities for trade in securities to its members and brokers who trade in securities. It regulates the trade activities so as to ensure free and fair trade 4. Allows dealings only in listed securities: In fact, stock exchanges maintain an official list of securities that could be purchased and sold on its floor. Securities which do not figure in the official list of stock exchange are called unlisted securities. Such unlisted securities cannot be traded in the stock exchange. 5. Transactions effected only through members: All the transactions in securities at the stock exchange are effected only through its authorized brokers and members. Outsiders or direct investors are not allowed to enter in the trading circles of the stock exchange. Investors have to buy or sell the securities at the stock exchange through the authorized brokers only. 6. Association of persons: A stock exchange is an association of persons or body of individuals which may be registered or unregistered.

7. Recognition from Central Government: Stock exchange is an organized market. It requires recognition from the Central Government. 8. Working as per rules: Buying and selling transactions in securities at the stock exchange are governed by the rules and regulations of stock exchange as well as SEBI Guidelines. No deviation from the rules and guidelines is allowed in any case. 9. Specific location: Stock exchange is a particular market place where authorized brokers come together daily (i.e. on working days) on the floor of market called trading circles and conduct trading activities. The prices of different securities traded are shown on electronic boards. After the working hours market is closed. All the working of stock exchanges is conducted and controlled through computers and electronic system. 10. Financial Barometers: Stock exchanges are the financial barometers and development indicators of national economy of the country. Industrial growth and stability is reflected in the index of stock exchange.

Functions

1. Continuous and ready market for securities Stock exchange provides a ready and continuous market for purchase and sale of securities. It provides ready outlet for buying and selling of securities. Stock exchange also acts as an outlet/counter for the sale of listed securities. 2. Facilitates evaluation of securities Stock exchange is useful for the evaluation of industrial securities. This enables investors to know the true worth of their holdings at any time. Comparison of companies in the same industry is possible through stock exchange quotations (i.e price list). 3. Encourages capital formation Stock exchange accelerates the process of capital formation. It creates the habit of saving, investing and risk taking among the investing class and converts their savings into profitable investment. It acts as an instrument of capital formation. In addition, it also acts as a channel for right (safe and profitable) investment.

4. Provides safety and security in dealings Stock exchange provides safety, security and equity (justice) in dealings as transactions are conducted as per well defined rules and regulations. The managing body of the exchange keeps control on the members. Fraudulent practices are also checked effectively. Due to various rules and regulations, stock exchange functions as the custodian of funds of genuine investors. 5. Regulates company management Listed companies have to comply with rules and regulations of concerned stock exchange and work under the vigilance (i.e. supervision) of stock exchange authorities. 6. Facilitates public borrowing Stock exchange serves as a platform for marketing Government securities. It enables government to raise public debt easily and quickly

7. Provides clearing house facility Stock exchange provides a clearing house facility to members. It settles the transactions among the members quickly and with ease. The members have to pay or receive only the net dues (balance amounts) because of the clearing house facility. 8. Facilitates healthy speculation Healthy speculation, keeps the exchange active. Normal speculation is not dangerous but provides more business to the exchange. However, excessive speculation is undesirable as it is dangerous to investors & the growth of corporate sector. 9. Serves as Economic Barometer Stock exchange indicates the state of health of companies and the national economy. It acts as a barometer of the economic situation / conditions. 10. Facilitates Bank Lending Banks easily know the prices of quoted securities. They offer loans to customers against corporate securities. This gives convenience to the owners of securities.

Introduction of India Stock Exchange 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.

Scope of Stock Exchange Times are really quite exciting; an ever increasing plethora of events followed the global financial crisis. With globalization and innovation in the financial markets at its peak - it is very essential to study the market risks and requirements. Over the years, the India stock market has undergone major changes to remain at par with the global peers. With global trade and finance getting more dynamic day by day, the India stock market is not far behind to experience these developments. This has helped the financial structure of India get more innovative. Main Players in Stock Exchange

The India stock market is steered on by the two exchanges viz, Bombay Stock Exchanges (BSE) and National Stock Exchange (NSE). The trade and business of the entire country is dependant on the performance of these two main stock exchanges. Any minor developments in the economy might push the indexes on these exchanges down or vice versa.

10 Major Global Stock Exchanges (market capitalization as on August 2009)

Rank Economy 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Market Capitalization (USD Billions) United States NYSE Euronext 15,970 United States NASDAQ OMX 4,931 Japan Tokyo Stock Exchange 3,827 United Kingdom London Stock Exchange 3,613 China Shanghai Stock Exchange 2,717 Hong Kong Hong Kong Stock Exchange 2,711 Canada Toronto Stock Exchange 2,170 India Bombay Stock Exchange 1,631 India National Stock Exchange of India 1,596 Brazil BM&F Bovespa 1,545 Australia Australian Securities Exchange 1,454 Germany Deutsche Brse 1,429 China Shenzhen Stock Exchange 1,311 Switzerland SIX Swiss Exchange 1,229 Spain BME Spanish Exchanges 1,171 South Korea Korea Exchange 1,091 Russia MICEX 949 South Africa JSE Limited 925 Stock Exchange Trade Value (USD Billions) 19,813 13,439 3,787 2,741 4,496 1,496 1,368 258 801 868 1,062 1,628 3,572 788 1,360 1,607 408 340

Strengths of India Stock Market

The India stock market boasts of a fully automated trading system on all stock exchanges, provides a wide range of products. It is an integrated platform to trade in both cash and derivatives and has a host of around 4,000 corporate brokers all across India. The stock market of India has made considerable progress following its international peers and the modern market mechanisms have helped them create a niche for themselves. The market regular, Securities and Exchange Board of India (SEBI) plays an important role in the management of the stock exchanges in India. The regulatory methods are sound - in terms of intermediaries, trading mechanism, settlement cycles, risk management, derivative trading. The usage of Information technology is to a large extent responsible for the outstanding performance of the stock markets in India.

The two main players of the India stock market - NSE and BSE have outshone all the other exchanges and majority of the stocks are listed on these two exchanges. The market participants are ever increasing, the volume of securities has been growing, transaction costs are getting reduced, and there is significant improvement in efficiency, transparency and safety. The international standards are well complied with to maintain global standard of performance. Important elements of India stock market

Investors Issuers Intermediaries Regulators

If all these four elements are taken good care of from the onset, a stock market can easily exhibit sound growth and perform exponentially.

Major Stock Exchanges in India

(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 Market (WDM). The Equities division of NSE began its operations in 1994 while in

2000 the corporation incorporated its Derivatives division. Some NSE Figures and Facts

The equities division of NSE covers around 300 Indian cities, while its derivates section covers 305 cities. The number of securities accessible for buying and selling in NSE exchange in its equities and derivates section are 1,383 and 3,143 respectively. The total amount of Settlement warranty fund in NSE equities division and derivates section are Rs 2,085.25 crores and Rs 6,018.30 crores respectively. The daily turnover of NSE equities division is Rs 10,336.52 crores, for derivates segment is Rs 32,809.96 crores and for Whole sale debt division is Rs 13,911.57 crores.

NSE uses satellite communication expertise to strengthen contribution from around 400 Indian cities. The exchange administers around rs 1 million of buying and selling on daily basis. It is one of the biggest VSAT incorporated stock exchange across the world. Currently more than 8,500 customers are doing online exchange business on NSE application.

(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 corporative body integrated under the stipulations of the Companies Act, 1956. Some BSE Figures and Facts

BSE exchange was the first in India to launch Equity Derivatives, Free Float Index, USD adaptation of BSE Sensex and Exchange facilitated Internet buying and selling policy

BSE exchange was the first in India to acquire the ISO authorization for supervision, clearance & Settlement BSE exchange was the first in India to have launched private service for economic training Its On-Line Trading System has been felicitated by the internationally renowned standard of Information Security Management System.

