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Indian Securities Market

Indian Securities Market. Past, Present & Future. May 29, 2012. Outline. Present. 1. On the Origin of Indian Securities Market. 3. 2. 7. Market Development Phase. 3. 14. 4. Regulatory Evolution. 11. 5. Future. 9. 2. 1. On the Origin of the Indian Securities Market.

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Indian Securities Market

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  1. Indian Securities Market Past, Present & Future May 29, 2012

  2. Outline Present 1 On the Origin of Indian Securities Market 3 2 7 Market Development Phase 3 14 4 Regulatory Evolution 11 5 Future 9 2

  3. 1 On the Origin of the Indian Securities Market

  4. 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, Defaulter’s 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-à-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 4

  5. 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

  6. 1992 - A Mixed Bag

  7. 2 Market Development Phase: 1999 – 2003

  8. Introduction of New Products VaR Model for Margin Calculation - July, 2001

  9. 3 Present

  10. Highlights 10

  11. 4 Regulatory Evolution

  12. 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

  13. 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

  14. 5 The Future

  15. 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

  16. Thank You 16

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