RISK MANAGEMENT

HEDGING RISKS OF A NEW STOCK EXCHANGE

ByAkanksha Saxena 10020242002 Ashok Venkat 10020242004 Komal Fulzele 10020242009 Shweta Tiwari 10020242027 Supriya Rai 10020242028 Om Ranjan 10020242039

What is a Stock Exchange

Stock exchange is that place where trading of shares is done in terms of sale and purchase.

Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends.

The securities traded on a stock exchange include: shares issued by companies, unit trusts, derivatives, pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there.

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

Why Free Flow Market Cap?

It depicts the market more rationally It removes undue influence of government or promoter share holding, there by giving the equal opportunity for companies to be in the SENSEX Almost all the Indices world over are calculated by this methodology It gives Fund managers more authentic information for benchmark comparisons.

 SENSEX is calculated using the "Free-float Market Capitalization" methodology, wherein, the level of index at any point of time reflects the free-float market It reflects value of 30 component stocks relative to a base period. The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This market capitalization is further multiplied by the free-float factor to determine the free-float market capitalization.

 Largest, with over 6,000 stocks listed. Accounts for over two thirds of the total trading volume in the country. Established in 1875, also the oldest in Asia. First one to be recognised by the Government of India under the Securities Contracts (Regulation) Act, 1956.

BSE

NSE
India's first debt market. Set up in 1993 to encourage stock exchange reform through system modernization and competition. Instruments traded are, treasury bills, government security and bonds issued by public sector companies

Roles and Functions

Established for the purpose of assisting, regulating and controlling business of buying, selling and dealing in securities.

Provides a market for the trading of securities to individuals and organizations seeking to invest their saving or excess funds through the purchase of securities.

Provides a physical location for buying and selling securities that have been listed for trading on that exchange.

Establishes rules for fair trading practices and regulates the trading activities of its members according to those rules

Exchange is Responsible for.

Transparency
Disclosure of information in timely, complete and accurate manner to the Exchange and the public on a regular basis

Efficient market
This means that orders are executed and transactions are settled in the fastest possible way.

Fair
The exchange assures that no investor will have an undue advantage over other market participants

Liquidity
Ability to sell an asset quickly at a fairly known price Low transactions costs

Benefits of Stock Exchanges to Community

It assist the economies development by providing a body of interested investors. It uploads the position of superior enterprises and assist them in raising further funds.

It encourages capital formation

Government can undertake projects of national importance and social value raising funds through the sale of its securities on the stock exchange. It is the stock exchanges that central bank of a country can control credit by undertaking open market operations (purchase and sale of securities)

Benefits to Investor
Liquidity of the investment is increased The stock exchange safeguards interests of investors through strict enforcement of rules and regulations.

The securities dealt on a stock exchange are good collateral security for loans.
The present net worth of investments can be easily known by the daily quotations

Benefits to the company

A company whose shares quoted on stock exchange they enjoy better reputation and credit. The market for the shares of such a company is naturally widened.

The market price of securities is likely to be higher in relation to its earnings, dividends and property values.
This raises the bargaining power of the company in the event of a takeover, merger or amalgamation.