Name -Raveena. P.

Jethani VI Semester Section A Reg no -09BBM20150

SAPM ASSIGNMENT 1) Give the SEBI guidelines for primary and secondary markets SEBI has brought out a number of guidelines separately, from time to time, for primary market, secondary market, mutual funds, merchant bankers, foreign institutional investors, investor protection etc. SEBI Guidelines for Primary Market or Listing:  New Company: A new company is one (a) which has not completed 12 months commercial production and does not have audited results and (b) where the promoters do not have a track record. These companies will have to issue shares only at par.  New Company set-up by Existing Company: When a new company is being set-up by existing companies with a five year track record of consistent profitability and a contribution of at least 50% in the equity of new company, it will be free to price its issue, i.e., it can issue its share at premium.  Private and Closely held Companies: The private and closely held companies having a track record of consistent profitability for at least three years, shall be permitted to price their issues freely. The issue price shall be determined only by the issues in consultation with lead managers to the issue.  Existing Listed Companies: The existing listed companies will be allowed to raise fresh capital by freely pricing expanded capital provided the promoters contribution is 50% on first Rs. 100 crores of issue, 40% on next Rs. 200 crores, 30% on next Rs. 300 crores and 15% on balance issue amount. Reservation of Issues  Reservations under public subscription for various categories of persons are made in the following manner:  Permanent employees 10%  Indian Mutual Funds 20%  Foreign Institutional Investors 15%  Development Financial Institutions 20%  Shareholders of group of companies 10% Composite Issues  In the case of composite issue, i.e., right cum public issue by existing listed companies differential pricing shall be allowed. In other words, issue to the public can be priced differentially as compared to issue to right shareholders. However, justification for the price difference should be given in the offer document

Lock In Period  Lock in period is five years for promoters contribution from the date allotment or from the commencement of commercial production whichever late. At present, the lock in period has been reduced to one year. Guidelines for Public Issue  Abridged prospectus has to be attached with every application.  A company has to highlight the risk factors in the prospectus.  Objective of the issue and cost of project should be mentioned in the prospectus.  Companys management, past history and present business of the firm should be highlighted in the prospectus.  Particulars in regard to company and other listed companies under the same management which made any capital issues during the last three years are to be stated in the prospectus.  Justification for premium, in the case of premium is to be stated.  Subscription list for public issues should be kept open for a minimum of three days and a maximum of 10 working days.  The collection centres should be at least 30 which include all centres with stock exchanges.  Collection agents are not to collect application money in cash.  The quantum of issue, whether through a right or public issue, shall not exceed the amount specified in the prospectus. No retention of over subscription is permissible under any circumstances.  A compliance report in the prescribed form should be submitted to SEBI within 45 days from the date of closure of issue.  Minimum number of shares per application has been fixed at 500 shares of face value of Rs. 100.  The allotments have to be made in multiples of tradable lot of 100 shares of Rs. 10 each.  Issues by way of bonus, rights etc. to be made in appropriate lots to minimize odd lots.  If minimum subscription of 90% has not been received, the entire amount is to be refunded to investors within 120 days.  The capital issue should be fully paid up within 120 days.  Underwriting has been made mandatory.  Limit of listing of companies issue in the stock exchange has been increased from Rs. 3 crores to Rs. 5 crores.  The gap between the closure dates of various issues viz, rights and public should not exceed 30 days.  Issues should make adequate disclosure regarding the terms and conditions of redemption, security conversion and other relevant features of the new instrument so that an investor can make reasonable determination of risks, returns, safety and liquidity of the instrument. The disclosure shall be vetted by SEBI in this regard.

SEBI Regulations Regarding Secondary Market Stock Exchange  Board of Directors of stock exchange has to be reconstituted so as to include nonmembers, public representatives, government representative to the extent of 50% of total number of members.  Capital adequacy norms have been laid down for members of various stock exchanges depending upon their turnover of trade and other factors.  Working hours for all stock exchanges have been fixed uniformly.  All the recognized stock exchanges will have to inform about the transaction within 24 hours.  Guidelines have been issued for introducing the system of market making in less liquid scrip's in a phased manner in all stock exchanges. Brokers  Registration of brokers and sub-brokers is made compulsory.  In order to ensure that brokers are professionally qualified and financially solvent, capital adequacy norms for registration of brokers have been evolved.  Compulsory audit of brokers book and filing of audit report with SEBI have been made mandatory.  To bring about greater transparency and accountability in the broker-client relationship, SEBI has made it mandatory for brokers to disclose transaction price and brokerage separately in the contract notes issued to client.  No broker is allowed to underwrite more than 5% of public issue. Foreign Institutional Investors (FII)  Foreign institutional investors have been allowed to invest in all securities traded in primary and secondary markets.  There would be no restriction on the volume of investment for the purpose of entry of FIIs.  The holding of single FII in a company will not exceed the ceiling of 5% of the equity capital of a company.  Disinvestment will be allowed only through stock exchanges in India.  FIIs have to pay a concessional tax rate of 10 per cent on large capital gain (more than one year) and 30 per cent on short term capital gains. A tax rate of 20% on dividend and interest is prescribed

2) Write a note on the functioning and settlement procedure of MCX and NCDEX The following is a synopsis of the procedure adopted by both the National Commodity and Derivatives Exchange (NCDEX) and the Multi-commodity Exchange (MCX) in arriving at the spot and settlement rate.

1) MCX
The exchange has appointed a 5-member panel comprising of bankers, MMTC, bullion importers and traders who will work out the daily reference spot price and announce the same at 4 pm in the evening. This reference price is ideally for Mumbai, but occasionally it would be such that prices of other important centres will also be indicated. The settlement price procedure is somewhat like this: The days settlement price is the days closing price and is worked out on the basis of the weighted average price of all trades done in the last 30 minutes of the trading session. The pay-in and payout will be decided on this price. However, if the number of trades is less than five, during the last 30 minutes, then the system calculates the weighted average of last five trades conducted during the day. If no trades are transacted, say in any illiquid contracts, then the previous days closing price will be the days settlement price.

2) NCDEX
The spot prices for all commodities are collected from members across the country through polling. This is being done by Crisil for non-agri products, and CMIE for agricultural products. For bullion, leading bullion banks in Mumbai are polled and arrived at a Mibor like figure for gold and silver prices. Also unlike in London, where LBMA decides the worlds indicative prices twice during the day, in India there is no such well accepted body whose price will be accepted as a reference price. The polled bid/ask prices are then bootstrapped and the median of the two bootstrapped prices will be taken as the clean price. This overcomes the problems attached to smaller sample size and sample variances. Since it is possible for members to act in concert and try to manipulate the polled prices, adequate measures will be taken to ensure that the difference between the polled prices from various centres do not vary significantly. Typically, the daily settlement price is the Value Weighted Average Price (VWAP) or the theoretical futures prices arrived at from the spot prices. VWAP would be a better option if the product has sufficient liquidity. In its absence, the impact loss would be high resulting in settlement price being biased on the higher (lower) side for rising (falling) market.

To arrive at the daily settlement price, there would be a closing session for 15 minutes after the normal market close time during which a single price call auction will be held. Orders shall be received and the price that clears maximum volume of trade would become the consensus price. Consensus price arrived at through this mechanism will be valid only if order for at least 15 contracts are executed by a minimum number of five clients. On failure to meet this requirement, all the orders collected in the closing session will be cancelled and alternative methods (given below) will be used to determine the settlement price. On the day of expiry of the contract, the final settlement price will be the spot price on the expiry day.