Brokerage Services

MFS

STOCK BROKERS
Stockbroker is a member of a recognized stock exchange who buys, sells or deals in securities. To work as a stockbroker registration with SEBI is mandatory. SEBI is empowered to impose conditions while granting the certificate of registration.

SEBI GUIDELINE FOR STOCK BROKER

REGISTRATION: A broker seeking registration with SEBI, has to apply through the stock exchange of which he is member. For registering SEBI checks eligibility of the applicant to become the member of stock exchange, has the necessary infrastructure to effectively discharge his duties, past experience etc. Every registered stockbroker is required to pay annual fee @ Rs. 5,000 for turn over up to Rs. 1 crore and 0.01% of turnover exceeding Rs. 1 crore. For calculating turnover underwriting and collection of deposits are not taken into account for the purpose of calculating the turnover. The authenticity of the annual turnover is to be certified by the stock exchange concerned.

 CAPITAL ADEQUACY NORMS FOR BROKERS: An absolute minimum of Rs. 5 lakh as a deposit with the exchange is to be maintained by the members of the BSE & CSE and Rs. 3.5 lakh for DSE and ASE irrespective of volume of business. In case of other Stock Exchange the minimum requirement is Rs. 2 lakhs. DUTY TO THE INVESTOR:

The main duties of a STOCK BROKER towards the investor are: He should be faithful to the clients in his dealings with them and execute orders as per the instructions. He should issue to his clients a contract note without any delay for all transactions in the form specified by the SE. To avoid breach of trust, he should not disclose or discuss with any other person details of investment and transaction of clients. He should not mislead clients merely to generate business. He should avoid dealing with a client who is a defaulter in his dealings with other brokers. When dealing with a client, he is required to disclose whether he is acting as a principal or as an agent. He should not give investment advice to any client unless sought/wanted by him. A stockbroker should have adequately trained staff and arrangements to render fair, prompt and competent services to his clients. He should extend full cooperation to other brokers in protecting the interest of his clients regarding their rights to dividends, bonus shares, rights issues and any other rights related to such securities.

SUB BROKERS: MEANING

A sub-broker acts on behalf of a stockbroker as an agent or otherwise for assisting investors in buying, selling or dealing in securities through such brokers but he is not a member of a stock exchange. To act as a sub-broker, registration with SEBI is required.

 SEBI GUIDELINE FOR SUB - BROKER: REGISTRATION OF SUB-BROKERS: According to SEBI regulations currently in force, a sub-broker is required to submit along with the application (a) recommendation from a stockbroker with whom he will be affiliated and (b) two references, including one from his banker. The individual applicant should not be less than 21 years of age, has not been convicted in any offence involving fraud or dishonesty and has passed the equivalent of at least 12th standard from a recognized institution. The annual fee payable by a sub-broker is Rs. 1000 for an initial period of five years. After the expiry of five years, an annual fee of Rs. 500 is payable as long as the certificate remains in force.

 DUTY TO THE INVESTORS: A sub-broker, in his dealings with the clients and the general investing public, should faithfully execute the orders for buying and selling of securities at the best available market price and promptly inform his clients about the execution of an order and make payment in respect of securities sold and arrange for prompt delivery of securities purchased. He should issue promptly to his clients (a) Purchase or sale notes for all the transactions entered into by him with his clients, or through the principal broker (b) Scrip(share)-wise details. He should not furnish misleading information to his clients to generate business. He should not recommend his clients any scrip / security unless the client has asked for the advice.

FOREIGN BROKERS: MEANING

Foreign institutional investors (FIIs) now play a significant role in the stock markets. With a view to helping the FIIs to follow the procedures and encourage them to invest in India, SEBI has issued a different set of guidelines: SEBI GUIDELINE FOR FOREIGN BROKERS: Registration with SEBI: It is mandatory for a foreign broker to get registered with SEBI in order to do business in India. While applying for registration, a foreign broker has to disclose to SEBI name(s) and registration number(s) of the stock exchanges where he is registered in the capacity of a broker dealer together with an undertaking that he would operate and assist only on behalf of the registered FIIs and would not deal in securities on his own account as principal in India. On advice from SEBI, the RBI would accord approval to him to open (a) A foreign currency denominated bank account and a rupee account with a designated bank branch and (b) Multiple custodian accounts with the approved custodian of all registered FIIs whom he may be assisting or on whose behalf he would be placing orders with a member of Indian stock exchanges.

