10. HISTORY OF STOCK BROKERAGE FIRMS 23 EVOLUTION OF INDIAN BROKERAGE 11. 26 MARKET STOCK BROKING: AN INTRODUCTION & 12. 28 SEBI GUIDELINES 13. TOP 10 BROKERAGE FIRMS IN INDIA 37 SECURITIES AND EXCHANGE BOARD OF 41 14. INDIA (STOCK BROKERS AND SUB- BROKERS), REGULTIONS 1992 15. TECHNOLOGY USED FOR TRADING 42

WORKING OF BROKING FIRMS IN INDIA Page 1 THINGS TO DO BEFORE OPENING 16. 44 ONLINE TRADING A/C ONLINE STOCK TRADING COMPANIES IN 47 19. INDIA PROTECTION OF INVESTORS RIGHTS & 20. 58 INTEREST 21. Conclusion 63

22. Bibliography 64

1. NEED FOR STUDY

 To provide the reader a better understanding of the concept of working of broking firms in india.

WORKING OF BROKING FIRMS IN INDIA Page 2  To not just learn about working of broking firms but understand how to apply it to trading.

 To make investors aware of the need for proper guidance of brokers before investing in the markets.

 To provide for a reliable way of understanding how to invest and were to invest.

 To explore the pros and cons of the concept of working of broking firms in india.

 To understand the new concept of online trading.

2. OBJECTIVE OF STUDY

WORKING OF BROKING FIRMS IN INDIA Page 3  To explore a different alternative for the analysis of working of broking firms in india.

 To provide for the understanding of the concept of working of broking firms in a simple and easy manner.

 To make the understanding of the concept of working of broking firms easier for investors.

 To analyze the concept of working of broking firms with its benefits and limitations.

 To familiarize the reader with all the concepts associated with working of broking firms.

 To provide for the understanding of various tools and instruments related to

working of broking firms.

 To gain knowledge about the various types of techniques used in working of broking firms.

3. SCOPE OF STUDY

WORKING OF BROKING FIRMS IN INDIA Page 4  It deals with the various tools and instruments used for working of broking firms in india.

 It informs the reader as to why and where this concept should be used.

 It explores the various types of techniques used in working of broking firms.

 It informs the reader about the benefits and limitations of the concept.

 It explores the various schemes of broking firms.

 It provides regualation of sebi on broking firms.

WORKING OF BROKING FIRMS IN INDIA Page 5 4. LIMITATIONS OF STUDY

 This study on working may not be applicable for investors with a long-term perspective.

 Due to certain limits, this project only covers a few important concepts of working of broking firms in india.

 Working of broking firms cannot be applied on a stand-alone basis.

 It is not interested in the value of the company, but only in more and more of investors approach them.

 Working of broking firms only tells you when to invest and not where to invest.

WORKING OF BROKING FIRMS IN INDIA Page 6 5. EXECUTIVE SUMMARY

Working of broking firms refers to the study of stock market, stock exchanges due to know the evolution of broking firms in india. It involves the use of various brokers, sub brokers and the broking firms. It is the tool of financial analysis, which not only studies but also reflecting the investor & brokers relationship.

The focus of broking firms is mainly on the they work for investors. It appeals mainly to all kind of investors. It is the oldest approach dating back to the late 19th century.

Instead of approaching door-to-door to the customers it uses online and telephone programs to trade in the stock market. Theis project is based more theoretical manner instead of practical . It is different forms of trading in the stock market.

It explains us that how the brokers as well as the broking firms earns more and more profits by having number of investors under them. It also gives various services to the customers/investors. It is very useful and can provide for extraordinarily high returns if investments are done through the brokers. Now-a-days people are very much close to the best broking firms in india.

WORKING OF BROKING FIRMS IN INDIA Page 7 6. Stock Market of India

Introduction Stock markets refer to a market place where investors can buy and sell stocks. The price at which each buying and selling transaction takes place is determined by the market forces (i.e. demand and supply for a particular stock).

Let us take an example for a better understanding of how market forces determine stock prices. ABC Co. Ltd. enjoys high investor confidence and there is an anticipation of an upward movement in its stock price. More and more people would want to buy this stock (i.e. high demand) and very few people will want to sell this stock at current market price (i.e. less supply). Therefore, buyers will have to bid a higher price for this stock to match the ask price from the seller which will increase the stock price of ABC Co. Ltd. On the contrary, if there are more sellers than buyers (i.e. high supply and low demand) for the stock of ABC Co. Ltd. in the market, its price will fall down.

In earlier times, buyers and sellers used to assemble at stock exchanges to make a transaction but now with the dawn of IT, most of the operations are done electronically and the stock markets have become almost PAPERLESS. Now investors don’t have to gather at the Exchanges, and can trade freely from their home or office over the phone or through Internet.

WORKING OF BROKING FIRMS IN INDIA Page 8 7. History of the Indian Stock Market - The Origin

One of the oldest stock markets in Asia, the Indian Stock Markets have a 200 years old history.

18th East India Company was the dominant institution and by end of the century, business in its loan securities gained full momentum. Century 1830's Business on corporate stocks and shares in Bank and Cotton presses started in Bombay. Trading list by the end of 1839 got broader. 1840's Recognition from banks and merchants to about half a dozen brokers. 1850's Rapid development of commercial enterprise saw brokerage business attracting more people into the business. 1860's The number of brokers increased to 60. 1860-61 The American Civil War broke out which caused a stoppage of cotton supply from United States of America; marking the beginning of the "Share Mania" in India. 1862-63 The number of brokers increased to about 200 to 250. 1865 A disastrous slump began at the end of the American Civil War (as an example, Bank of Bombay Share which had touched Rs. 2850 could only be sold at Rs. 87).

Pre-Independence Scenario – Establishment of Different Stock Exchanges

1874 With the rapidly developing share trading business, brokers used to gather at a street (now well known as "Dalal Street") for the purpose of transacting business. 1875 "The Native Share and Stock Brokers' Association" (also known as "The Bombay Stock Exchange") was established in Bombay.