(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, Madras Stock Exchange, Calcutta Stock Exchange and Delhi Stock Exchange. The recent to join the list was Meerut Stock Exchange and Coimbatore Stock Exchange. Catalog of Regional Stock Exchanges in India

Ahmadabad Stock Exchange Bangalore Stock Exchange Bhubaneswar Stock Exchange Calcutta Stock Exchange Cochin Stock Exchange Coimbatore Stock Exchange Delhi Stock Exchange Guwahati Stock Exchange Hyderabad Stock Exchange Jaipur Stock Exchange Ludhiana Stock Exchange Madhya Pradesh Stock Exchange Madras Stock Exchange Magadha Stock Exchange Mangalore Stock Exchange

Meerut Stock Exchange OTC Exchange Of India Pune Stock Exchange Saurashtra Kutch Stock Exchange Uttar Pradesh Stock Exchange Vadodara Stock Exchange

Introduction of LSE

The Ludhiana Stock Exchange Limited was established in 1981, by Sh. S.P. Oswal of Vardhmaan Group and Sh. B.M. Lal Munjal of Hero Group, leading industrial luminaries, to fulfill a vital need of having a Stock Exchange in the region of Punjab, Himachal Pradesh, Jammu & Kashmir and Union Territory of Chandigarh. Since its inception, the Stock Exchange has grown phenomenally. The Stock Exchange has played an important role in channelizing savings into capital for the various industrial and commercial units of the State of Punjab and other parts of the country. The Exchange has facilitated the mobilization of funds by entrepreneurs from the public and thereby contributed in the overall, economic, industrial and social development of the States under its jurisdiction. Ludhiana Stock Exchange is one of the leading Regional Stock Exchange and has been in the forefront of other Stock Exchange in every spheres, whether it is formation of subsidiary for providing the platform of trading to investors, for brokers etc. in the era of Screen based trading introduced by National Stock Exchange and Bombay Stock Exchange, entering into the field of Commodities trading or imparting education to the Public at large by way of starting Certification Programmers in Capital Market.

OPERATIONS OF LUDHIANA STOCK EXCHANGE

TURNOVER Ludhiana Stock Exchange is one of the leading Stock Exchanges among the Regional Stock Exchanges of the country, and has been providing trading platform for the investors situated in Punjab, J&K, and Himachal Pradesh & Chandigarh.. It had been generating significant amount of the business in the secondary market. It recorded a peak turnover of Rs.9154 crores during the year 2000-2001. The structural changes that took place in the recent past in the Capital Market of the country had a negative impact on the trading volume of the regional Stock Exchanges. There has been a significant reduction of turnover during the financial year 2001-2002, but the reduction in turnover of the Exchange has been more than adequately compensated by substantial rise in the turnover of LSE Securities Limited, a subsidiary of Ludhiana Stock Exchange. TRADING ON BIGGER STOCK EXCHANGES The exchange acquired the membership of NSE and BSE: through its subsidiary, the LSE securities LTD, with the objective of providing an enabling mechanism to its member brokers to trade on NSE and BSE as a sub brokers of LSE securities Limited. Trading at NSE and BSE was commenced through the subsidiary route from September 200 and December 2000 respectively. END OF AN ERA The management of the stock Exchange apprehended that the smaller regional stock exchanges would not be able to meet the challenges imposed by expansion of bigger stock exchanges like NSE and BSE and might end up losing their business to VSAT counters of the bigger stock exchanges. In order to prepare for such an eventuality, stock exchanges set up a broking armed in the name of LSE Securities Ltd (a subsidiary company of stock exchange) in January 2000 and built infrastructure and IT based sophisticated systems to enable its members and investors to trade on NSE and BSE through the subsidiary route.

LSE HAS:OWN BUILDING

LSEAL has its own six stories ultra modern building at Feroze Gandhi market at Ludhiana. It started its operation on 16th Aug, 1983. OWN BULLETIN LESAL is continuously publishing LSEAL Bulletin at the interval of quarter. It is also publishing LSE annual report which provides information to the various members and investors of stock exchanges. SCREEN BASED TRADING It was started at LSE on Nov. 18, 1996. The requisite software is developed by CMC Ltd. This screen Based Trading is based on VECTOR (Versatile Engine for Centralized Trading and on line reporting System) this system displays funds with respect of opening prices of the stock exchanges as well as the last traded prices. ON LINE TRADING THROUGH VSAT LSEAL has chalked out an ambitious program to expand online trading through V-SAT to untie other than Ludhiana and plans to take the trading facility to doorstep of investors in this year. The Board of Directors of LSE have approved the plan for expansion of online trading through VSAT with the object of broad base business opportunities to the investor and members, the exchange has set up 30 trading terminals at remote sites and union territory of Chandigarh. Trading through V-SAT has been smoothly conducted in October 1999. SETTLEMENT GUARANTEE FUND It provides guarantee to all genuine based trading system of the stock exchange and was implemented a settlement guarantee fund with effect from 6th April, 1998. SETTLEMENT AND CLEARING There is T+2 settlement cycle prevailing in the market. Members are given scrip wise delivery notes. The members are required to deposit scrips sold by them to the clearing

house on the second working day following the day of transaction. Purchasing members are required to make the payment against the delivery also on aforesaid day. DEPOSITORY SYSTEM LSE commence trading in demat shares from November 16, 1998 by becoming a participant of NSDL. The exchange has set up in-house DP services to facilitate trading and settlement in demat securities. INVESTOR GRIEVANCES CELL LSE has made special arrangement to handle investors complaints and grievance so its premises for providing information relating to Capital market. This center has a well equipped library. The exchange introduced a computer based stock. Tel system for providing on line real time information through a fully automatic system, to the investors and members of the general public such as prices of the scrips, book closures, new listings, new issuers etc. Centre is also equipped with a screen for providing live rates of trading at NSE and BSE DEPOSITORY PARTICIPANT SERVICE The company is the DP of NSE and is the only depository in the region having on line real time connectivity with NSDL. DP operation of the company not only benefited the investors of the region but has also proved to be a source of income for the company.

The Vision and Mission of Stock Exchange is: "Reaching small investors by providing services relating to Capital Market including Trading, Depository Operations etc., and creating Mass Awareness by way of education and training in the field of Capital Market. To create educated investors and fulfilling the gap of skilled work force in the domain in Capital Market." Further, the Exchange has 295 members out of which 162 are registered with National Stock Exchange as Sub-brokers and 121 with Bombay Stock Exchange as sub-brokers through our subsidiary.

Profile of LSE

Ludhiana Stock Exchange Company Profile Ludhiana Stock Exchange is one of the leading Stock Exchange among the Regional Stock Exchanges of the country, and has been providing trading platform for the investors situated in Punjab, J & K, and Himachal Pradesh & Chandigarh. Ludhiana Stock Exchange, it is a corporate member of NSE in both the capital market and futures and options segments and BSE equity segment. Trading member of LSE can assess NSE and BSE platforms by registering themselves as sub brokers of LSE Securities Ltd. LSE Securities Ltd. thus provides the investors one stop solution for cost effective trading and settlement services in small cities. LSESL is depository participant (DP) of NSDL & CDSL and is providing depository services to intermediaries and investors. LSE has also carved out its unique position among the Stock Exchanges of the country by successfully conducting short term course on Capital market. Designation EXECUTIVE DIRECTOR Experience 15 - 25 years Industry Type Banking / Financial Services / Stock Broking Functional Area Accounts / Finance / Tax / CS / Audit Keyword Executive Director , Stock Broking , Finance , Accounts , Taxation , Auditing , Budgetary Control , NSE , BSE , Operations , Liaison , CA, CS, ICWA, MBA Location Ludhiana Annual Salary Best In Industry Education UG - Any Graduate - Any Specialization PG - CA;CS;ICWA;MBA/PGDM - Finance Job Description Overall Administration of Exchange. Responsible for the profitability, Branding of Exchange. Overall responsible for the Trading Operations, Finance & Accounts, Budgetary control functions of the Exchange. Liaison with Securities & Exchange Board of India, National Stock Exchange, Bombay Stock Exchange Limited, Ministry of Finance, Ministry of Corporate Affairs and Registrar of Companies. Accountable to the Board of Ludhiana Stock Exchange.