TRADING SYSTEM IN INDIA

Stock Market Trading: main objective as To set up a nationwide trading facility for equities, debt instruments and hybrids. To ensure equal access to investors across the country through an appropriate communication network. To provide a fair, efficient and transparent securities market to investors using the electronic trading system. To ensure shorter settlement cycle and book entry settlement system and To meet the current international standards prevalent in the securities markets.

Wholesale Debt Market (WDM) and Capital Market (CM) segments

Wholesale Debt Market (WDM) Segment: The WDM segment provides a facility for institutions/ body corporate (institutional investors) to enter into high value transactions in instruments such as government securities, T-bills, public sector undertaking bonds, units of mutual funds, certificates of deposits, commercial papers etc. Only trading members can transact in WDM segment. Trading Members: Recognized members of NSE are called trading members. Only body corporate, bank subsidiaries and financial institutions can become Trading members. They must possess a minimum net worth of Rs. 2 crore. The annual fee is Rs. 30 Lakh and a TM cannot withdraw his membership before five years. The applicant must be engaged solely in securities business and not in any fund based activity. The minimum paid up capital should be Rs. 30 lakh. TM can either trade on their own or on behalf of their clients, including participants. Participants: Participants are the organizations directly responsible for settlement of trade. They are large players in the markets and as such take direct settlement responsibility of their own trades executed through TMs. The participants have access to the NSE trading system to enable to see the breadth and dept of the market through enquiry screens. They are able to monitor all market movements.

Capital Market (CM) Segment:

CM covers trading in equities and retail trade in debt instruments like nonconvertible debentures and hybrid instruments. Individuals, registered firms, corporate bodies and institutional members are eligible to become trading members in this segment. The minimum net-worth requirements for members is (a) individuals and registered firms Rs. 75 lakhs and (b) Corporate bodies Rs. 100 lakh.

Trading System: There are separate trading systems for both WDM and CM segments. Let us discuss the two in detail.
Capital Market Segment: The NSE market is fully automated Screen-Based Trading System which adopts the principle of an order driven market. It provides complete flexibility to members in the kinds of orders that can be placed by them. Orders, as and when they are received, are first time stamped and then immediately processed for potential match.

Wholesale Debt Market Segment:

The fully computerized, online trading system has changed the very manner in which trading is perceived in the Indian Stock Market. Besides the fact, that the system has increased trading velocities and cut timeframes. The trading system provides tremendous flexibility to the users in terms of the type of orders that can be placed on the system. Detailed information on the total order depth in a security, the best buys and sells available in the market, the quantity traded in that security, the high, the low and last traded price is available through the various market screens at all point of time. Clearing and Settlement System of NSE: Trading has grown rapidly at NSE, due to short and tight settlement cycles which the NSE operates as per a well defined schedule so that investors are assured of settlement.

 Settlement Features of Capital Market Segment: The cycles are short and announced well in advance by the NSE. All scrip are handled by the Clearing House. The gap between fund pay-in and payout is only one day. The NSE takes responsibility for rectifying short or bad deliveries and objections by initiating auction buy-in. It assures legal guarantee of transactions and settlement of the NSE. NSE operates on account period for a periodic settlement cycle. Trading period starts on Wednesday and ends on Tuesday of the next week. All trades concluded during a particular period are settled during the next week. Securities are paid in on the Monday following the trading period. Funds are paid in on Tuesday. The payout day for both funds and securities is Wednesday. Thus, settlement is completed in eight days from the end of the last day of the trading cycle. The clearing system is automated. Settlement is on a physical basis requiring the delivery and receipt of documents. The NSE has set up a clearing house, namely, National Securities Clearing Corporation Ltd. (NSCCL) for managing settlement of securities.