WORKING OF BROKING FIRMS IN INDIA Page 9 1880's Development of cotton mills industry and set up of many others. 1894 Establishment of "The Ahmedabad Share and Stock Brokers' Association". 1880 - Sharp increase in share prices of jute industries in 1870's was 90's followed by a boom in tea stocks and coal. 1908 "The Calcutta Stock Exchange Association" was formed. 1920 Madras witnessed boom and business at "The Madras Stock Exchange" was transacted with 100 brokers. 1923 When recession followed, number of brokers came down to 3 and the Exchange was closed down. 1934 Establishment of the Lahore Stock Exchange. 1936 Merger of the Lahore Stock Exchange with the Punjab Stock Exchange. 1937 Re-organisation and set up of the Madras Stock Exchange Limited (Pvt.) Limited led by improvement in stock market activities in South India with establishment of new textile mills and plantation companies. 1940 Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited was established. 1944 Establishment of "The Hyderabad Stock Exchange Limited". 1947 "Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks and Shares Exchange Limited" were established.

Post Independence Scenario The depression witnessed after the Independence led to the closure of lot of exchanges in the country. Lahore E-stock Exchange was closed down after the partition of India, and later on merged with the Delhi Stock Exchange. Bangalore Stock Exchange Limited was registered in 1957 and got recognition only by 1963. Most of the other Exchanges were in a miserable state till 1957 when they applied for recognition under Securities Contracts (Regulations) Act, 1956. The Exchanges that were recognized under the Act were: WORKING OF BROKING FIRMS IN INDIA Page 10 1. Bombay 2. Calcutta 3. Madras 4. Ahmedabad 5. Delhi 6. Hyderabad 7. Bangalore 8. Indore

Many more stock exchanges were established during 1980's, namely:

1. Cochin Stock Exchange (1980) 2. Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982) 3. Pune Stock Exchange Limited (1982) 4. Ludhiana Stock Exchange Association Limited (1983)

5. Guwahati Stock Exchange Limited (1984) 6. Kanara Stock Exchange Limited (at Mangalore, 1985) 7. Magadh Stock Exchange Association (at Patna, 1986) 8. Jaipur Stock Exchange Limited (1989) 9. Bhubaneswar Stock Exchange Association Limited (1989) 10. Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989) 11. Vadodara Stock Exchange Limited (at Baroda, 1990) 12. Coimbatore Stock Exchange 13. Meerut Stock Exchange

At present, there are twenty two recognized stock exchanges in India which does not include the Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL).

Government policies during 1980's also played a vital role in the development of the Indian Stock Markets. There was a sharp increase in number of Exchanges, listed companies as well as their capital, which is visible from the following table:

WORKING OF BROKING FIRMS IN INDIA Page 11 Sr. As on 31st December 1946 196 197 197 198 1985 1991 1995 No. 1 1 5 0 1 No.of Stock Exchanges 7 7 8 8 9 14 20 22

2 No.of Listed Cos. 112 120 159 155 226 4344 6229 8593 5 3 9 2 5 3 No.of Stock Issues of 150 211 283 323 369 6174 8967 11784 Listed Cos. 6 1 8 0 7 4 Capital of Listed Cos. 270 753 181 261 397 9723 32041 59583 (Cr. Rs.) 2 4 3 5 Market value of Capital 971 129 267 327 675 2530 11027 47812 of Listed Cos. (Cr. Rs.) 2 5 3 0 2 9 1

6 Capital per Listed Cos. 24 63 113 168 175 224 514 693 (4/2)(Lakh Rs.)

7 Market Value of Capital 86 107 167 211 298 582 1770 5564 per Listed Cos. (Lakh Rs.) (5/2)

8 Appreciated value of 358 170 148 126 170 260 344 803 Capital per Listed Cos. (Lakh Rs.)

WORKING OF BROKING FIRMS IN INDIA Page 12 8. HISTORY OF STOCK EXCHANGES

WORKING OF BROKING FIRMS IN INDIA Page 13 History of the Bombay Stock Exchange :

The Bombay Stock Exchange is known as the oldest exchange in Asia. It traces its history to the 1850s, when stockbrokers would gather under banyan trees in front of Mumbai's Town Hall. The location of these meetings changed many times, as the number of brokers constantly increased. The group eventually moved to Dalal Street in 1874 and in 1875 became an official organization known as 'The Native Share & Stock Brokers Association'. In 1956, the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act.

The Bombay Stock Exchange developed the BSE Sensex in 1986, giving the BSE a means to measure overall performance of the exchange. In 2000 the BSE used this index to open its derivatives market, trading Sensex futures contracts. The development of Sensex options along with equity derivatives followed in 2001 and 2002, expanding the BSE's trading platform.

Historically an open-cry floor trading exchange, the Bombay Stock Exchange switched to an electronic trading system in 1995. It took the exchange only fifty days to make this transition.

Bombay Stock Exchange Profile : Address Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai 400001 Telephone 91-22-22721233/4

Trading Hours Monday - Friday, 9:55 am - 3:30 pm IST Holidays Bakri-Id, Republic Day, Good Friday, Ambedkar

WORKING OF BROKING FIRMS IN INDIA Page 14 Jayanti, Independence Day, Ganesh Chaturthi, Dasera, Diwali (Laxmi Poojan), Diwali (Bhaubeej), Ramzan Id, Guru Nanak Jayanti. Securities Stocks, bonds, derivatives. Trading System Electronic. Key Staff Chairman - Jagdish Capoor. CEO - Rajnikant Patel

About the Bombay Stock Exchange :

As the first stock exchange in India, the Bombay Stock Exchange is considered to have played a very important role in the development of the country's capital markets. The Bombay Stock Exchange is the largest of 22 exchanges in India, with over 6,000 listed companies. It is also the fifth largest exchange in the world, with market capitalization of $466 billion. The Bombay Stock Exchange uses the BSE Sensex, an index of 30 large, developed BSE stocks. This index gives a measure of the overall performance of the Bombay Stock Exchange, and is closely followed around the world. Based on the Sensex, the BSE equity market has grown significantly since 1990.

