STOCK EXCHANGE

An extended arm of the Regulator

 Stock Exchange

A stock exchange, securities exchange

or (in Europe) bourse is a corporation
or mutual organization which
provides "trading" facilities for stock
brokers and traders, to trade stocks
and other securities.
Functionality
 A Market Place
Providing an organized platform, putting
together, those wanting to sell shares in
touch with those seeking to buy.
Effectively, the Stock Exchange is a
market for second hand shares! To
facilitate this process the market has
two main 'players' - stock brokers and
market makers.
 A Monitoring Entity

Monitors and regulates the acts of

companies listed with it and members
empanelled with it and other market
intermediaries in pursuit of promoting
investors’ awareness and protection of
their interest.
 SEBI

Stock Exchange

Listing Agreement
Bye-Laws, AOA, MOA

Listed Companies
Members

Investors
The First Stock Exchange

 In 11th century France the

courtiers de change were
concerned with managing and
regulating the debts of agricultural
communities on behalf of the
banks. As these men also traded in
debts, they could be called the first
brokers.
Cont…..
The First Stock Exchange
 The Dutch later started joint stock
companies, which let shareholders
invest in business ventures and get a
share of their profits—or losses. In
1602, the Dutch East India Company
issued the first shares on the
Amsterdam Stock Exchange. It was
the first company to issue stocks and
bonds. In 1688, the trading of stocks
began on a stock exchange in
London.
History of Stock Exchanges
Around the Globe
 In 1860, the exchange flourished
with 60 brokers. In fact the 'Share
Mania' in India began when the
American Civil War broke and the
cotton supply from the US to
Europe stopped. Further the
brokers increased to 250.

Cont…..
History of Stock Exchanges
Around the Globe
 At the end of the war in 1874, the
market found a place in a street
(now called Dalal Street). In 1887,
"Native Share and Stock Brokers'
Association" was established. In
1895, the exchange acquired
premises in the street which was
inaugurated.
Role of Stock Exchanges

 Facilitating Capital Augmentation

 Converting saving into surplus
 Increasing opportunity cost of money
 Facilitating Financial and Strategic
growth to companies
 Balancing Wealth Segmentation

Cont…..
Role of Stock Exchanges
 Introducing a Free and Fair
Corporate Governance Mechanism
 Creating investment opportunities
for small investors
 Funding to Government Projects
 Mirror of the Economic Growth
Ownership
originated as mutual organizations,
owned by its members. recent
trend for stock exchanges to
demutualize, where the members
sell their shares in an initial public
offering. In this way the mutual
organization becomes a
corporation, with shares owned by
non-members.
Other types of exchanges
In the 19th century, exchanges
were opened to trade forward
contracts on commodities.
Exchange traded forward contracts
are called futures contracts.
CORPORATISATION AND DEMUTUALISATION
OF INDIAN EXCHANGES

Structure of Indian Stock Exchanges

 BSE the oldest exchange in Asia
was established in 1875 as
Voluntary ‘not for profit’ un-
incorporated association of persons.
 Ahemdabad and Indore stock
exchanges were other exchanges
having similar structure.
Cont…..
 CORPORATISATION AND
DEMUTUALISATION OF INDIAN EXCHANGES
 The membership of these exchanges entitled
the person to be the part owner of the
exchange as well as a broker on the
exchange.

 All other regional stock exchanges were

formed as companies under section 12 of the
Companies Act, 1956 as company limited by
shares/guarantee, but had a “not for profit”
motive.
Cont…..
 CORPORATISATION AND
DEMUTUALISATION OF INDIAN EXCHANGES
 These exchanges worked like a co-
operative society where the share of the
company entitled the owner to be the
shareholder of the exchange and also
gave him a right to act as broker on the
exchange.

 OTCEI is a company formed under

section 25 of the Companies Act, 1956.
 CORPORATISATION AND
DEMUTUALISATION OF INDIAN EXCHANGES

 NSE is a company formed under

section 12 of the Companies Act,
1956 with a profit motive.

 Thus all exchanges in India except

NSE were not-for-profit entities.
Stock Indices
Stock indices represents the performance of
stock market and by proxy, reflects investors
sentiment on the state of the economy.
BSE INDICES:
BSE Sensex , BSE 100 Index, BSE 200 Index,
BSE 500 Index, BSE MIDCAP Index, BSE
SMLCAP Index, BSE TECk Index, BSE PSU
Index, BSE AUTO Index, BSE BANKEX, BSE CG
Index, BSE CD Index, BSE FMCG Index, BSE
HC Index, BSE IT Index, BSE Metal Index, BSE
Oil & Gas Index.
NSE INDICES:
Nifty, Jr. Nifty, CNX IT, Bank Nifty
Mutual structure of Indian
Stock Exchanges

 Indian stock exchanges (except

NSE and OTCEI) therefore followed
a mutual structure where the
ownership and management rights
of the exchange are bundled with
trading rights as a broker and all
three are represented by ownership
of card/share of the exchange.
Demutualisation

 In order to overcome the perceived

disadvantages of a mutual structure, the
global trend amongst the exchanges has
been to “demutualise” themselves.

