Capital Markets of India - Stock Exchanges of India

"In terms of the legal structure, the stock exchanges which are recognised under the Securities Contracts (Regulation) Act in India, could be segregated into two broad groups - 20 stock exchanges which were set up as companies, either limited by guarantees or by shares, and the 3 stock exchanges which are functioning as associations of persons (AOP) viz. BSE, ASE and Indore Stock Exchange. The 20 stock exchanges which are companies are: the stock exchanges of Bangalore, Bhubaneswar, Calcutta, Cochin, Coimbatore, Delhi, Gauhati, Hyderabad, Interconnected SE, Jaipur, Ludhiana, Madras, Magadh, Managalore, NSE, Pune, OTCEI, Saurashtra-Kutch, Uttar Pradesh, and Vadodara. Of these, the stock exchanges of Ahmedabad, Bangalore, BSE, Calcutta, Delhi, Hyderabad, Madhya Pradesh, Madras and Gauhati were given permanent recognition by the Central Government at the time of setting up of these stock exchanges. Apart from NSE, all stock exchanges whether established as corporate bodies or Association of Persons (AOPs), are non-profit making organizations." (Report of Committee on Corporatisation and Demutualisation of Stock Exchanges)

Of the 23 stock exchanges inthe country, 20 are Regional stock exchanges andthe remaining three with AllIndiajurisdiction are NSE, BSE and OTCEI.Separateodules are covered with regards to the structure and functioning and systgems/procedurefollowed in NSE and BSE.

OTCEI was incorporated in October 1990 as a Section 25 company under the Companies Act 1956 and is recognized as a stock exchange under Section 4 of the Securities Contracts Regulation Act, 1956. The object of the OTCEI is "to provide an alternate market for the securities of smaller companies, public-sector companies, closely-held companies desirous of listing, etc. it has been promoted jointly by UTI, ICICI, IDBI, SBI Capital Markets Ltd, IFCI, GIC and Canbank Financial Services Ltd.

The Exchange was set up with a multi-tier securities exchange model to aid enterprising promoters in raising finance for new projects in a cost-effective manner and to provide investors with a transparent & efficient mode of trading. OTCEI is intended to provide easy marketability and better liquidity of securities to an investor. Besides, it also offers facilities of transfer of shares listed here.

Modelled along the lines of the NASDAQ market of USA, OTCEI introduced many novel concepts to the Indian capital markets such as screen-based nationwide trading, sponsorship of companies, market making and Scripless trading. As a measure of success of these efforts, the Exchange today has 115 listings and has assisted in providing capital for enterprises that have gone on to build successful brands for themselves like VIP Advanta, Sonora Tiles & Brilliant mineral water, etc.

With the automation of all the stock exchanges and the expansion of trading terminals of BSE and NSE across the country, investors have an easy access to the securities market. The nationwide reach of two large stock exchanges has affected the market structure in two ways. First, the business of other stock exchanges has declined significantly, as investors have preferred to trade in BSE and NSE, which offer deeper markets. Second, with the declining of trading volumes in other stock exchanges, the issuers feel that hardly any purpose is served by remaining listed in the regional stock exchanges. The concept of regional stock exchange, which was introduced in the days of manual trading and open outcry system to encourage mobilization of resources and development of equity cult across the country, has thus lost its relevance in the days of automated trading. It is therefore widely felt that the concept of regional stock exchange needs to be abolished. similar recommendation has been made by the Committee on Delisting of Shares and the committee on demutualisation of stock exchanges set up by SEBI.

Inter-connected Stock Exchange of India Limited (ICSE) has been promoted by 14 Regional Stock Exchanges to provide cost-effective trading linkage/connectivity to all the members of the Participating Exchanges, with the objective of widening the market for the securities listed on these Exchanges. nter-Connectivity of Stock Exchanges is a mechanism to enable a Trader (member brokers of any Participating Exchange) or a Dealer (Trading member directly enrolled by ISE) to deal with another Trader or Dealer through his own Local Trader Work Station located in his office. ISE is a national-level stock exchange and provides trading, clearing, settlement, risk management and surveillance support to its Traders and Dealers. ISE aims to address the needs of small companies and retail investors with the guiding principle of optimising the existing infrastructure and harnessing the potential of regional markets, so as to transform these into a liquid and vibrant market through the use of state-of-the-art technology and networking. I

The mission of ICSE is to endeavour to consolidate the small, fragmented and less liquid markets into a national-level, liquid market by using state-of-the-art infrastructure and support systems. Its Objectives is to create a single integrated national level solution with access to multiple markets for providing high cost-effective service to millions of investors across the country. Create a liquid and vibrant national level market for all listed companies in general and small capital companies in particular. Optimally utilise the existing infrastructure and other resources of Participating Stock Exchanges, which are under-utilised now. Provide a level playing field to small traders and dealers by offering an opportunity to participate in a national market having investment-oriented business. Reduce transaction cost. Provide clearing and settlement facilities to the traders and dealers across the Country at their doorstep in a decentralised mode. Spread demat trading across the country.

The Participating Exchanges of ISE have in all about 4500 stockbrokers, out of which more than 200 have been currently registered as Traders on ISE. In order to leverage its infrastructure and to expand its nationwide reach, ISE has also appointed around 450 Dealers across 70 cities other than the Participating Exchange centres. These Dealers are administratively supported through the regional offices of ISE at Delhi (north), Kolkata (east), Coimbatore (south) and Nagpur (central), besides Mumbai (west).

ISE has also floated a wholly-owned subsidiary, ISE Securities & Services Limited (ISS), which has taken up corporate membership of the National Stock Exchange of India Ltd. (NSE) in both the Capital Market and Futures & Options segments and The Stock Exchange, Mumbai in the Equities segment, so that the Traders and Dealers of ISE can access other markets in addition to the ISE market and their local market. ISE thus provides the investors in smaller cities a one-stop solution for cost-effective and efficient trading and settlement in securities.