In addition to individual stocks, the BSE also has a market in derivatives, which was the first to be established in India. Listed derivatives on the exchange include stock futures and options, index futures and options, and weekly options. The Bombay Stock Exchange is also actively involved with the development of the retail debt market. The debt market in India is considered extremely important, as the country continues to develop and depends on this type of investment for growth. Until recently, the debt market in India was limited to a wholesale market, with banks and financial institutions as the only participants. The Bombay Stock Exchange believes that a retail market will bring great opportunities to individual investors through better diversification.

WORKING OF BROKING FIRMS IN INDIA Page 15 Bombay Stock Exchange is the oldest stock exchange in Asia What is now popularly known as the BSE was established as "The Native Share & Stock Brokers' Association" in 1875. Over the past 135 years, BSE has facilitated the growth of the Indian corporate sector by providing it with an efficient capital raising platform.

Today, BSE is the world's number 1 exchange in the world in terms of the number of listed companies (over 4900). It is the world's 5th most active in terms of number of transactions handled through its electronic trading system. And it is in the top ten of global exchanges in terms of the market capitalization of its listed companies (as of December 31, 2009). The companies listed on BSE command a total market capitalization of USD Trillion 1.28 as of Feb, 2010.

BSE is the first exchange in India and the second in the world to obtain an ISO 9001:2000 certification. It is also the first Exchange in the country and second in the world to receive Information Security Management System Standard BS 7799-2- 2002 certification for its BSE On-Line trading System (BOLT).

Presently, we are ISO 27001:2005 certified, which is a ISO version of BS 7799 for Information Security.

The BSE Index, SENSEX, is India's first and most popular Stock Market benchmark index. Exchange traded funds on SENSEX, are listed on BSE and in Hong Kong. Futures and options on the index are also traded at BSE.

BSE continues to innovate:

 Became the first national exchange to launch its website in Gujarati and Hindi and now Marathi.

 Purchased of Marketplace Technologies in 2009 to enhance the in-house technology development capabilities of the BSE and allow faster time-to- market for new products.

 Launched a reporting platform for corporate bonds christened the ICDM or Indian Corporate Debt Market.

WORKING OF BROKING FIRMS IN INDIA Page 16  Acquired a 15% stake in United Stock Exchange (USE) to drive the development and growth of the currency and interest rate derivatives markets.

 Launched 'BSE STAR MF' Mutual fund trading platform, which enables exchange members to use its existing infrastructure for transaction in MF schemes.

 BSE now offers AMFI Certification for Mutual Fund Advisors through BSE Training Institute (BTI).

 Co-location facilities for Algorithmic trading.

 BSE also successfully launched the BSE IPO index and PSU website.

 BSE revamped its website with wide range of new features like 'Live streaming quotes for SENSEX companies', 'Advanced Stock Reach', 'SENSEX View', 'Market Galaxy', and 'Members'.

 Launched 'BSE SENSEX MOBILE STREAMER'.

With its tradition of serving the community, BSE has been undertaking Corporate Social Responsibility (CSR) initiatives with a focus on Education, Health and Environment. BSE has been awarded by the World Council of Corporate Governance the Golden Peacock Global CSR award for its initiatives in Corporate Social Responsibility (CSR).

Other Awards:

 The Annual Reports and Accounts of BSE for the year ended March 31, 2006 and March 31, 2007 have been awarded the ICAI awards for excellence in financial reporting.

The Human Resource Management at BSE has won the Asia - Pacific HRM awards for its efforts in employer branding through talent management at work, health management at work and excellence in HR through technology.

WORKING OF BROKING FIRMS IN INDIA Page 17 History of National Stock Exchange

In order to lift the Indian stock market trading system on par with the international standards and on the basis of the recommendations of high powered Pherwani Committee, the National Stock Exchange was incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of India, all Insurance Corporations.

NSE provides exposure to investors in two types of markets, namely:

WORKING OF BROKING FIRMS IN INDIA Page 18 1. Wholesale Debt Market. 2. Capital Market

Wholesale Debt Market - Similar to money market operations, debt market operations involve institutional investors and corporate bodies entering into transactions of high value in financial instruments like treasury bills, government securities, commercial papers etc.

Trading at NSE

1. Fully automated screen-based trading mechanism.

2. Strictly follows the principle of an order-driven market.

3. Trading members are linked through a communication network.

4. This network allows them to execute trade from their offices.

5. The prices at which the buyer and seller are willing to transact will appear on the screen.

6. When the prices match the transaction will be completed.

7. A confirmation slip will be printed at the office of the trading member.

Advantages of trading at NSE WORKING OF BROKING FIRMS IN INDIA Page 19 1. Integrated network for trading in stock market of India.

2. Fully automated screen based system that provides higher degree of transparency.

3. Investors can transact from any part of the country at uniform prices.

4. Greater functional efficiency supported by totally computerized network.

9. HISTORY OF STOCK BROKING

The history of stock broking in the United States parallels the growth of the nation's economy since colonial times. The industry has tended to be cyclical in nature, and has survived several downturns, including a major economic depression in the 1930s. Government regulations have been introduced at times in an effort to place controls on what were viewed as harmful trading practices.

Origin

The first stock brokerage house in the United States started in Philadelphia in 1800. While the practice had been around since the early 1700s, the Philadelphia Stock Exchange was the first organized body that brought brokers together and served to codify the rules and regulations under which business had been conducted. The profession continued to expand with the growth of corporations and the dawning of the Industrial Revolution.

Crash

The first major negative event in the industry occurred when the stock market crashed in 1929, which was followed by the Great Depression. The result of the

WORKING OF BROKING FIRMS IN INDIA Page 20 crash was due to investors who had borrowed heavily to purchase stocks and began to realize that they were hugely overvalued and attempted to sell them off.

Securities Act

In an effort to prevent the recurrence of the 1929 crash, the Securities Act was implemented in 1933 as a way to regulate the industry. Eventually, the stock market began to rebound, and continued a general pattern of steady growth over the next several decades.

Change

In the early 1970s the growth of technology led to reforms in the United States which helped to reopen the markets to more liberalized trading. In the late 1980s, another crash in the market occurred due to the dropping of prices of stock index futures. Much like the Great Depression, this led to a mass-selling of these securities, causing the stock market to plummet.

