BSE Limited.

Indian Securities Market

Past, Present & Future
May 29, 2012

Outline
Section

Contents

Page

On the Origin of Indian Securities Market

Market Development Phase

Present

Regulatory Evolution

11

Future

14

On the Origin of the Indian Securities

Market

Pre-Independence

Corporate stocks and shares in Bank and Cotton presses started in Bombay, trading carried out under
Banyan Tree 1830s
Stock Trading in Calcutta practiced under Neem Tree 1830s
Share Mania in India due to advent of Civil War 1860-61
Native Share and Stock Brokers Association of India formed July 9, 1875
Membership through Card System
Admission Fee (Price of Card) in 1900s Rs. 51; Annual Subscription Fee Rs. 5
Committee of Management, Arbitration Committee, Defaulters Committee, Corner Committee
English translation of Rules available to public for Re. 1
Tentative Scheduled Hours of Operation 2 hours a day on 144 days and 3 hours a day on 66
days
Short Selling allowed vis--vis Cash Market in Calcutta and Madras Stock Exchange
Admission for Quotations
Clearing House Bank of India
Formation of The Calcutta Stock Exchange Association 1908
Incorporation of Bombay Stock Exchange Limited (not BSE Ltd.) 1918
Madras Stock Exchange 1920
Madras Stock Exchange reconstituted 1938

Post-Independence
Bombay, Calcutta, Madras, Ahmedabad, Delhi, Hyderabad and Indore Stock
Exchanges were recognised under the Securities Contracts (Regulations) Act,
1956, with Bangalore Stock Exchange getting its approval in 1963
The number of stock exchanges remained 8 till 1980, many stock exchanges set
up in the 80s
SENSEX first compiled on January 2, 1986 (Base Year: 1978-79 = 100)
Full Market Capitalisation methodology
Shifted to Free Float methodology on September 1, 2003
Launch of S&P CNX Nifty April, 1996 (Base: November 3, 1995 = 100)
Shifted to Free Float methodology on June 26, 2009
Shift from floor-based to screen-based trading 1992 in OTCEI, 1994 in NSE and
1995 in BSE
NSDL, the first Depository established in 1996, followed by CDSL in 1999
Shift from Weekly Settlement to Rolling Settlement
IPF introduced in 1987 in BSE, in 1995 in NSE
SGF / TGF introduced in 1996 in NSE, 1997 in BSE
5

1992 - A Mixed Bag

Cons &
Conmen

A New
Beginning

Market Development Phase: 1999 2003

Introduction of New Products

Interest Rate
Swaps (IRS) /
Forward Rate
Agreements (FRA)
June 1, 1999

Equity Derivatives
June 9, 2000

Index Options
June, 2001

Options on
Individual
Securities
July, 2001
Futures on
Individual
Securities

Retail Debt Market

Exchange Traded
Funds
January 2002

January, 2003
Interest Rate
Futures
June, 2003

November, 2001

VaR Model for Margin Calculation - July, 2001

Present

Highlights

2008

2009

2010

Launch of Securities Lending & Borrowing Scheme

Recognition to MCX-SX Approval for Currency Futures only
Launch of Currency Futures
Algo Trading allowed by SEBI

Re-Launch of Interest Rate Futures

Launch of Mutual Fund trading platform

Recognition to United Stock Exchange (USE) Approval for Currency Futures & Options only
Launch of Currency Options
Mobile Based Trading
Introduction of Smart Order Routing (SOR)
Introduction of Volatility Index
Introduction of SIP

10

Regulatory Evolution

11

Acts, Rules and Regulations

Bombay Securities Contracts Control Act 1925

The Capital Issues (Control) Act 1947
Repealed on May 29, 1992
Securities Contract (Regulation) Bill 1954
Securities Contract (Regulations) Act 1956
Bombay Securities Contracts Control Act, 1925 repealed
Securities Contract (Regulations) Rule 1957
SEBI Act May 1, 1992
Corporatisation & Demutualization Scheme 2005
Manner of Increasing and Maintaining Public Shareholding (MIMPS) in
recognised stock exchanges, Regulations 2006

12

SEBI Board Press Release: Regulatory Implications

Final Rules expected in 2-3 months

MIIs must form independent Board Committees for regulatory oversight

Main exchanges already have an independent surveillance committee which can be

repurposed

Regulatory Functions of all MIIs must report to independent committees of their Boards

CRC to be formed by SEBI

Handle conflicts of interest
Regular interaction with Independent Committees of MIIs

SEBI proposing future creation of industry-wide SRO along the lines of FINRA in the US

13

The Future

14

Future Initiatives

Interoperability of Clearing Corporations

Complete Physical Segregation of Client Securities
Prevent misutilisation of Client securities
Securities of one client not used to offset default of another
Seamless Portability of Client from one member to in case of default of
member or otherwise

15

Thank You

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