4. Capital Market
Primary Market Secondary Market
Equity Market Debt Market
Share Market Bond Market
5. Financial instruments that are traded in the
• equity instruments
• credit market instruments,
• insurance instruments,
• foreign exchange instruments,
• hybrid instruments.
6. Suppliers and Borrowers
• . Major suppliers of funds in the capital market
1. Commercial banks.
2. Insurance companies.
3. Business corporations.
4. Retirement funds.
• Major borrowers in the capital market
1. Treasury departments.
3. Securities dealers.
7. Secondary Market
Secondary Market refers to a market where securities
are traded after being initially offered to the public in the
primary market and/or listed on the Stock Exchange.
For the G.I, the S.E provides an efficient platform for
trading of his securities.
For the management of the company, Secondary equity
markets serve as a monitoring and control conduit—by
facilitating value-enhancing control activities, enabling
implementation of incentive-based management
contracts, and aggregating information (via price
discovery) that guides management decisions.
8. Primary Market
In primary markets, securities
are bought by way of public
issue directly from the
New issue are available in
The primary is a middlemen.
New issue of common
stock;bonds and preferred
stock are sold by companies.
In Secondary market share are
traded between two investors.
Securities usually bought and
sold through the secondary
The secondary market are
broker and dealer.
The secondary market stock
and bonds issues are sold to
9. • Importance Of Secondary Market
• Characteristics of Secondary Market
2.Over the counter
10. Functions of Secondary Markets
• Provides regular information about the value of security.
• Helps to observe prices of bonds and their interest rates.
• Offers to investors liquidity for their assets.
• Secondary markets bring together many interested
• It keeps the cost of transactions low.
11. Products available in the Secondary Market
Shares: Equity Shares, Rights Issue/ Rights Shares,
Bonus Shares, Preference shares, Cumulative
Preference Shares, Cumulative Convertible
Bonds: Zero Coupon Bond, Convertible Bond, Treasury
12. Participants in the Secondary Market
• Stock Exchange
• Clearing Corporation
• Depositories/ DP
• Trading Member (Stock Broker)/ Clearing Member
• Broker--- INB
• Sub- Broker-INS
• Brokers of derivative segment--INF
• Registrar to an Issue and Share Transfer Agent
13. Getting started
• To start trading the following are required –
• Trading account
•Member – Client Agreement
•Risk Disclosure Document
• Demat account
• Bank account
• Permanent Account Number (PAN)
• Unique Client Code- KYC Norms
14. Where to trade
• The secondary market is divided into two segments –
• Cash/ Equity segment
• Derivative segment –
• Equity Futures and Option (F & O) – Index /
•Currency Futures/ Option
• Interest Rate Futures
15. How to trade
• Trade through a SEBI registered Stock Broker, by -
• Placing margins as required with the broker
• placing order over the phone
• email etc.
• Internet Trading
• Wireless / Mobile Trading.
16. Post Trade
• The stock broker is required to provide contract notes
confirming the trades done within 24 hrs of executing
• The contract notes can either be in physical or electronic
17. Charges by the Stock Broker
• Brokerage charged by member broker (maximum 2.5%)
• Service tax as stipulated
• Securities Transaction Tax
• Penalties arising on specific default on behalf of client
• Securities Transaction Tax (STT) is a tax being levied
on all transactions done on the stock exchanges at
rates prescribed by the Central Government from time
• The settlement in the securities market is done on
a T+2 Rolling Settlement Cycle (where T =
Securities and Exchange Board of
T + 2
19. Settlement – Auction And - Close Out
• Incase there is a shortage in Pay-in of shares at the time
of settlement on T+2, the Stock Exchange purchases the
requisite quantity in the Auction Market and gives them
to the buying trading member.
• If the shares could not be bought in the auction i.e. if
shares are not offered for sale in the auction, the
transactions are closed out as per SEBI guidelines
20. Pay-in and pay-out days for funds and
securities for Normal Settlement
Trading Rolling Settlement Trading T
Clearing Custodial Confirmation T+1 working days
Delivery Generation T+1 working days
Settlement Securities and Funds pay in T+2 working days
Securities and Funds pay out T+2 working days
Post Settlement Valuation Debit T+2 working days
Auction T+3 working days
Bad Delivery Reporting T+4 working days
Auction settlement T+5 working days
Close out T+5 working days
Rectified bad delivery pay-in and pay-out T+6 working days
Re-bad delivery reporting and pickup T+8 working days
Close out of re-bad delivery T+9 working days
21. For redressing my grievances
• We have following recourses available:
• Office of Investor Assistance and Education (OIAE) : You can lodge
a complaint with OIAE Department of SEBI against companies for
delay, non-receipt of shares, refund orders, etc., and with Stock
Exchanges against brokers on certain trade disputes or non receipt
• Arbitration: If no amicable settlement could be reached, then you
can make application for reference to Arbitration under the Bye
Laws of concerned Stock Exchange.
• Court of Law
23. 1-Market Orders
The simplest type of order is the market order,an order
executed at the best price available in the market.If more
buy orders and sell orders reach market at the same time,
the price can obtain.Buyers give priority offering lower price.
Sellers give offering higher price.
If there are more than one order at the same price.The
priority rule is based on the time of arrival of the order.
The danger of a market order is that an
adverse move may take place between the
time the investor places the order and the
time the order is executed.