Rebound

WORKING OF BROKING FIRMS IN INDIA Page 21 Stock broking again saw a boom as tighter regulations were put in place following the 1987 crash. The markets reached new heights in the late 1990s. The terrorist attacks of September 11, 2001 slowed the pattern of growth.

Another Crash

In 2008, the largest single-day drop since 1987 occurred, as the market lost $1.2 trillion of its value on September 29. The drop occurred as a result of several factors, including the collapse of the mortgage industry and a worsening credit crisis. The market has rebounded only slightly as of mid-2009

10. HISTORY OF STOCK BROKERAGE FIRMS.

Stock brokerage firms have been an established feature in the financial industry for nearly one thousand years. Dealing in debt securities, brokers employ a variety of systems to aid investors with the purchase and sales of stocks and bonds in a variety of markets. The firms have changed over the years, growing to massive organizations that can affect the entire financial sector positively or negatively with their performance. Changing with the times, the early twenty-first century saw a rise of online trading that enabled the average investor to take part in the stock market for the first time.

History

During the 11th century, the French began regulating and trading agricultural debts on behalf of the banking community, creating the first brokerage system. In the

WORKING OF BROKING FIRMS IN INDIA Page 22 1300s, houses began to be set up in major cities like Flanders and Amsterdam in which commodity traders would hold meetings. Soon, Venetian brokers began to trade in government securities, expanding the importance of the firm.

Significance

The earliest brokerage firms were established in London coffee houses, enabling individuals to purchase stocks from a variety of organizations. They formally founded the London Stock Exchange in 1801 and created regulations and memberships. The system was copied by brokerage firms across the world, most notably on Chestnut Street in Philadelphia. Soon, the US exchange was moved to New York City and various firms like Morgan Stanley and Merrill Lynch were created to assist in the brokering of stocks and securities. The firms limited themselves to researching and trading stocks for investment groups and individuals.

Consideration

During the 1900s, stock brokerage firms began to move in a direction of market makers. They adopted the policy of quoting both the buying and selling price of a security. This allows a firm to make a profit from establishing the immediate sale and purchase price to an investor. The conflict with brokerage firms setting prices creates the concern that insider trading can result from the sharing of information. Regulators have enforced a system called Chinese Walls to prevent communication between different departments within the brokerage company. This has resulted in increased profits and greater interconnection within the financial industry.

Effects

WORKING OF BROKING FIRMS IN INDIA Page 23 The creation of high valued brokerage firms like Goldman Sachs and Bear Stearns created a system of consolidation. Working with hundreds of billions of dollars, the larger firms began to merge and take over smaller firms in the last half of the 20th century. Firms like Smith Barney were acquired by Citigroup and other investment banks, creating massive financial institutions that valued, held, sold, insured and invested in securities. This conglomeration of the financial sector created an environment of volatility that caused a chain reaction when other firms like Bear Stearns and Lehman Brothers filed for bankruptcy. Trillions of dollars of assets were tied together in different companies and resulted in a large economic collapse in late 2008.

Features

A large share of the brokerage firms have moved to an online format. Smaller brokers such as E Trade, TD Ameritrade and Charles Schwab have taken control of most individual investors account. The added convenience and personal attention paid to the small investor has resulted in a large influx of activity.

In addition, the fact that the online resources offer up- to- the- minute pricing and immediate trades makes their format appealing to the modern user. Discounted commissions have lessened the price of trades, giving access to a wider swath of people and adding liquidity.

WORKING OF BROKING FIRMS IN INDIA Page 24 OVERVIEW

The Indian retail brokerage industry consists of companies that primarily act as agents for the buying and selling of securities (e.g. stocks, shares, and similar financial instruments) on a commission or transaction fee basis. It has two main interdependent segments: Primary market and the Secondary market.

11. Evolution of the Indian Brokerage Market

The Indian broking industry is one of the oldest trading industries that had been around even before the establishment of the BSE in 1875. Despite passing through a

WORKING OF BROKING FIRMS IN INDIA Page 25 number of changes in the post liberalization period, the industry has found its way towards sustainable growth. The evolution of the brokerage market is explained in three phases: pre1990, 1990-2000, post 2000.

Early Years

The equity brokerage industry in India is one of the oldest in the Asia region. India had an active stock market for about 150 years that played a significant role in developing risk markets as also promoting enterprise and supporting the growth of industry.

The roots of a stock market in India began in the 1860s during the American Civil War that led to a sudden surge in the demand for cotton from India resulting in setting up of a number of joint stock companies that issued securities to raise finance. This trend was akin to the rapid growth of securities markets in Europe and the North America.

Bombay, at that time, was a major financial centre having housed 31 banks, 20 insurance companies and 62 joint stock companies.

In the aftermath of the crash, banks, on whose building steps share brokers used to gather to seek stock tips and share news, disallowed them to gather there, thus forcing them to find a place of their own, which later turned into the Dalal Street. A group of about 300 brokers formed the stock exchange in Jul 1875, which led to the formation of a trust in 1887 known as the “Native Share and Stock Brokers Association”.

A unique feature of the stock market development in India was that that it was entirely driven by local enterprise, unlike the banks which during the pre- independence period were owned and run by the British. Following the establishment of the first stock exchange in Mumbai, other stock exchanges came into being in major cities in India, namely Ahmedabad (1894), Calcutta (1908), Madras (1937), Uttar Pradesh and Nagpur (1940) and Hyderabad (1944). The stock

WORKING OF BROKING FIRMS IN INDIA Page 26 markets gained from surge and boom in several industries such as jute (1870s), tea (1880s and 1890s), coal (1904 and 1908) etc, at different points of time.

12. STOC K BROKING : A N INTRODUCTIO N AN D SEB I GUIDELINES Lesso n Objectives To understand the stock broking activity, SEBI regulations related to stock broking activity. Introduction In India, stock exchanges were almost self regulatory till 1988, supervised by Ministry of Finance under the Securities Contracts Regulation Act (SCRA). However, the stock exchanges were not discharging their self-regulatory role as well as a result of which malpractices crept into trading, adversely affecting investor’s interests. SEBI has been setup to ensure that the stock exchanges discharge their self-regulatory role properly. Ever since SEBI began to monitor brokers, stock broking is emerging as a professional advisory service, in tune with the requirements of a mature, sophisticated, screen based, automated stock

WORKING OF BROKING FIRMS IN INDIA Page 27 exchanges in the country in sharp contrast to traditional, closed character as inherited family business. So we will discuss the Indian Stock Broking system here. The stock broking activity consists of various intermediaries. Let us discuss them one by one. Stoc k Brokers Stockbroker is a member of a recognized stock exchange who buys, sells or deals in securities. To work as a stockbroker registration with SEBI is mandatory. SEBI is empowered to impose conditions while granting the certificate of registration.

