Watchdogs Of Financial Markets

Saagar Bhanot
MBA-1
CBS
 FINANCIAL MARKETS

A Financial Market is a mechanism that allows people to

trade (buy and sell) securities (stocks and bonds), commodities
(precious metals, agricultural goods) and other fungible items
at low transaction cost.

Classified into two parts: Money Market and Capital Market

 Money Market

Money market involves short-term borrowing and lending with

a year or shorter maturity time frame.

Instruments: T-Bills, Commercial Papers, Certificate of

Deposit

Regulatory Authority : Reserve Bank Of India

 Reserve Bank Of India
It was established in 1935 in accordance with the provisions of
the Reserve Bank of India Act, 1934

It formulates, implements and monitors the monitory policy

It performs merchant banking function for the central and the
state governments; also acts as their banker.

It sets the CRR and SLR limit and prescribes broad banking
parameters.
 CAPITAL MARKET
Capital Market is a market for trading securities (debt
or equity), through which business enterprises and
government can raise long term funds.

It can be divided into two parts:

Primary Market

Secondary Market
 PRIMARY MARKET
Primary Market deals with issuance of new securities.
Companies, governments or public sector institutions can
obtain funding through the sale of new stock or bond issue.

Instruments: IPO, Rights Issued etc.

Regulatory authority: SEBI

 Securities and Exchange Board of India
Norms for eligibility for entities accessing the primary market

 Net Tangible Assets of at least Rs. 3 crores for 3 full years.

 Distributable profits in at least three years.
 Net worth of at least Rs. 1 crore in three years.
 The issue size does not exceed 5 times the pre- issue net worth
 SECONDARY MARKET
Secondary Market refers to the market where securities are
traded after being initially offered to the public in the primary
market and listed on the stock exchange
It can be divided into three markets: Equity Market, Currency
Market, Capital Market

Major Trading Platforms:

BSE
NSE

Regulatory Authority: SEBI, FMC, RBI

 SEBI
REGULATIONS REGARDING LISTING OF SHARES

In respect of Large Cap Companies, the minimum post-issue

paid-up capital of the company should be Rs. 3 crores and
minimum issue size should be Rs. 10 crores.
In respect of Small Cap Companies, the minimum post-issue
paid-up capital of the company should be Rs. 3 crores and
minimum issue size should be Rs. 3 crores.
The maximum capitalization in case of large cap company is
Rs. 25 crores and in case of small cap companies it is Rs. 5
crores.
 Continued
REGULATIONS REGARDING INSIDER TRADING

Regulation 2(e) defines an ‘insider’ as a person connected or

deemed to be connected and who is reasonably expected to
have access to any unpublished price sensitive information in
respect of securities [i.e. shares, debentures etc.] of a company,
or who has received or has had access to such unpublished
information. In such case, he is liable to a penalty of Rs. 25
crore or 3 times the amount of profit made in such trading
whichever is higher.
……
REGULATIONS REGARDING DELISTING OF
SECURITIES

A recognized stock exchange may delist the securities of

any listed companies on such grounds as are prescribed
under the SEBI act. Before delisting any company the
stock exchange has to give the concerned company a
reasonable opportunity of being heard and has to record
the reason for delisting.
 FORWARD MARKETS COMMISSION
Forward Markets Commission (FMC) headquartered at Mumbai, is a
regulatory authority which is overseen by the Ministry of Consumer Affairs,
Food and Public Distribution, Govt. of India. It is a statutory body set up in
1953 under the Forward Contracts (Regulation) Act, 1952 

REGULATIONS:-
Limit on open positions of an individual operator to prevent overtrading.
Limit on price fluctuations to prevent abrupt upswing or downswing in prices.
Special margin deposits to be collected on outstanding purchases or sales to
curb excessive speculative activity through financial restraints.
Minimum/maximum prices to be prescribed to prevent future from falling
below the levels that are not remunerative and from rising above the levels not
warranted by genuine supply and demand factors.
Restriction on entry of FII’s in the commodity market.
THANK YOU!!!