Desired Profile Candidate should possess a professional degree in CA/CS/ICWA/MBA from a recognized university. Candidate should have at least 15 years of post qualification experience in the securities/ capital market, of which at least 8 years should have been at the senior management level. Candidate should have demonstrated leadership abilities and superior understanding and judgments in implementing complex financial and institutional decisions. Candidate must have significant management experience, preferable of initiating change and transforming superior analytical and outstanding communications skills.

Age Between 40- 50 years. The application together with curriculum vitae should contain details of qualification, experience, remuneration drawn and expected, two references and as well as recent passport size photograph should reach by 01.09.2007 to

LSE have 324 restricted companies 925 total broker trading members 212 are Punjab regional companies 163 are non regional companies 12 board of directors 6 fix share holder directors 3 trading member director 3 public interest directors

LSESL (Ludhiana Stock Exchange Securities Ltd) LSESL is a subsidiary of the LSE ltd under the policy formulated by the Securities & Exchange Board of India (SEBI) for "Revival of Small Stock Exchanges". The policy enunciated by the SEBI permits a stock exchange to float a subsidiary, which can take up membership of larger stock exchanges, such as the National Stock Exchange of India Ltd. (NSE), and Bombay Stock Exchange Ltd. (BSE). LSESL has been registered by SEBI as a Trading-cum-Clearing Member in the Capital Market segment & Futures & Options

segment of NSE & Capital Market segment of BSE & Trading Member of MCX stock exchange ltd. Trading Member of LSE can access NSE & BSE by registering themselves with SEBI as sub-brokers of LSESL. Under LSE, the depository is the main part of the LSE Securities Ltd. there are two segments which are mainly used for Depository Participant i.e., CDSL (Central Depository Services Ltd) and NSDL (National Securities Depository Ltd).

OBJECTIVE OF LSE SECURITIES LTD. 1. OBJECTIVES OF THE COMPANY LSE Securities Limited is a subsidiary of the Ludhiana Stock Exchange, which was formed with an objective to enhance business and investment opportunities for the investors and members of Ludhiana Stock Exchange at large, through innovative products by encompassing a variety of activities related to the capital market. The company has a paid-up capital of Rs 5.55 crores. 2. INTRODUCTION OF THE LSE SECURITIES LTD. LSE Securities Ltd., was incorporated in January, 2000 with a view to revive the capital market in the region and for taking full advantage of the emerging opportunities being provided by expansion of bigger stock exchanges like NSE and BSE. The company since its inception has marched forward rapidly and achieved many milestones in a short span of existence. 3. GOVERNING COUNCIL The Council of the management of the Company comprises of 10 directors of which 3are broker members and 7non-brokers. Five non broker members are Independent Directors of eminent status from the field of finance, law and management and remaining two are Chief Executive Officer of LSE Securities Limited and Executive Director of the holding company (Ludhiana Stock Exchange), who is on the Board of the company as ex-officio Directors. Thus the council of management has representation of sub-brokers as well as professionals and subject specialists representing various fields of business activities. Operations of the company are run in a professional, transparent and fair manner keeping in view of the interest of investors as well as other stake-holders.

4. CORPORATE MEMBERSHIP OF NSE & BSE SEBI, at the initiative of LSE, permitted smaller Stock Exchanges, to trade on bigger Stock Exchanges through their subsidiary companies. The Ludhiana Stock Exchange floated its subsidiary company, the LSE Securities Limited, with the objective of obtaining trading rights on bigger Stock Exchanges. It has obtained corporate membership of both NSE and BSE in the first half of year 2000. 5. TRADING AT NSE AND BSE The LSE Securities Ltd. commenced trading operations in Capital Market Segments of BSE and NSE in September, 2000 and December 2000 respectively. The turnover of the Company at NSE and BSE is growing by leaps and bounds ever since in incorporation. There was encouraging response from the sub-brokers especially at NSE counters. During the financial year 2005-06, the Company recorded a turnover of Rs. 7975 crores and Rs.3834 crores in "Capital Market" segments of NSE and BSE respectively. For the year ended 2005-2006, there were 128 sub-brokers registered for NSE and 68 for BSE 6. F&O SEGMENT OF NSE The LSE Securities Ltd. commenced trading operations in Future and Options Segment of NSE in February 2002. The Company became the first subsidiary of any Regional Stock Exchange which commenced trading in F&O Segment of NSE. Response to trading facilities in the F&O segment of NSE has been very encouraging and volumes generated in this segment soon exceeded those in Capital Market segment. 7. TRADING THROUGH V-SATS The LSE Securities Limited has provided facility to its sub-brokers for trading on NSE and BSE through VSAT counters which are located outside Stock Exchange Building. During 2005-2006, 27 sub-brokers of the company have been trading through VSAT on NSE and 13 on BSE. 8. CERTIFICATION IN FINANCIAL MARKET In order to provide professional services to the investors of LSE Securities Limited through its sub-brokers, the company motivated its sub-brokers and its staff to qualify the certification in financial markets conducted by NSE. All trading terminals for Capital

Market Segment and F&O segment are being operated by the persons after having qualified the said certification. 9. DEPOSITORY PARTICIPANT DEPOSITORY LIMITED (NSDL) SERVICES NATIONAL SECURITIES

The LSE Securities Ltd. commenced its operations as Depository Participant of NSDL in August 2000. The DP services provided by the Company have technology edge over other DPs, as DP of the company is the only On-line Real-Time DP in the region. As a result of efficient services and competitive rates, the Company has been able to increase its market share in the DP business at the cost of other DPs in the region. As on date DP of NSDL and CDSL of the Company at Ludhiana is servicing over 35000 beneficiary accounts. 10. DEPOSITORY PARTICIPANT SERVICES CENTRAL DEPOSITORY SERVICES (INDIA) LIMITED (CDSL) In order to further strengthen its services to sub-brokers and investors, the Company applied for the DP of CDSL. It started DP operations of CDSL in December 2001. With the operationalisation of DP Services of CDSL, the Company has been able to provide delivery of shares to sub-brokers and investors on the day of pay-out which in turn helps the subbrokers to give timely deliveries to their clients. Introduction of CDSL operations has also enabled the sub-brokers and investors of the Company to timely meet the pay-in obligations of securities purchased by the investors on BSE and sold next day on NSE through the Company and vice-versa. 11. EXPANSION PROJECTS To increase its presence in the region further, the company plans to open its branches of Depository Services in the major cities of the region. To start with, it has already opened its branches at Jalandhar Amritsar and Chandigarh.

DEPARTMENTS OF LSE The main aim of LUDHIANA STOCK EXCHANGE is to ensure the safety and security to the investments of the investors and to provide the proper services under the prescribed guidelines of SE 131. So to maintain the proper system of working of exchange, there are so many different departments in which particular functions are performed, assigned to those departments.

Following in the list of various departments of LSE:OPERATIONAL DEPARTMENTS 1. Margin section 2. Clearing house 3. Computer section and Information system department SERVICE DEPARTMENTS 1. Legal Department 2. Secretarial Department 3. I.G.C(Investor Grievance Cell) 4. Listing Section 5. Accounting Section 6. HR Department/ Personnel Department All the section performs specific functions. There is no duplication of work; e v e n t h e n all the sections are interconnected with each other. There is an organized network of recording of activities performed there. But before studying the inter dependence of section) here is the details of all department i.e. actually what function is performed by each and every section.