Registratio n A broker seeking registration with SEBI has to apply through the stock exchange of which he is member. For registering SEBI checks - eligibility of the applicant to become the member of stock exchange, has the necessary infrastructure to effectively discharge his duties, past experience etc. Every registered stockbroker is required to pay annual fee @ Rs. 5,000 for turn over up to Rs. 1 crore and 0.01% of turnover exceeding Rs.1 crore. For calculating turnover underwriting and collection of deposits are not taken into account for the purpose of calculating the turnover. The authenticity of the annual turnover is to be certified by the stock exchange concerned. Capita l adequac y norm s fo r broker s An absolute minimum of Rs. 5 lakhs as a deposit with the exchange is to be maintained by the members of the BSE & CSE and Rs. 3.5 lakhs for DSE and ASE irrespective of volume of business. In case of other SE the minimum requirement is Rs. 2 lakhs. The security deposit kept by the members in the SE forms part of the base minimum capital; 25% of the base minimum capital is to be maintained in case with the exchange. Another 25% remains in the form of a long term fixed deposit

WORKING OF BROKING FIRMS IN INDIA Page 28 with a bank on which the SE is given free lien. The remaining requirement is being maintained in the form of securities with a 30% margin. The securities should be in the name of the member and are pledged in favor of SE.

Dut y t o th e Investo r The duties of a broker to the investor are:

1. He should be faithful to the clients in his dealings with them and execute orders as per the instructions.

2. He should issue to his clients a contract note without any delay for all transactions in the form specified by the SE.

3. To avoid breach of trust, he should not disclose or discuss with any other person details of investment and transaction of clients.

4. He should not mislead clients merely to generate business.

5. He should avoid dealing with a client who is a defaulter in his dealings with other brokers.

6. When dealing with a client, he is required to disclose whether he is acting as a principal or as an agent.

7. He should not give investment advice to any client unless sought by him.

8. A stockbroker should have adequately trained staff and arrangements to render fair, prompt and competent services to his clients.

9. He should extend full cooperation to other brokers in protecting the interest of his clients regarding their rights to dividends, bonus shares, rights issues and any other rights related to such securities.

Su b Brokers A sub-broker acts on behalf of a stockbroker as an agent or otherwise for assisting investors in buying, selling or dealing in securities through such brokers but he is not a member of a stock exchange. To act as a sub-broker, registration with SEBI is required. It grants a certificate of registration to a sub-broker subject to the conditions that (a) he has to pay the prescribed fee, (b) he takes adequate steps for

WORKING OF BROKING FIRMS IN INDIA Page 29 redresal of investor grievances within one month of the receipt of the complaint and keeps SEBI informed about the number, nature and other particulars of the complaints (c) he is authorized in writing by a broker for affiliation in buying, selling or dealing in securities. Registratio n o f Sub-broker s According to SEBI regulations currently in force sub-broker is required to submit along with the application (a) Recommendation from a stockbroker with whom he will be affiliated and (b) two references, including one from his banker. The individual applicant should not be less than 21 years of age, has not been convicted in any offence involving fraud or dishonesty and has passed the equivalent of at least HSC from a recognized institution. The annual fee payable by a sub-broker is Rs. 1000 for an initial period of five years. After the expiry of five years, an annual fee of Rs. 500 is payable as long as the certificate remains in force. Dut y t o th e investor s A sub-broker, in his dealings with the clients and the general investing public, should faithfully execute the orders for buying and selling of securities at the best available market price and promptly inform his clients about the execution of an order and make payment in respect of securities sold and arrange for prompt delivery of securities purchased. He should issue promptly to his clients (a) purchase or sale notes for all the transactions entered into by him with his clients, or through the principal broker (b) scrip-wise details. He should not furnish misleading information to his clients to generate business. He should not recommend his clients any scrip/security unless the client has asked for the advice.

Foreig n Brokers Foreign institutional investors (FIIs) now play a significant role in the stock markets. With a view to helping the FIIs to follow the procedures and encourage

WORKING OF BROKING FIRMS IN INDIA Page 30 them to invest in India, SEBI has issued a different set of guidelines Registratio n wit h SEB I It is mandatory for a foreign broker to get registered with SEBI in order to do business in India. While applying for registration, a foreign broker has to disclose to SEBI name(s) and registration number(s) of the stock exchanges where he is registered in the capacity of a broker dealer together with an undertaking that he would operate and assist only on behalf of the registered FIIs and would not deal in securities on his own account as principal in India. On advice from SEBI, the RBI would accord approval to him to open (a) a foreign currency denominated bank account and a rupee account with a designated bank branch and (b) multiple custodian accounts with the approved custodian of all registered FIIs whom he may be assisting or on whose behalf he would be placing orders with a member of Indian stock exchanges. Transaction in Accounts The foreign currency denominated accounts of registered foreign brokers would be credited with inward remittance brought in by him and inward remittance to make initial payment against the purchase contracts on behalf of registered FIIs. The rupee account will be credited with the commissions / brokerages earned by him in India. Initial payment on account of purchase contract on behalf of registered FIIs would be made through Rupee account. Reimbursement of this initial payment would be made by the designated bank/custodian of the registered FII.

The brokers are allowed to freely repatriate commission/ brokerage earned in India after transferring them to the foreign currency denominated account subject to payment of taxes on the basis of conversion of rupees to foreign currency at the prevailing market rates. WHAT IS STOCK BROKING

A stock broker is nothing but a registered and qualified working professional who buys stocks and derivatives for other people. The stock broker thus performs all the transactions for people on the stock exchange. The stock broker maintains WORKING OF BROKING FIRMS IN INDIA Page 31 information of the people for whom he is buying or selling stocks. This information includes name, address, PAN No. and other relevant information. No transaction can take place in the stock market without a stock broker. The stock broker cannot give inputs or advice to people buying or selling stocks unless he is registered with the Securities and exchange board of India as a portfolio manager. The stock broker takes a certain brokerage for the transactions he does for his clients on the stock exchange.