 Demutualisation means “segregation of

membership right in a recognized stock
exchange into a distinct ownership right
through the ownership of shares and
distinct trading and / or clearing right of
that recognized stock exchange”.
Corporatisation

 In order to demutualise, a corporate

structure of the exchange is a necessity.
 Exchanges like BSE that were not even a
corporate entity needed to be converted
from “association of persons” to a
Company limited by shares.
 This process of conversion is termed as
“corporatisation”.
 Indian Effort to make
exchanges more vibrant and
transparent
 KANIA COMMITTEE REPORT
 Management-three stakeholders namely
shareholders, brokers and investing public to
be equally represented.
 Disbursal of majority shareholding post
demutualisation to non-brokers.
 Concept of converting part of reserves of
the exchange into deposit from brokers and
issuance of shares.
 Consolidation of exchanges recommended.
Amendments made recently

 In Income Tax Act, 1962 relating to

incidence of capital gains tax.
 In Indian Stamp Act, 1899 relating to
exemption of stamp duty on transfer of
immovable property.
 In SCRA, 1956 to give powers to SEBI to
approve any scheme of Corporatisation /
Demutualisation.
 In SEBI (Stock Broker and Sub-broker
Regulations, 1992) for regulating the
activities of Stock Broker and Sub-broker in a
transparent manner.
 INTRODUCTION
 OUR  BOARD
MISSION
 OUR VISION  STAKES IN
DSE
 MILESTONES  TRADING
PROSPECTS
 OUR MISSION

 To provide world class trading

facilities for investors and
companies.
 To introduce innovative
techniques and instruments to
maximize shareholders’ value.
 To uphold highest standards of
corporate governance and
transparency.
 OUR VISION

CAPITAL’S EXCHANGE
FOR
CAPITAL MARKET
 FAST COMPANY …FAST GROWTH…

MILESTONE

S
JUN’47 : INCORPORATION OF DSE

JUN’56 : RECORDING OF TRANSACTIONS IN CHOPRI

DEC’57 : SCRA ENACTED AND MADE APPLICABLE

MAR’82: PERMANENT

RECOGNITION U/S 4 OF SCRA, 1957

CONT……
 MILESTONES

FEB’87 : COMPUTERISED RECORDING STARTED

FEB’88 : LAUNCHED DSE INDEX

MAR’89: CONSTITUTION OF CUSTOMER PROTECTION

FUND

APR’92: DSE INDEX CROSSES 1000 POINTS

CONT….
 MILESTONES

JUN’96 : FORMATION OF SUBSIDIARY - DFSL

MAR’97: ALL TIME HIGH NO. OF COMPANIES LISTED

AT 3895

AUG’97: LAUNCHED ONLINE TRADING PLATFORM

CONT………
MILESTONES
DEC’97
INAUGURATATION
OF
DSE HOUSE

CONT……………
MILESTONES SEP’2000

ALL TIME HIGH

TRADING VOLUME AT Rs. 9648.69 Cr.

CONT…………………………
 MILESTONES
JUN’2007

DSE COMPLETED GLORIOUS YEARS…

CONT…….
 MILESTONES
AUG’2007

DEMUTUALISATION PROCESS

COMPLETED

SUCCESSFULLY
DEMUTUALIZATION
OF DSE
 DSE HAD TO ENSURE

Induction Of Non-trading
Shareholding Of Not Less Than
51% Of Post Demutualization
Equity Shareholding
AND

To restrict the trading

members’ shareholding up to
49% of post demutualization
equity shareholding of the
exchange
 PROCESS OF
DEMUTUALIZATION
 Constitution of Demutualization
Committee of the Exchange
 Appointment of Valuers
 Offer for Sale under the Scheme
 Invitation for Expression of Interest
 Approvals from various regulatory
authorities
 COMPOSITION OF BOARD

BOARD

EXECUTIVE DIRECTOR
NON EXECUTIVE DIRECTORS
Mr. H. S. Sidhu
 NON EXECUTIVE
DIRECTORS

SHAREHOLDER PUBLIC INTEREST TRADING MEMBER

DIRECTORS DIRECTORS DIRECTORS
STAKEHOLDERS OF DSE
 19.84%
Foreign
Holding

31.25%
Domestic Holding

48.91%
Trading Member Holding
TRADING PROSPECTS

 CAPITAL’S EXCHANGE FOR

CAPITAL MARKET

 COMPOSITE TRADING PLATFORM

PROVIDER EXCHANGE
SMALL & MEDIUM
ENTERPRIZES ORIENTED
EXCHANGE

SINGLE WINDOW
CLEARANCE FACILITATOR
EXCHANGE
Time Has Come
To
Go
Global
Success Journey
Continues…

Towards New Era Of

Growth…...
The Future Ahead…………...
SENSEX

DSE Index

NIFTY

2008-09