24. 2-Limit Orders
• It designates a price treshold for the execution of
trade.It is a conditional order.
A buy limit order indicates that the security may be
purchased only at the designated price or lower.
A sell limit order indicates that the security may be
sold at the designated price or higher.
• The danger of limit order is that it comes
with no guarantee it will be executed at all.
The designated price may not be obtainable.
25. 3-Stop Order
Stop order specifies that the order is not be
executed until the market moves to a designated
price at which time it becomes a market order.
A stop order to buy specifies that the order is
not to be executed until the market rises to a
A stop order to sell specifies that the order is
not to be executed until the market price falls
below a designated price.
• Two dangers of stop order:
1-Security prices sometimes exhibit abrupt price changes.
2-Stop order can be subject to the uncertainty of the execution price.
26. 4-Market if Touched Orders
• This order becomes a market order if a designated
price is reached.However,a market-if-touched order
to buy becomes a market order if the market falls to
a given price.A market-if-touched order to sell beco-mes
a market order if the market rise to a specified
27. 5-Time Specific Order
• Orders may be placed to buy or sell
at the open or close of trading for the
day that is time specific orders.
28. 6-Size Related Orders
For common stock,orders are also classified
by their size.
A round lot is typically 100 shares of a stock.
An odd lot is defined as less than a round lot.
A block trade is defined as an order of 10.000 shares of
a given stock.
29. Stock Exchange
• It is a place where buying and selling of Securities takes
• Regulatory Authority : SEBI
• trading platform provided by NSE: Electronic
• There are 23 stock exchanges in India.
• In India we have Bombay stock exchange , National
stock exchange and the rest 21 are Regional stock
31. • REGULATORY AUTHORITY
• Regulatory authority is the one which is under the
• A few Stock Exchange companies follow the rules which
are laid down by the government of India.
• Example: 1) SEBI:- (Securities Exchange Board of
• Demutualisation of stock exchanges
• Demutualisation refers to the transition process of an
exchange from a “mutually-owned” association to a
company “owned by shareholders”.
• Mutual Exchange
37. Top 10 Stock Exchange in World
• New York Stock Exchange (NYSE) - Headquartered in New
York City. Market Capitalization (2011, USD Billions) – 14,242;
Trade Value (2011, USD Billions) – 20,161.
• NASDAQ OMX - Headquartered in New York City. Market
Capitalization (2011, USD Billions) - 4,687; Trade Value (2011,
USD Billions) – 13,552.
• Tokyo Stock Exchange - Headquartered in Tokyo. Market
Capitalization (2011, USD Billions) – 3,325; Trade Value
(2011, USD Billions) – 3,972.
• London Stock Exchange - Headquartered in London. Market
Capitalization (2011, USD Billions) – 3,266; Trade Value
(2011, USD Billions) – 2,871.
• Shanghai Stock Exchange - Headquartered in Shanghai.
Market Capitalization (2011, USD Billions) – 2,357; Trade
Value (2011, USD Billions) – 3,658.
38. • Hong Kong Stock Exchange - Headquartered in Hong Kong.
Market Capitalization (2011, USD Billions) – 2,258; Trade
Value (2011, USD Billions) – 1,447.
• Toronto Stock Exchange - Headquartered in Toronto. Market
Capitalization (2011, USD Billions) – 1,912; Trade Value
(2011, USD Billions) – 1,542.
• BM&F Bovespa - Headquartered in Sao Paulo. Market
Capitalization (2011, USD Billions) – 1,229; Trade Value
(2011, USD Billions) – 931.
• Australian Securities Exchange - Headquartered in Sydney.
Market Capitalization (2011, USD Billions) – 1,198; Trade
Value (2011, USD Billions) – 1,197.
• Deutsche Börse - Headquartered in Frankfurt. Market
Capitalization (2011, USD Billions) – 1,185; Trade Value
(2011, USD Billions) – 1,758.
39. Stock Trading
• Screen Based Trading
• NEAT: National Exchange for Automated Trading
• Placing orders with the broker.
• Contract Note
• details are required
• maximum brokerage: 2.5%
40. Step 1. Investor / trader decides to trade
Step 2. Places order with a broker to buy / sell the
required quantity of respective securities
Step 3. Best priced order matches based on price-time
Step 4. Order execution is electronically
communicated to the broker’s terminal
41. Step 5. Trade confirmation slip issued to the investor /
trader by the broker
Step 6. Within 24 hours of trade execution, contract
note is issued to the investor / trader by the broker
Step 7. Pay-in of funds and securities before T+2 day
Step 8. Pay-out of funds and securities on T+2
42. SEBI Risk Management System
The primary focus of risk management by SEBI has
been to address the market risks, operational risks and
SEBI has been continuously reviewing its policies and
drafting risk management policies to mitigate these risks,
thereby enhancing the level of investor protection and
catalyzing market development.
43. Direct Market Access (DMA)
• Direct Market Access (DMA) is a facility which allows
brokers to offer clients direct access to the exchange
trading system through the broker’s infrastructure without
manual intervention by the broker. Some of the
advantages offered by DMA are direct control of clients
over orders, faster execution of client orders, reduced
risk of errors associated with manual order entry, greater
transparency, increased liquidity, lower impact costs for
large orders, better audit trails and better use of hedging
and arbitrage opportunities through the use of decision
support tools / algorithms for trading. Presently, DMA
facility is available for institutional investors.