The brokers are expected to issue contract notes to the clients after a particular transaction has been done. They are also expected to issue periodic reports to their clients with respect to the transactions that have been done by them in that periodic interval. If you are looking to become a portfolio manager then there is a different policy and procedure that you need to follow for it. Stock brokers can be individual stock brokers or form a company or an organization there by making a brokerage. All brokerages have to pay a certain sales tax for the transactions that are done with the brokerage by other clients wither through selling or buying a certain stock. Thus any person who wants to buy or sell any stock with a particular stock exchange has to do that with a particular stock broker affiliated with that stock exchange.

HOW TO BECOME A STOCK BROKER

If you are interested in becoming a stock broker in India then you can go through the following guidelines that will tell you how to become a stock broker in the country and what are the minimum requirements required for the same. The minimum age of twenty one is required to be a stock broker or a partner or a director of a stock broking company. The stock brokers or directors must be graduates at least.

They should also possess work experience of minimum two years in a work environment dealing with securities either as a consultant, advisor or a portfolio manager or should have worked as a treasurer, broker or a sub broker or a broking

WORKING OF BROKING FIRMS IN INDIA Page 32 agent at a brokerage which is authorized as a brokerage in the country. If you want to get registered with the National stock exchange then a minimum equity capital of at least Rs. 30 lakhs or 0.3 million to get registers.

Also if you want to be registered as a broker then you should not have been involved in dishonesty or any fraud of any kind and should not have defaulted at any stock exchange as well as not have become bankrupt.

If you are interested in taking up any course related to stock broking or the capital markets then you can take courses with the following institutes.

• Institute of Chartered Financial Analysts of India, Mumbai • National Stock Exchange of India, Mumbai • Institute of Financial and Investment Planning, Mumbai • Institute of Chartered Financial Analysts of India, Hyderabad • Institute of Company Secretaries of India, New Delhi • Bombay Stock Exchange Training Institute, Mumbai • All India Centre for Capital Market Studies, Nasik

Who can be a stock broker?

Any one and every one who is interested in becoming a stock broker can be one provided he is a graduate and has atleast two years of experience in a relevant field of broking, consultancy or advising. In order to become a stock broker one has to get themselves registered with the particular stock exchange for which he wants to be the stock broker.

What are the responsibilities of a stock broker? WORKING OF BROKING FIRMS IN INDIA Page 33 The responsibilities of a stock broker are to facilitate the buying and selling of stocks or of shares of a particular company. Thus the stock broker has to be affiliated with the main stock exchanges in the country so that he can help his or her clients in performing the transaction with the stock exchange.

Who can not become a stock broker?

You may not be allowed to become a stock broker if you are not a graduate or do not have the relevant work experience details. You can also be refused to be given a stock broker license if you have earlier defaulted at any stock exchange or have been bankrupt before.

Which are the institutes that offer a stock broking related course?

There are several institutes that will offer stock broking related courses in India. Some of them are:-

• National Stock Exchange of India, Mumbai.

• Institute of Financial and Investment Planning, Mumbai.

• Institute of Chartered Financial Analysts of India, Hyderabad.

• Institute of Company Secretaries of India, New Delhi.

Brokerage firms are the business entities that deal with stock trading. India, with an increasing capital market and a growing number of investors, has a number of brokerage firms. In Indian retail brokerage industry, the brokerage firms primarily work as agents for buying and selling of securities like shares, stocks and other

WORKING OF BROKING FIRMS IN INDIA Page 34 financial instruments and earn commission for each of the transactions. There are plenty of brokerage firms in India. Let's have a look at the top 10 brokerage firms in India.

Before talking anything about top brokerage firms in India, let's have a glance at the Indian retail brokerage market, which is going through a wonderful phase with high growth rate. The total trading volume of the Indian brokerage companies stood at US$ 1239.1 billion in the year 2004, which increased to US$ 1492.1 billion in 2005. It is further expected to reach US$ 6535.7 billion by the year 2015.

13. TOP 10 BROKERAGE FIRMS IN INDIA

Among all the Indian brokerage companies, the top 10 Brokerage Firms in India can be listed as below:

Name Kotak Securities Limited Terminals 4320 Sub Brokers 910 No. of Employees 4008 No. of Branches 350 Name Karvy Stock Broking Limited Terminals 1700 Sub Brokers 19000 No. of Employees 3910

WORKING OF BROKING FIRMS IN INDIA Page 35 No. of Branches 581 Name Indiabulls Terminals 2876 Sub Brokers NA No. of Employees 5873 No. of Branches 522 Name IL&FS Investment Limited

Terminals 1644

Sub Brokers NA No. of Employees 1900 No. of Branches 294 Name Motilal Oswal Securities Terminals 7923 Sub Brokers 890 No. of Employees 2193 No. of Branches 63 Name Reliance Money Terminals 2428 Sub Brokers 1494 No. of Employees 2037 No. of Branches 142 Name India Infoline Terminals 173 Sub Brokers 173 No. of Employees NA No. of Branches 605 Name Angel Broking Limited Terminals 5715 Sub Brokers NA

WORKING OF BROKING FIRMS IN INDIA Page 36 No. of Employees 284 No. of Branches NA Name Anand Rathi Securities Limited Terminals 1527 Sub Brokers 320 No. of Employees 4566 No. of Branches 220 Name Geojit Terminals 627 Sub Brokers 247 No. of Employees 343 No. of Branches 314

BROKERAGE CHARGES

INTRADAY BROKERAGE CHARGES

WORKING OF BROKING FIRMS IN INDIA Page 37 Intraday Brokerage Charges

0.3 0.25 0.25

0.2 s e g r 0.15 a h 0.1 0.1 0.1 0.1 C 0.1 0.05 0.05 0.05

0 Indiabulls Kotak India-infoline ICICI direct Karvy Motilal Sharekhan Securities oswal Financial Brokerage Firms

Indiabulls Kotak Securities India-infoline ICICI direct Karvy Motilal oswal Sharekhan