MARGIN SECTION Margin Section is an important section. This section apart from dealing in the regulating the trading of brokers keeps a check on excessive t r a d i n g i n speculation. Margin is the amount, which is collected from brokers for the safety of transactions. As the transactions are to be finalized on basis, in the mean time the rates may fluctuate which may lead to default. So to make the transaction safe, daily margins are collected from brokers. When a member gets registered in the exchange and with Securities Exchange Board of India (SEBI), then before s t a r t i n g t r a d i n g h e i s s u p p o s e d t o d e p o s i t s o m e a m o u n t f i x e d b y S E B I a s security. Now as SEBIs rolling settlement prevails. Ultimately margin is the d i f f e r e n c e b e t w e e n t h e l i m i t a n d t r a d e d o n e b y t h e m e m b e r . T h e s e c u r i t y deposited by a member is called Base Minimum Capital. If any member wants to t r a d e b e y o n d h i s t r a d i n g l i m i t , h e c a n d o s o b y d ep o s i t i n g A d d i t i o n a l B a s e Minimum Capital.

TYPES OF MARGINS:

As we have discussed earlier margins, collected from members to avoid the losses and to provide security to the investors. There are different types of margins, which are imposed given as follows:-

Market to Market Margin: The exchange collects this margin on daily basis, broker-wise 100% national loss of each member for every scrip, calculated as the different of his buying or selling price and closing of that scrip at the end of the day. This is also called loss margin. The margin is payable in cash or in bank guarantee. Value at Risk Margin (VAR Margin): For the scrips in the compulsory rolling settlement at 99% VAR based margin system would be introduced i.e. July 02, 2001. The computation of this margin is done by software development by CHICAGO Stock Exchange. Additional Margin: Thus margin is 12% would be levied over and above the VAR margin. This margin is collected from brokers on T+1 basis. Special Margin: The brokers will be required to deposit margin as per the percentage prescribed by stock exchange in this regard from time to time. Payment of Margin: The brokers shall be required to deposit margin demanded from them by 11:00 AM on T+1 day. That is on next trading day. The margin brokers shall be collected by way of cheques drawn on the prescribed banks, demand draft or by way of direct debit to the banks account to broker. CLEARING HOUSE Clearing house takes care of pay-in and pay-out securities. At this time there is weekly trading system (Monday to Friday) prevails. And securities are settled by rolling settlement. Means pay-in and pay-out of securities is settled on T+3 Basis would commence

form 1st April, 2002. SEBI decide the following activity schedule for exchanges for the T+3 rolling settlement. SETTLEMENT CYCLE SCHEDULE Sr. No. 1 2 3 Day T T+2 T+3 Description of Activity Trade Trade Date Securities & funds pay-in and pay-out Auction of shortage in delivery

T - TRADING PERIOD: PAY IN/PAYOUT OF SECURITIES On trading day brokers buy and sold the securities or scrips and pay-in and payout of securities will be completed on T+2 basis e.g. if broker buy/sell shares on Monday then pay in of securities will be on Wednesday, 10:30A.M. And pay out of scrips will also on Wednesday up to 2:00 P.M., in this way pay-in/pay-out of securities cycle will be completed. AUCTION OF UNDELIVERED SCRIPS In case if broker fails to deliver the scrips on T+2 delivery day. T h e n i t i s responsibility of clearing house to settle the undelivered scrips. Then, auction will start. In above example, auction of pending securities will be conducted on Thursday. In auction price of securities may will fluctuate 20% high or low of that trading day. In this way trade in auction is settled. CLOSE OUT In case the shares of particular scrips is not available on the date o f auction. Then it is obligation of solicitor (exchange) to give monetary benefit to initiator (buyer) against the default of defaulter of securities in this m a n n e r settlement schedule has completed. INVESTORS GRIEVANCE SECTION LSE has a separate investor's grievance cell, which receives complaints from investors and follows up the complaints with companies and member broker to ensure their satisfactory redressal. For providing b e t t e r services to the investors the stock exchange has maintained investor protection fund. In this fund Rs. 500 is collected from each member annually. Apart from this one percent of the total listing fee collected and ten percent interest covered on company

deposits is also transferred to the investor protection fund. One more fund investor service fund has been set up. 20% of the listing fee is transferred to it. The funds of it are used for maintenance of investor service center, holding of seminars for investor/brokers benefit, and publication of LSE Bulletin. Rationale behind Establishing Investors Grievance Cell To safeguard the investors interest through investors grievance section. To participate as monitoring authority in the public and right issue of the company. To ensure that the company listed at the LSE compiles with all the listing requirements. To keep a record of the inquiry base of the listed companies, their annual financial results and any subsequent increase in the equity base.

ACCOUNTS SECTION Most of the work in account section LSE is done manually, although help is taken t h r o u gh computers for the purpose of making Trial Balance, Income and Expenditure statement and Balance Sheet. The annual report of LSE is generally published in August every year. Some of the important polices of LSE are: The company follows accrual system of accounting recognizes income and expenditure accordingly. Depreciation is provided on written down, value method in accordance with and din the manner specified in schedule XIV of the Companies Act1956. Fixed costs are stated at historical costs less depreciation. Stock/Inventory (stationery) is valued at cost.

Interest on funds borrowed which is attributable to construction of fixed assets and other indirect expenditure during construction is included under work in progress. The company has the procedure of receiving shares, scrips of various companies as securities against the performance of the contract. No accounting e n t r i e s i n s u c h t r a n s a c t i o n a r e m a d e i n r e s p e c t o f d e f a u l t i n g m e m b e r s b y crediting security account and debiting member's investment a/c. The shares in such cases are valued at prices on the date of transfer deeds.

Functions of Accounts Section:The account section performs the following function. To make and receive payments to the outside agencies, these agencies include companies listed at LSE and brokers working at LSE. To disburse personnel expenses.

To keep the records of all incoming and outgoing money depreciation of financial statements at the end of financial year. To get their accounts audited from the third party.

Sources of funds of LSE: Membership fee from brokers at the beginning. Initial listing fee from companies i.e. Rs. 1,000/Annual listing fee from companies. Annual fee from brokers (Rs. 5000) and their authorized representatives. (Rs. 500 each) as broker member is allowed to have maximum 4 authorized representatives. Interest income from deposits of companies for listing, which are made at 1% of issue amount and minimum capital for this purpose is Rs. 4/- crores. Such deposits are retained until there is no dispute against the company subject to the minimum of 6 months, Annual computer fee from brokers (Rs. 5000) Library charges from brokers (Rs. 200) p.a.) Brokers contribution to investor protection fund (Rs. 500 p.a) Fines and penalties form brokers. Maintenance charges Rs. 13.50 per sq. feet, per quarter from those members having rooms and those not having rooms all those not having rooms are charges at till rate of Rs. 1500/- pa. Water and electricity charges Rs. 750 per quarter, whose area is less than 200 sq. feet and 900/- per quarter which is having area of more than 200 sq. feet. The members who are not having rooms are charged at the rate of Rs. 300/- (p.a.) Interest earned affixed deposits.

Billing of members is done on annual basis for annual fees and other abovementioned charges. On 1st April of each year and they are to make payment in 180

days up to 30 September. Beyond it, they are charged interest on due amount @ 12% p.a. still in case of nonpayment, broker member is served a show cause notice for 60 days on 1st April next year. If member fails to, comply with notice then he can be expelled.

Application Of Funds Of LSE:1. 5% of listing fees to SEBI each year. 2. 20% for providing services to investors out, or listing fee annually to investor service fund. 3. Administrative expenses (I) Electricity Charges. (II) Security Charges 4. (III) Telephone Charges (IV) VSAT Charges 5. Salaries (V) Printing and stationary

6. 1% of listing is transferred annually to investor protection fund.

PERSONNEL DEPARTMENT Ludhiana stock exchange does not have a personnel department in its Organization chart. This department carries out all activities relating to the recruitment of the personnel, whenever and wherever a vacancy arises, maintenance of attendance register. This department also deals with the appointment or removal of floor clerks or authorized representatives of brokers. These departments also maintain records of leaves and overtime of employees.

