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Role And Functions Of Capital Market, Securities And Exchange Board Of India And Forex Market – Banking Study Materials

The government of india enacted the SEBI Act. 1992, on april 1992 to provide for the establishment of a board, called the securities and Exchange board of India Commonaly Known as SEBI, to protect the interests of investors in securities and to promote the development of and to regulate, the securities market for matters connected therewith or incidental thereto (prier to the formation of SEBI).

IBPS/SBI RRB Banking Jobs Study Materials- 

Capital Market-

Capital market is a market for long term debt and equity shares. In this market, capital funds comprising both equity and debt are issued and readed. this also includes private placement sources of debt and equity as well as organised markets like stock exchanges. capital market can be further divided into the two types of markets:

Primary Market-

In the primary market, securities or shares are offered to the public for subscription, for thye purpose of raising capital or fund. the issue of securities, shares or bonds in the primary market is subject to the fulfilment of a number of pri-issue guidelines by Exchange board of india (SEBI) and compliance to various provisions of the Company Act. The primary market is classified into ‘Public Issue’ market and ‘Private Placement’ market. there are a number of intermediaries in the primary market such as merchant banker, issue manager, lead arranger, etc.

Secondary Market-

Secondary market refers to a market where securities are traded after being initially offered to the public in thye primary market or listed on the stock exchange. secondary market compries equity markets and debt markets.secondary market is the trading avenue in which already existing securities are traded amongst investors. secondary market could be either an auction or a dealer market while stock exchange is the part of an auction market, over the counter market is a part of the dealer market.

Stock Exchanges in india-

There are 22 recognised stock exchanges in india. in terms of legal structure, the stock exchanges in india could be segregated into two broad groups:

(1) Nineteen Stock Exchange.

(2) Three stock Exchange.

Nineteen Stock Exchange :

ninteen stock exchanges are set up as companies, either limited by guarantees or by shares. The ninteen stock exchanges which have been functioning as companies includes:

The Stock Exchange Of Banglore, Bhubaneswar, calcutta, Cochin, Coimbatore, Delhi, Guwahati, Hyderabad, Interconnected SE, Jaipur, Ludhina, Madras, Magadh, Pune, Saurashtra-Kutch, Utter-Predesh And Vadodara.

National Stock Exchange Of India (NSE).

Over The Counter Exchange Of India (OTCEI).

Three stock Exchange:

3 Stock Exchange are Association of persons (AOPs) i.e.

Bombay Stock Exchange (BSE).

Ahmedabad Stock Exchange (ASE).

Madhya Pradesh Stock Exchange (MPSE).

The NSE was started in 1992 by banks and finential institutions including Indestrial FinenCial Corporation of India (IFCI), IL & FS, Industrial Credit And Investment Corporation of india (ICICI), Punjab National Bank (PNB) and general Insurance Corporation. Foreign institutional investors in india. there is however, a limit of 5 percent, beyond which on single investor either directly or indirectly, can hold shares in an Indian stock exchange. NSE, already has an enabling provision allowing a foreign Institutional Investment (FII) up to 26 percent and a Foreign Direct Investment (FDI) limit of 23 percent of its paid-up capital.

Stock Brokers-

A broker is a member of of recognised stock exchange, who is permitted to do trading on the screen based trading system of different stock exchanges. he is enrolled as a member with the concerened exchange and is registred with SEBI.

A Sub-Broker is affilated to a member of a recognised stock exchange and is a person who is registred with Exchange Board of India (SEBI).

Bond:

A bond is a negotiable certificate evidencing indebtedness. it is normally unsecured. a bond security is generally issued by a company, municipality or a government agency. a bond is issuer promises to repay the loan amount on a specified matuarity date.

The Various types of bond are as follows:

(1) Coupon Bonds.

(2) Zero Coupan Bonds.

(3) Convertiable Bonds.

Coupon Bonds:

these are normal bonds on which the issuer pays the investor interest at the predetermined rate at agreed intervals, normally twice a year. the maturity of the bond is known by the period for which it is issued.

Zero Coupon Bonds:

A bond issued at a discount and repaid at a face value is called zero coupon bond. No periodic interest is paid in this case the difference between the issue price redemption price represents the return to the holder.

Convertible Bonds:

A bond giving the investor the option to convert the bond into equity at a fixed conversion price is referred to as a Convertible Bonds.

Types Of capital Issue In the Primary Market:

In the primary market. issue can be classified as given:

(1) Public Issues.

(2) Rights Issues.

(3) Preferential Issues.

Public Issues:

Public Issues can be further classified into two types such as:

1. Initial Public Offerings (IPO)

2. Further Public Offerings. (FPOs)

Initial Public Offerings:

An IPO is the offering that is made when an unlisted company makes either a fress issue of securities or an offer for sale of its existing securities or both for the first time to the public.

Further Public Offerings:

An FPO is made when an already listed company makes either a fress issue of securities to the public or an offer for sale to public, through an offer documents.

Rights Issues:

Right Issue (RI) is when a listed company propses to issue fress securities to its existing share-holders as on recorded date. the rights are normally offered in a perticular ratio to the number of securities held prior to the issue.

Forex Market-

The forex market is viewed as an Over-the-Counter (OTC), or “Interbank”, market because of the way that the whole market is run electronically, inside a system of banks, constantly over a 24-hour period. This implies that the spot forex market sector is spread everywhere throughout the globe with no focal area. They can happen anyplace. The forex OTC business sector is by a wide margin the greatest and most mainstream financial market on the planet, exchanged all around by an extensive number of people and associations. In the OTC market sector, members figure out who they need to exchange with relying upon trading conditions, engaging quality of costs, and notoriety of the exchanging partner.

The foreign exchange market, which is normally known as “forex” or “FX,” is the biggest financial market on the world. Contrasted with the measly $22.4 billion a day volume of the New York Stock Exchange, the foreign exchange market looks totally ginormous with its $5 TRILLION a day exchange volume.the biggest stock exchange on the world, the New York Stock Exchange (NYSE), trades a volume of about $22.4 billion every day.

Actually, as indicated by the International Monetary Fund (IMF), the U.s. dollar contains about 62% of the world’s official foreign exchange reserves! Since very nearly every speculator, business, and central bank
own it, they give careful consideration to the U.s. dollar.

There are additionally other critical reasons why the U.s. dollar assumes a focal part in the forex market:

1.the United States economy is the LARGEST economy on the world.

2.the U.S. dollar is the reserve currency of the world.

3.the United States has the biggest and most liquid financial markets on the world.

4.the United States has a super stable political framework.

5.the United States is the world’s sole military superpower.

6.the U.S. dollar is the medium of trade for some cross-fringe transactions. Case in point, oil is evaluated

7.in U.S. dollars. So if Mexico needs to purchase oil from Saudi Arabia, it must be purchased with U.s. dollar.

8.if Mexico doesn’t have any dollars, it need to sell its pesos first and purchase U.s. dollars.

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