DELIVERY BROKERAGE CHARGES

Delievery Brokerage Charges

0.8 0.75

0.7

0.6 0.5 0.5 0.5 0.5 0.5 0.5 0.45 s e g

r 0.4 a h

C 0.3

0.2

0.1

0 Indiabulls Kotak India- ICICI Direct Karvy Motilal oswal Sharekhan Securities infoline Financial Brokerage Firms

Indiabulls Kotak Securities India-infoline ICICI Direct Karvy Motilal oswal Sharekhan

14. Securities and Exchange Board of India (Stock-Brokers and Sub-Brokers) Regulations, 1992.

WORKING OF BROKING FIRMS IN INDIA Page 38 Date Details 06-Apr- SEBI (Stock Brokers and Sub-brokers) (Amendment) 2011 Regulations, 2011. 23-Oct- Securities and Exchange Board of India (Stock-Brokers and 1992 Sub-Brokers) [As Amended upto 19th November, 2009]. 13-Apr- Securities and Exchange Board of India (Stock Brokers and 2010 Sub- Brokers) (Amendment) Regulations, 2010. 19-Nov- Securities and Exchange Board of India (Stock Brokers and 2009 Sub-Brokers)(Amendment) Regulations, 2009. 11-Aug- Securities and Exchange Board of India (Stock Brokers and 2008 Sub-Brokers) (Amendment) Regulations, 2008. 25-Sep- SEBI (Stock Brokers and Sub-brokers) (Third Amendment) 2006 Regulations, 2006. 07-Sep- SEBI (Stock Brokers and Sub-brokers) (Second Amendment) 2006 Regulations, 2006. 01-Aug- Securities and Exchange Board Of India (Stock Brokers and 2006 Sub Brokers) (Amendment) Regulations, 2006. 23-Sep- Securities and Exchange Board of India (Stock-Brokers and 2003 Sub-Brokers)(Amendment) Regulations, 200.

15. TECHNOLOGY USED FOR TRADING

WORKING OF BROKING FIRMS IN INDIA Page 39 Stock Exchange

Stocks (Shares, equity) are traded in stock exchange. India has two big stock exchanges (Bombay Stock Exchange - BSE and National Stock Exchange - NSE) and few small exchanges like Jaipur Stock Exchange etc. Investor can trade stocks in any of the stock exchange in India.

Stock Broker

Investor requires a Stock Broker to buy and sell shares in stock exchanges (BSE, NSE etc.). Stock Broker are registered member of stock exchange. A stock broker can register to one or more stock exchanges. Only stock brokers can directly buy and sell shares in Stock Market. An investor must contact a stock broker to trade stocks. Broker charge commissions (brokerages) for their service. Brokerage is usually a percent of total amount of trade and varies from broker to broker.

Stock Trading

Traditionally stock trading is done through stock brokers, personally or through telephones. As number of people trading in stock market increase enormously in last few years, some issues like location constrains, busy phone lines, miss communication etc start growing in stock broker offices. Information technology (Stock Market Software) helps stock brokers in solving these problems with Online Stock Trading.

Online Stock Market Trading is an internet based stock trading facility. Investor can trade shares through a website without any manual intervention from Stock Broker.

In this case these Online Stock Trading companies are stock broker for the investor. They are registered with one or more Stock Exchanges. Mostly Online Trading Websites in India trades in BSE and NSE. WORKING OF BROKING FIRMS IN INDIA Page 40 There are two different type of trading environments available for online equity trading. 16. Things to do before opening Online Share Trading Account

1. Ask for Demo: Contact the broker who provide online trading service and ask him to give you a demo of product. 2. Check if the broker trades in multiple stock exchanges. Usually most of the Online Trading Websites trade in NSE and BSE in India. 3. Check the integration of Brokerage account, Demat account and Bank account. 4. Compare brokerages with other peer companies.

Standard document require to open an Online Trading Account

. Proof of residence (Address proof) . Driving license . Voter's ID . Passport . Photo credit card . Photo ration card . Utility Bill (Telephone, Electricity etc) . Bank Statement . Proof of identity

WORKING OF BROKING FIRMS IN INDIA Page 41 17. Online Stock Trading Companies in India

Some of the popular stock brokers in India Financial Market are:

a. ICICI Direct b. Sharekhan c. IndiaBulls Securities d. 5Paisa e. Motilal Ostwal Securities f. HDFC Securities g. Reliance Money h. Religare i. IDBI Paisa Builder

ICICI Direct Stock Trading

Trading Platforms

ICICI Direct offers 2 trading platforms to its customers:

1. Share Trading Account (Website Based Trading)

WORKING OF BROKING FIRMS IN INDIA Page 42 Website based online Share Trading Account by ICICI Direct is primarily for buying and selling of stocks at BSE and NSE. The ICICI Direct website allows Cash Trading, Margin Trading, Margin PLUS Trading, Spot Trading, Buy Today Sell Tomorrow, IPO Investment, Mutual Fund Investment etc. ICICIDirect.com website is the primary Investment vehicle of ICICI Limited.

2. Trade Racer (Trading Terminal)

Trade Racer is a power packed Trading platform which provides an investor with Live streaming quotes & Research Calls, integrated fund transfer system along with multiple watch list facility. Investor can also do technical analysis with the help advance charting tools. Single Order entry page for Equities and Derivatives, Technical Analysis, Integrated Fund Transfer System, Customized Interface, Intra- day and EOD Charts and Shortcut keys for faster access to markets are some of the key features of Trade Racer Terminal.

Trading Brokerage and fees

• Trading Account Opening Charges (One Time): Rs. 975 • Trading Annual maintenance charges (AMC): Rs 0 • Demat Account Opening Charges (One Time): Rs. 100 (for Agreement Stamp Paper) • Demat Account Annual Maintenance Charges (AMC): Rs. 500 (Rs 0/- for 1st year with 3 in 1 Account)

ICICI offers 2 types of brokerage plans to its customer:

I-Secure Plan (Flat brokerage Plan)

This plan offers Flat Brokerage (in %) irrespective of turnover value. This plan is suitable for traders / investors looking at secured and fixed brokerage.