MEMBERSHIP DEPARTMENT

This department deals with membership of exchange. The trade in market is done through the authorized members who are registered with concerned stock exchange and SEBI. There are two types of members in stock exchanges. o Corporate members o Individual member

Following are the requirements to be an individual member of exchange

Age Limit: Qualification:

To be member of stock exchange there is age limit Minimum age is 21 yrs Maximum age is 60 yrs. To be member minimum qualification Matriculation is plus person has three-year experience interview. Including written test and membership department deal with all above requirements of members.

Following requirements are for corporate members:-

1. Company must be registered u/s 324 of the company Act i.e. Directors with
unlimited liability. 2. Two copies of MOA & AOA. Qualification & Proof of age of at least two directors, who will deal in securities

ACHIEVEMENTS OF LUDHIANA STOCK EXCHANGE TABLE 1.4 Oct 1981 Aug 1983 Aug 1983 Incorporation of Stock Exchange Commencement of operations Shifting of operation to own building

Nov 1996 April 1998 Nov 1998 Sep 1999 Jan 2000 Aug 2000 Dec 2000 Sep 2000 July 2001 January 2002 Feb 2002 April 2002 April 2003 Oct 2003

Online Screen Trading Modified carry forward system (MCTS) and settlement gurantee fund. Trading and settlement in demat scrips Trading at remote sites through VSAT counters Introduction of rolling settlement Commencement of online real time depository services Trading on N.S.E. in C.M. segment (Through NSEL) Trading on B.S.E. in CM segment (Through LSEL) Introduction of Compulsory rolling settlement Complete shift of trading CM segment from ISE To LSE securities Ltd. Trading in F&O segment of N.S.E. Rolling settlement cycle prevailing at LSE on T+3 basis Rolling settlement cycle prevailing at LSE on T+2 cycle Incorporation of LSE commodities trading services Ltd., a subsidiary of LSE. Securities Ltd. Introduction of MCX (Multi Commodity Exchange of India) MCX offers 14 different commodities such as steel, kapas, rubber, blackpepper, oil soil seeds, precious metal etc.

March 2004

derivatives
A security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage Investopedia explains Derivative Futures contracts, forward contracts, options and swaps are the most common types of derivatives. Derivatives are contracts and can be used as an underlying asset. There are even derivatives based on weather data, such as the amount of rain or the number of sunny days in a particular region. Derivatives are generally used as an instrument to hedge risk, but can also be used for speculative purposes. For example, a European investor purchasing shares of an American company off of an American exchange (using U.S. dollars to do so) would be exposed to exchange-rate risk while holding that stock. To hedge this risk, the investor could purchase currency futures to lock in a specified exchange rate for the future stock sale and currency conversion back into Euros. http://www.investopedia.com/terms/d/derivative.asp

Usage
Derivatives are used by investors to: provide leverage (or gearing), such that a small movement in the underlying value can cause a large difference in the value of the derivative; speculate and make a profit if the value of the underlying asset moves the way they expect (e.g., moves in a given direction, stays in or out of a specified range, reaches a certain level); hedge or mitigate risk in the underlying, by entering into a derivative contract whose value moves in the opposite direction to their underlying position and cancels part or all of it out; obtain exposure to the underlying where it is not possible to trade in the underlying (e.g., weather derivatives); create option ability where the value of the derivative is linked to a specific condition or event (e.g. the underlying reaching a specific price level).

Hedging Derivatives allow risk related to the price of the underlying asset to be transferred from one party to another. For example, a wheat farmer and a miller could sign a futures contract to exchange a specified amount of cash for a specified amount of wheat in the future. Both parties have reduced a future risk: for the wheat farmer, the uncertainty of the price, and for the miller, the availability of wheat. However, there is still the risk that no wheat will be available because of events unspecified by the contract, such as the weather, or that one party will renege on the contract. Although a third party, called a clearing house, insures a futures contract, not all derivatives are insured against counter-party risk. From another perspective, the farmer and the miller both reduce a risk and acquire a risk when they sign the futures contract: the farmer reduces the risk that the price of wheat will fall below the price specified in the contract and acquires the risk that the price of wheat will rise above the price specified in the contract (thereby losing additional income that he could have earned). The miller, on the other hand, acquires the risk that the price of wheat will fall below the price specified in the contract (thereby paying more in the future than he otherwise would have) and reduces the risk that the price of wheat will rise above the price specified in the contract. In this sense, one party is the insurer (risk taker) for one type of risk, and the counter-party is the insurer (risk taker) for another type of risk. Hedging also occurs when an individual or institution buys an asset (such as a commodity, a bond that has coupon payments, a stock that pays dividends, and so on) and sells it using a futures contract. The individual or institution has access to the asset for a specified amount of time, and can then sell it in the future at a specified price according to the futures contract. Of course, this allows the individual or institution the benefit of holding the asset, while reducing the risk that the future selling price will deviate unexpectedly from the market's current assessment of the future value of the asset. Derivatives can serve legitimate business purposes. For example, a corporation borrows a large sum of money at a specific interest rate.[3] The rate of interest on the loan resets every six months. The corporation is concerned that the rate of interest may be much higher in six months. The corporation could buy a forward rate agreement (FRA), which is a contract to pay a fixed rate of interest six months after purchases on a notional amount of money.[4] If the interest rate after six months is above the contract rate, the seller will pay the difference to the corporation, or FRA buyer. If the rate is lower, the corporation will pay the difference to the seller. The purchase of the FRA serves to reduce the uncertainty concerning the rate increase and stabilize earnings.

Speculation and arbitrage Derivatives can be used to acquire risk, rather than to insure or hedge against risk. Thus, some individuals and institutions will enter into a derivative contract to speculate on the

value of the underlying asset, betting that the party seeking insurance will be wrong about the future value of the underlying asset. Speculators look to buy an asset in the future at a low price according to a derivative contract when the future market price is high, or to sell an asset in the future at a high price according to a derivative contract when the future market price is low. Individuals and institutions may also look for arbitrage opportunities, as when the current buying price of an asset falls below the price specified in a futures contract to sell the asset. Speculative trading in derivatives gained a great deal of notoriety in 1995 when Nick Leeson, a trader at Barings Bank, made poor and unauthorized investments in futures contracts. Through a combination of poor judgment, lack of oversight by the bank's management and regulators, and unfortunate events like the Kobe earthquake, Leeson incurred a US$1.3 billion loss that bankrupted the centuries-old institution.[

Types
OTC and exchange-traded In broad terms, there are two groups of derivative contracts, which are distinguished by the way they are traded in the market: Over-the-counter (OTC) derivatives are contracts that are traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary. Products such as swaps, forward rate agreements, and exotic options are almost always traded in this way. The OTC derivative market is the largest market for derivatives, and is largely unregulated with respect to disclosure of information between the parties, since the OTC market is made up of banks and other highly sophisticated parties, such as hedge funds. Reporting of OTC amounts are difficult because trades can occur in private, without activity being visible on any exchange. According to the Bank for International Settlements, the total outstanding notional amount is US$684 trillion (as of June 2008).[6] Of this total notional amount, 67% are interest rate contracts, 8% are credit default swaps (CDS), 9% are foreign exchange contracts, 2% are commodity contracts, 1% are equity contracts, and 12% are other. Because OTC derivatives are not traded on an exchange, there is no central counterparty. Therefore, they are subject to counter-party risk, like an ordinary contract, since each counter-party relies on the other to perform.

