Bye-Laws of Indian Stock Exchange:
The Central government of India will recognize stock exchange only when there are proper rules and regulations for the stock exchange. For a proper function of stock exchange it has its own bye-laws and the framing of bye-law requires permission of the government. The bye-law will contain details regarding the following:
- Hours of trading
- Clearing house or settlement
- Blank transfers and conveyance margin requirements, etc.
- Brokerage commission, fees,
- In case of disputes, arbitration arrangement
- Limiting the number of securities for transactions; and
- Procedure for settlement of transactions.
The stock exchange must also state that it is willing to act in accordance with the government regulations that may be imposed from time to time. It should also mention that the stock exchange will also act in public interest and also according to the interest of trade and commerce in the country.
Terms used in the Stock Exchange in India
A broker is a commission agent who buys and sells securities on behalf of clients. He is given commission as a percentage of the value of securities transacted.
He is a person who buys and sells securities in his own name. Any profits made in the transaction are solely enjoyed by the jobber. The difference in the selling price and buying price is his profit.
They are appointed by the members to assist them but they cannot do business on their own.
Remisiers or Sub-brokers:
They are appointed by the brokers for securing business. Each broker is allowed to have five sub-brokers.
A bull is a speculator who buys the share at a lower price with a view to sell on a future day at a higher price. He earns profit when the share price goes up to a higher level. The market is said to be bullish when the prices of shares are going up.
A bear is quite opposite to bull where he sells the share at a higher price and purchases at a lower price. A market is said to be ‘bearish when there is more sale of shares due to which the price falls. A bull purchases a share with an expectation that the price will go up so that he can sell. A bear sells the share so that he can avoid any further fall in the price and prevent any loss.
When a person purchases shares of a new company with the view to sell them at a higher price.
When a bear is unable to buy a share at a lower price or is unable to fulfill his commitment due to changing price in the market.
It is deposit of cash or securities left with the broker by the client.
When a bear is unable to meet selling obligations on the date of delivery.
When transactions are taking place outside the market and outside the trading hours, it is Kerb trading. It is illegal. They will not be reported in the stock market. It is a parallel market.
It is difference between the price prevailing in two different markets. It may be buying in one market at a lower price and selling the same at a higher price in a different market.
Different Classification of shares traded in stock exchanges
- Alpha shares: Shares which are frequently traded in the market.
- Technical shares: Shares belonging to technological companies.
- Growth oriented shares: Shares which determine the economic growth of the country.
- Cyclical shares: Shares whose prices fluctuate due to trade cycle fluctuations.
- Blue chip shares: Companies with long standing and very good performance and whose shares are in demand.
- Rolling settlement: Trade outstanding with stock market at the end of the day has to be settled at the end of the settlement period.
- Permitted Securities: Permitted securities are securities or stocks listed in one stock exchange and permitted to be traded in other stock exchanges also. For example, Reliance Industry shares listed in Bombay Securities Exchange may be permitted to trade in Madras Stock Exchange. All the permitted securities are allowed to be traded after 1.30 p.m while the Listed securities are traded from 12 noon to 2 p.m.
- T+5 rolling settlement: Transaction entered into on a particular day has to be settled on the fifth working day, when pay in or pay out happens. U.S.A & U.K follow T+3 system, while Germany follows T+2 settlement cycle.
- Liquidity shares: Shares which can be quickly traded are called liquid shares.
As per the guidelines of SEBI, all transactions in cash, future and option segments should be settled on the last Thursday of every month.
Classification of shares in Bombay Stock Exchange:
- A Group – This group consists of 150 scrips in which carry forward facility is permitted. That is, transactions in these categories can be shifted from one settlement to another settlement day.
- B1 Scrip – This group consists of cash group shares where carry-forward facility is not allowed.
- B2 Scrip: Low market capital. Thinly traded stocks. Carry-forward facility is not allowed.
- Circuit Filter – Maximum permissible fluctuation limit – 8% in A group and B1 stock. 25% in certain B2 stock. If the fluctuations occur beyond this limit, circuit breaker will operate.