Exchange-traded derivative contracts (ETD) are those derivatives instruments that are traded via specialized derivatives exchanges or other exchanges. A derivatives exchange is a market where individuals trade standardized contracts that have been defined by the exchange.[7] A derivatives exchange acts as an intermediary to all related transactions, and takes Initial margin from both sides of the trade to act as a guarantee. The world's largest[8] derivatives exchanges (by number of transactions) are the Korea

Exchange (which lists KOSPI Index Futures & Options), Eurex (which lists a wide range of European products such as interest rate & index products), and CME Group (made up of the 2007 merger of the Chicago Mercantile Exchange and the Chicago Board of Trade and the 2008 acquisition of the New York Mercantile Exchange). According to BIS, the combined turnover in the world's derivatives exchanges totaled USD 344 trillion during Q4 2005. Some types of derivative instruments also may trade on traditional exchanges. For instance, hybrid instruments such as convertible bonds and/or convertible preferred may be listed on stock or bond exchanges. Also, warrants (or "rights") may be listed on equity exchanges. Performance Rights, Cash xPRTs and various other instruments that essentially consist of a complex set of options bundled into a simple package are routinely listed on equity exchanges. Like other derivatives, these publicly traded derivatives provide investors access to risk/reward and volatility characteristics that, while related to an underlying commodity, nonetheless are distinctive.

Common derivative contract types

There are three major classes of derivatives: Futures/Forwards are contracts to buy or sell an asset on or before a future date at a price specified today. A futures contract differs from a forward contract in that the futures contract is a standardized contract written by a clearing house that operates an exchange where the contract can be bought and sold, whereas a forward contract is a non-standardized contract written by the parties themselves. Options are contracts that give the owner the right, but not the obligation, to buy (in the case of a call option) or sell (in the case of a put option) an asset. The price at which the sale takes place is known as the strike price, and is specified at the time the parties enter into the option. The option contract also specifies a maturity date. In the case of a European option, the owner has the right to require the sale to take place on (but not before) the maturity date; in the case of an American option, the owner can require the sale to take place at any time up to the maturity date. If the owner of the contract exercises this right, the counter-party has the obligation to carry out the transaction. Swaps are contracts to exchange cash (flows) on or before a specified future date based on the underlying value of currencies/exchange rates, bonds/interest rates, commodities, stocks or other assets.

More complex derivatives can be created by combining the elements of these basic types. For example, the holder of a swaption has the right, but not the obligation, to enter into a swap on or before a specified future date.

THE DERIVATIVES PERFORM A NUMBER OF ECONOMIC FUNCTIONS:

1. Price Discovery: - Prices in organized derivatives markets reflects the perception

of market participants about the future and lead the prices of underlying to perceived future level. The prices of derivatives converge with the prices of the underlying at the expiration of the derivative contract. Thus derivatives help in discovery of future as well current price.

2. Transfer of risk: - The derivative market helps to transfer to the risks from those
who have them but may like them those who have an appetite for them. We can also term the derivative market as the insurance company, whereby certain players assumes the risk by receiving premium amount.

3. Increased volume in the cash market :- Derivatives due to their inherent nature
are linked to the underlying cash markets. With the introduction of derivative, the underlying market, witness higher trading volumes because of participation by more players who would not otherwise participate for lack of an arrangement to transfer risk.

4. New Entrepreneurial activities :- Derivatives have a history of attracting many

bright, creative, well-educated people with an entrepreneurial, new products and new employment opportunities, the benefits of which are immense.

5. Increase in saving :- Derivatives market helps increase savings and investments in

the long run Transfer of risk enables market participants to expand their volume of activities.

6. Trading in controlled environment :- The introduction of the derivatives has

shifted the trading in speculative dealings in controlled market and the counter party risk has been eliminated. IMPORTANCE OF DERIVATIVES TRADING Reduction of borrowing cost. 1. Enhancing the yield on assets.

2. Modifying the payment structure of assets to correspond to investor market view. 3. No physical delivery of share certificate so reduction in cost by stamp duty. 4. Increase in hedger, speculator and arbitrageurs. It does not totally eliminate speculation, which is basic need of Indian investors

INSTRUMENTS OF DERIVATIVE TRADING

Forward

Derivative

Future

Option

FORWARD CONTRACTS It is an agreement to buy/sell an asset on a certain future date at an agreed price. The two parties are : 1. Who takes a long position - agreeing to buy 2. Who takes a short position agreeing to sell The mutually agreed price is known as delivery price or forward price. The delivery price is chosen in such a way that the value of contract for both parties is zero at the time of entering the contract, but the contract takes a positive or negative value for parties as the price of underlying asset moves. It removes the future price risk. It a

speculator has information or analysis, which forecast an upturn in price, and then be can go long on the forwards market instead of cash market.

The speculator would go long on the forward, wait for the price to rise, and then take a reversing transaction to book profits. Speculator may well be required to deposit a margin upfront. However, this is generally a relatively small proportion of the value of assets underlying the forward contract.

Limitations of forward contract

1. No standardization. 2. One party can breach its obligation. 3. Lack of centralization of trading. 4. Lack of Liquidity. . FUTURE CONTRACT It is an agreement between buyer and seller for the purchase and sale of a particular assets at a specific future date; specific size, date of delivery, place and alternative asset. It makes obligation on both parties to fulfill the contract. FUTURE TERMINOLOGY Spot Price : The price at which an asset trades in the spot market. Future Price : The price as which the futures contract trades in the futures market. Contract cycle : The period over which the contract trades. The index futures contracts on the NSE have one moth, and three-month expiry cycles, which expire on the last Thursday of one month. Thus a January expiration contract expires on the last Thursday of the January. On the Friday following the last Thursday, a new contract having three-month expiry is introduced of trading.

Expiry Date : It is date specified in the futures contract. This is the last day on which the contract will be traded, at the end of which it will cease to exist. Basis : In the contract of financial futures, basis can be defined as the futures price minus the spot price. There will be a different basis for each delivery month for each contract. In a normal market, basis will be positive. This reflects that futures prices normally exceed spot prices. Initial margin : The amount that must be deposited in the margin account at a time a future contract is first entered into is known as initial margin. Marketing-to-market : In the futures market, at the end of each trading day, the margin account is adjusted to reflect the investors margin gain or loss depending upon the futures closing price. Maintenance margin : This is somewhat lower than initial margin. This is set to ensure that the balance in the margin account never becomes negative. If the balance amount falls below the maintenance margin, the investor receives a margin call and is expected to top up the margin account to the initial margin level before trading commences on the next day. FORWARD VS. FUTURES Features -Operational Mechanism -Contract Specifications -Counter party Risks -Liquidity -Price Forward Traded between two parties Differ from traded to trade Exists such risk Low Not Contracts No such risk High Highly Future Trade on Exchange Standardized

Discovery -Settlement Margin

Efficient At end of period No such margin

Efficient Daily Margin required for trading

OPTIONS Options are fundamentally different from forward and futures. An option gives the holder/buyers of the option the right to do something. The holder does not have committed himself to doing something. In contrast, in a forward or futures contract, the two parties have committed them self to doing something. Whereas it nothing (except margin requirement) to enter in to a futures he purchases of an option require an up front payment. TYPES OF OPTIONS Call Option : It gives an owner the write to buy a specified quantity of the underlying assets at a predetermined price i.e. the exercise price, or the specific date i.e. is the date of maturity. Call Option (Buyer) Why call option ? If u think market will rise Call option (Seller) Why sell Option : If u think market will remain neutral or slightly bearish . Put Option

It gives the holder the right to sell a specific quantity of underlying asses at an agreed price on date of maturity he gets the right to sell. Why Buy a Put Option (Buyer) If u think market will fall Put Option seller Why Sell a Put Option If u think market will remain neutral or moderately bullish OPTION TERMINOLOGY

1. Buyer of an option : The buyer of an option is the one who by paying the option
premium buys the right but not the obligation exercise his option on the seller/writer.

2. Writer of an option : The writer of a call/put option is the one who receives the
option premium and is thereby obliged to sell/buy the asset if the buyer exercise on him.

3. Option price : Option price is the price, which the option buyer pays to the option
seller. It is also referred as option premium.

4. Expiration date : The date specified in the options contract is known as expiration
date, the exercise date, the strike date or the maturity.

5. Strike Price : The price specified in the options contract is known as strike price or
the exercise price.

6. American options : these are the options that can be exercised at any time upto the
expiration date. Most exchange-traded options are Americans.

7. European options: These are the options that can be exercised only on the
expiration date itself. These are easier or analyze than American option, and properties of American options are frequently deducted from those of its European counterpart.

8. In the money option : An in the money option is an option that would lead to a
positive cash flow to the holder if it will exercise immediately. A call option in the index is set to be in-the-money when the current index stands at a level higher than the strike price (i.e. spot price>strike price). If the index is much higher than the strike price, the call is set to deep ITM. In the case of a put, the put is ITM if the index is below the strike price.

9. At-money option : (ATM) option is an option that would lead to zero cash flow if
it were exercised immediately. An option on the index is at-the-money when the current index equals the strike price.

10. Out-of-the money option : (OTM) options is an option that would lead to a
negative cash flow it was exercised immediately. A call option on the index is OTM when the current index stands at a level, which is less than the strike price (spot price<strike price). If the index is much lower than the strike price, the call is set to be deep OTM. In the case of a put, the put is OTM if the index is above the strike price.

Initial Public Offering (IPO):

A term well heard but seldom understood by most of the people. I came across a post in one of the threads many days back asking for some one to explain what is initial public offering. Well, before I begin, let me tell you that I'm a marketing guy and have no basic qualification in Finance as such. But I keep a keen watch on these things and keep my knowledge updated. So an IPO is simply a company's first sale of stock/shares to the public. Its said that an IPO occurs when a company registers its stock with the Securities and Exchange Commission and can sell equity ownership in the company to the public. In simple words, I'm giving you (meaning the public) a part of the ownership of my business. I do it for the first time and hence it is an IPO (initial public offering). These stocks or shares are often refered as securities. These securities offered in an IPO are often, but not always, those of young, small companies seeking outside equity capital and a public market for their stock. It is done to raise a capital for the business from the market. The shares offered in an IPO are usually a new issue, but they may also be shares held by major shareholders, or a mixture of both. These are then free to be sold or purchased after the allotment at the prevalent market prices. The process of the IPO can vary and involves sort of a complex application process for shares. The price at which the shares are sold will either be pre-determined, or determined

by an auction process. If the price is predetermined, it depends on the total net asset value of the company. There are two components in the price of a share: face value and a premium/discount.

Book Building
The NSE has set up nation-wide network for trading whereby members can trade remotely from their offices located all over the country. The NSE trading network spans various cities and towns across India. NSE decided to offer this infrastructure for conducting online IPOs through the Book Building process. NSE operates a fully automated screen based bidding system called NEAT IPO that enables trading members to enter bids directly from their offices through a sophisticated telecommunication network. Book Building through the NSE system offers several advantages:

The NSE system offers a nation wide bidding facility in securities It provides a fair, efficient & transparent method for collecting bids using latest electronic trading systems Costs involved in the issue are far less than those in a normal IPO

The IPO market timings are from 10.00 a.m. to 5.00 p.m. On the last day of the IPO, the session timings can be further extended on specific request by the Book Running Lead Manager.

Reverse Book Building

Delisting of shares under SEBI (delisting of Securities) guidelines 2003 Securities and Exchange Board of India has issued the SEBI (Delisting of Securities) Guidelines 2003 for delisting of shares from stock exchanges. The guidelines inter alia provide the overall framework for voluntary delisting by a promoter. In accordance with the guidelines for the first time in India by any Exchange, National Stock Exchange now provides online reverse book building for promoter/acquirer through its trading network which spans various cities and towns across India. NSE operates a fully automated screen based bidding system that enables trading members to enter offers directly from their offices through a sophisticated telecommunication network. What is Reverse Book Building (Delisting of shares)? The Reverse Book Building is a mechanism provided for capturing the sell orders on online basis from the share holders through respective Book Running Lead Managers (BRLMs) which can be used by companies intending to delist its shares through buy back process. In the Reverse Book Building scenario, the Acquirer/Company offers to buy back shares from the share holders. The Reverse Book Building is basically a process used for efficient price

discovery. It is a mechanism where, during the period for which the Reverse Book Building is open, offers are collected from the share holders at various prices, which are above or equal to the floor price. The buy back price is determined after the offer closing date Business process for delisting through book building is as follows:

The acquirer shall appoint designated Book Running Lead Manager (BRLM) for accepting offers from the share holders. The company/acquirer intending to delist its shares through Book Building process is identified by way of a symbol assigned to it by BRLM. Orders for the offer shall be placed by the share holders only through the designated trading members, duly approved by the Exchange. The designated trading members shall ensure that the security / share holders deposit the securities offered with the trading members prior to placement of an order. The offer shall be open for 'n' number of days. The BRLM shall intimate the final acceptance price and provide the valid accepted order file to the National Securities Clearing Corporation Limited (A wholly owned subsidiary of NSE carrying out clearing and responsible for settlement operations.)

SEBI guidelines shall be applicable to delisting of securities of companies and specifically apply to:

Voluntary delisting being sought by the promoters of a company. Any acquisition of shares of the company (either by a promoter or by any other person) or scheme or arrangement, by whatever name referred to, consequent to which the public shareholding falls below the minimum limit specified in the listing conditions or listing agreement that may result in delisting of securities. Promoters of the companies who voluntarily seek to delist their securities from all or some of the stock exchanges. Cases where a person in control of the management is seeking to consolidate his holding in a company, in a manner which would result in the public shareholding or in the listing agreement that may have the effect of company being delisted. Companies which may be compulsorily delisted by the stock exchanges.

NSE Reverse Book Building System NSE uses the reverse book building system; a fully automated screen based bidding system that allows offers to run in several issues concurrently. The system has the facility of defining a hierarchy amongst the users of the system. The Book Running Lead Manager can define who will be the Syndicate member and who will be the other members participating in the issue. The Syndicate Member and other Members also have a facility of defining a hierarchy among the users of the system as Corporate Manager, Branch Manager and Dealer. Trading Members

The Book Running Lead Manager will give the list of trading members who are eligible to participate in the Book Building process to the Exchange. Members have to submit a onetime undertaking to the Exchange. Eligible trading members have to give in the prescribed format details of the user IDs that they would like to use. List of Approved Trading Members:

ICICI Brokerage Services Limited. Karvy Stock Broking Limited. Master Capital Services Limited.

Subscribers Subscribers can approach any of the approved trading members for submitting offers in the NEAT IPO system. On line transaction registration slip are generated automatically after entering the offers in to the system, which acts as proof of the registration of each offer.

Reverse Book Building through the NSE system offers several advantages:

The NSE system offers a nation wide bidding facility in securities. It provides a fair, efficient & transparent method for collecting offers using latest electronic trading systems.

Procedures
Issuers

Issuers desirous of using NSE's online IPO system are required to comply with the following procedures: Submit a written request as per prescribed format for usage of electronic facilities and software of NSE Give details regarding Book Running Lead Manager, Co Book Running Lead Managers and Syndicate Members. Pay the requisite charges to NSE.

Trading Members The Book Running Lead Manager will give the list of trading members who are eligible to participate in the Book Building process to the Exchange. Members have to submit a one time undertaking to the Exchange. Eligible trading members have to give in the prescribed format details of the user IDs that they would like to use. Subscribers

Subscribers can approach any of the approved trading members for submitting bids in the NEAT IPO system. On line transaction registration slip are generated automatically after entering the bids in to the system which acts as proof of the registration of each Bid option.

Application Supported by Blocked Amount (ASBA) Procedure

Main Features of ASBA process ASBA provides an alternative mode of payment in issues whereby the application money remains in the investor's account till finalization of basis of allotment in the issue. ASBA process facilitates investors bidding with multiple options, to apply through Self Certified Syndicate Banks (SCSBs), in which the investors have bank accounts. SCSBs are those banks which satisfy the conditions laid by SEBI. SCSBs would accept the applications, verify the application, block the fund to the extent of bid payment amount, upload the details in the web based bidding system of NSE, unblock once basis of allotment is finalized and transfer the amount for allotted shares, to the issuer. This would co-exist with the current procedure of investors applying through sub syndicate/ syndicate members, with cheque as a payment instrument.

Registration procedure of Self Certified Syndicate Bank (SCSB): In order to register with the Exchange the SCSB has to submit a one time undertaking as per the prescribed format.

Issuers
An Issuer Company can issue capital through book building in following two ways:

75% Book Building process The option of 75% Book Building is available to all body corporates that are otherwise eligible to make an issue of capital to the public. The securities issued through the book building process are indicated as 'placement portion category' and securities available to public are identified as 'net offer to public'. In this option, underwriting is mandatory to the extent of the net offer to the public. The issue price for the placement portion and offers to public are required to be same.

100% of the net offer to the public through Book Building process In the 100% of the net offer to the public, entire issue is made through Book Building process. However, there can be a reservation or firm allotment to a maximum of 5% of the issue size for the permanent employees, shareholders of the company or group companies, persons who, on the date of filing of the draft offer

document with the Board, have business association, as depositors, bondholders and subscribers to services, with the issuer making an initial public offering. The number of bidding centres, in case of 75% book building process should not be less than the number of mandatory collection centres specified by SEBI. In case of 100% book building process, the bidding centres should be at all the places where the recognised stock exchanges are situated.

RESEARCH METHODOLOGY

Research is a procedure of logical and systematic application of the fundamentals of science to the general and overall questions of a study and scientific technique by which provide precise tools, specific procedures and technical, rather than philosophical means for getting and ordering the data prior to their logical analysis and manipulations. Different type of research design is available depending upon the nature of research project, availability of able manpower and circumstances. The study about LSE SECURITIES LTD. is exploratory as well as descriptive in nature .Discussion with experts, internet surfing, and journals were studied to explore more about the concerned objective and better understanding. After that questionnaire was prepared to meet the desired objective

Sources of Data: The source of data includes primary and secondary data sources.

Secondary Sources The secondary data is data, which is collected and compiled for the different purpose, which are used in research for this study. The secondary data include material collected from: Newspaper Magazine. Internet.

Data Collection Instruments The various methods of data gathering involves the use of appropriate recording forms. These are called tools or instruments of data collection. Data was collected through structured questionnaire administered by sitting with guide and discussing problems Sampling Technique The small representative selected out of large population is selected at random is called sample. Well-selected sample may reflect fairly, accurately the characteristic of population. The chief aim of sampling is to make an inference about unknown parameters from a measurable sample statistics. Sampling technique used was Snowball sampling was used for the purpose of data collection as reference was taken form sample to reach other sample.

Sample Size : Sample size refers to the number of items to be selected from the universe to constitute a sample. Due to constraints of cost and time, the sample size selected for the research is 25 investors and 35 brokers Sampling Unit:
The sampling unit was the person who had an account and was investing in stock market and broker who were trading in stock market.

LIMITATIONS OF THE STUDY No study is complete in itself, however, good it may and every study has some limitations: Time is the main constraint of my study. Availability of information was not sufficient because of less awareness among investors / brokers. Sample size is not enough to have a clear opinion.

DATA ANALYSIS AND INTERPRETATION

1.

REASONS BEHIND ITS ADOPTION

purpose

liquidity hedging 12% 25% speculation 40%

risk management 23%

Reasons behind adoption of derivatives are different by brokers, investors and dealers e.g. liquidity, risk management hedging, investor demand (speculation) etc. Out of 60 brokers, investors dealing in derivatives 14 (23%) adopt it due to characteristics of risk management, 15 (25%) due to hedging, 24 (40%) for speculation and remaining 7 (12%) due to liquidity.

2.

TRADED PERIOD IN DERIVATIVES

Traded period for Derivative Investment

25 20 No. of brokers 15 and investors 10 5 0 Weekly Monthly More than 1 month More than 2 months Series1

Traded Period

FIGURE 4.2 13 (22% investors and brokers are investing weekly in derivatives, 23 (38%) investing monthly, 19 (32%) investing after more than 1 month and only 5 (8%) investing too late after 2 months.

3.

IMPACT ON CUSTOMER BASE

25 20 15 No. of brokers 10 5 0 Series1

Increase

Decrease Impact

Remain same

FIGURE 4.3 Out of 35 brokers , 3 (5%) of brokers said that it does not increase their customer base because introducing small savings as investment, but derivatives increase customer base of 24 (70%) which is more than half. It is basically beneficial for those who are investing from last 2 or more years. In investment sector need minimum of Rs. 2,00,000 as investment so it is basically for corporate and investment sector only not for small

investors. 8 (25%) said their customer base remains same because they have started just now for investing in derivatives in future it will increase their customer base.

4. WHICH TOOL OF DERIVATIVE ACCORDING TO YOU IS BETTER ? a) b) c) d) Index future Stock future Index option Stock option

7 12%

8 13% Index Future Stock Future 30 50% 15 25% Index Option Stock Option

FIGURE 4.4 I got mix view on this question. But most of the informants i.e. 50% are in the favour of index future and rests are having some different different attraction .

CONCLUSION

The Stock Exchange has played an important role in channelising savings into capital for the various industrial and commercial units of the State of Punjab and other parts of the country.The Exchange has been conducting a unique certification programme in Capital Market in association with Centre for Industry Institute Partnership Programme Panjab University, Chandigarh for the last three year. The Exchange has been providing a variety of services for the benefit of investing public. (i).Investor Service Centres (ii).Investor Awareness Seminars (iii).Website of the Exchange: www.lse.co.in

No doubt that derivative growth towards the progress of economy is positive. But the problem confronting the derivative market segment are giving it a low customer base. The main problem that it confronts are unawareness and bit lot sizes etc. these problems could be overcome easily by revising lot sizes and also there should be seminar and general discussions on derivatives at varied places.

BIBLIOGRAPHY

MAGAZINES & NEWSPAPER: NSE News. ECONOMICS TIME

INTERNET SITES: www.bseindia.com www.nseindia.com www.scribd.com

Google search www.lse.com

QUESTIONNAIRE Dear Respondent, I am a student of MBA . I am working on the project LSE SECURITIES LTD.You are requested to fill in the questionnaire to enable, to undertake the study on the said project

NAME: OCCUPATION:

ADDRESS: PHONE NO:

1)

Do you about LUDHIANA STOCK EXCHANGE ? a) YES b) NO Respondent Yes No 50 0 Percentage(%) 100 0

2)

Do you have PAN Card ?. a) YES b) NO Respondent Yes No 50 0 Percentage(%) 100 0

3)

Who would provide better service ? a) BROKER b) SUB-BROKER

Respondent Broker Sub-Broker 20 30

Percentage(%) 33 67

4)

Do you ever invest money in Share Market ? a) YES b) NO Respondent YES NO 42 8 Percentage(%) 84 16

5) Do you know about NSE AND BSE ? a) YES b) NO Respondent YES NO 46 4 Percentage(%) 92 8

6) Do you know that who control LSE ? a) SEBI b) IRDA Respondent SEBI IRDA 29 21 Percentage(%) 58 42

7)

What is your purpose for trading in derivatives? a) c) Hedging Risk Management b) d) Speculation Liquidity

8)

How often do you trade? a) Weekly b) Monthly c) More than 1 month

d) More than 2 month 9) What is your customer base with introduction of derivatives? (FOR BROKERS) a) Increase b) Decrease c) Remains same.

10) . Which tool of derivative according to you is better? a) Index future b) Stock future c) Index option d) Stock option

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