WORKING OF BROKING FIRMS IN INDIA Page 43 I-Saver Plan (Variable brokerage plan)

This plan offers brokerage based on the trading volume i.e. high brokerage for low volume and low brokerage for high volume trades. This plan is suitable for traders/investors who trade in high volumes and can benefit from low brokerage.

ICICI Brokerage in Margin & Margin Plus

I - Saver Plan / I - Secure Plan Total Eligible Turnover per Brokerage (%) month Above Rs. 20 Crores 0.030 Rs.10 Crores to 20 Crores 0.035 Rs.5 Crores to 10 Crores 0.040 Less than Rs.5 Crores 0.050

How to open account with ICICI Direct?

For Online Stock Trading with ICICI, investor needs to open 3 accounts. ICICI Bank Account, ICICI Direct Trading Account and ICICI Demat Account (DP Account). Note: If you already have a bank account or demat account with ICICI, you could link it with new ICICI Direct trading account.

Opening trading account with ICICI is easy. You could use one of the following options to open account with ICICI Direct.

• Visit ICICIDirect.com and fill the "Open an Account" form. • Call ICICI and tell them that you are interested in opening an account with them.

WORKING OF BROKING FIRMS IN INDIA Page 44 In both the cases ICICI representative contact you in a day or two and tell you about the procedure to open the account. They usually send somebody to your home to collect documents, signature and for demo if required.

Advantages of ICICI Direct

1. 3-in-1 account integrates your banking, broking and demat accounts. All accounts are from ICICI and very well integrated. This feature makes ICICI the most interesting player in online trading facility. There is absolutely no manual interfere require. This is truly online trading environment. 2. Unlike most of the online trading companies in India which require transferring money to the broker's pool or towards deposits, at ICICIDirect you can manage your own demat and bank accounts through ICICIdirect.com. Money from selling stock is available in ICICI bank account as soon as the ICICIDirect receive it. 3. Investment online in IPOs, Mutual Funds, GOI Bonds, and Postal Savings Schemes all from one website. General Insurance is also available from ICICI Lombard. 4. Trading is available in both BSE and NSE. 5. Low bandwidth website is available for slow internet connection or for trading from mobile devices. 6. Through myGTC feature, you can place buy and sell limit orders in equity scrips of your choice specifying the period for which you want the order instruction to be valid.

Disadvantages of ICICI Direct

1. ICICI Direct brokerage is high and not negotiable.

WORKING OF BROKING FIRMS IN INDIA Page 45 2. With ICICIdirect.com e-Invest account (3-IN-1 concept), the Demat Account has to be opened with ICICI Bank Ltd as the Depository Participant (DP) and the Bank Account has to be opened with ICICI Bank Ltd. as the Banker.

WORKING OF BROKING FIRMS IN INDIA Page 46 MOTILAL OSWAL TRADING

WORKING OF BROKING FIRMS IN INDIA Page 47 Incorporated in 1987, Motilal Oswal Securities Ltd is a well diversified financial services firm offering a range of financial products and services such as Wealth Management, Broking & Distribution, Commodity Broking, Portfolio Management Services, Institutional Equities, Private Equity, Investment Banking Services and Principal Strategies.

Company has a diversified client base that includes retail customers (including High Net worth Individuals), mutual funds, foreign institutional investors, financial institutions and corporate clients. They are headquartered in Mumbai.

Type of Accounts:

1. Value Pac:

Value Pac is the upfront subscription scheme, which gives significant discounts in brokerage rates with defined time period to use it. With the wide range of Value Pacs, based on the Volume of Trade and the Validity period one can enjoy the benefits of placing trades at reduced charges.

2. Margin account:

Margin account is suitable for those who don't want to commit to a Value Pac (upfront subscription). In Margin Account investor have to give defined upfront margin amount at the time of opening the account.

Trading Platforms

Web Platform:

Web Platform is suited for first time investors who want a clean and simple interface. Investor can trade from any internet connected PC and place the order with instant confirmation.

Desktop Platform: WORKING OF BROKING FIRMS IN INDIA Page 48 Desktop Platform is suitable for those investors and traders who want live market watch and faster execution. ANGEL STOCK TRADING

Angel Group has emerged as one of the top 3 retail broking houses in India. Incorporated in 1987, it has memberships on BSE, NSE and the two leading commodity exchanges in India i.e. NCDEX & MCX. Angel is also registered as a depository participant with CDSL.

Angel's retail stock broking house offering a gamut of retail centric services.

• E-broking • Investment Advisory • Portfolio Management Services • Wealth Management Services • Commodities Trading

Trade In: BSE and NSE

Trading Platforms:

Angel Trade provides 4 trading platforms, 2 are browser based & 2 are application based.

1. Angel investor

It is a browser based trading platform. The rates are updated on clicking the refresh button. This facility ensures it is not blocked by firewall. Thus it is useful for investor who needs to access information from places where firewall blocks such data.

WORKING OF BROKING FIRMS IN INDIA Page 49 2. Angel Trade

It is a browser based trading platform. The rates are updated automatically. This platform is useful for investors & traders to access market from different terminals.

3. Angel Anywhere

It is an application based trading platform where rates are updated automatically. This is ideal for investors & traders who are inclined towards trading based on charts & technical tools.

Brokerage and fees:

1. Account opening fees:

Stock trading account - Rs 575/-

Demat account - Rs 200/-

Commodity trading - Rs 625/-

2. Brokerage: For trade up to the range of Rs 1 - 3 Crore: Cash Based: 0.50% Day trading: 0.05% Derivatives: 0.05% For trade more than Rs 3 Crore, brokerage is about 0.03%.

WORKING OF BROKING FIRMS IN INDIA Page 50 How to open account with Angel Trade?

There are 3 simple ways to open an account with Angel Trade.

• Visit one of their nearest branch and you will find representative to help you out. • Visit www.angeltrade.com and fill the contact us form. One of the representative contacts you shortly.

In both cases Angel Trade representative contact you in 24 to 48 hours and tell you about the procedure to open an account.

Advantages of Angel Trade

1. User friendly browser-based / application based online trading platform. 2. The auto square off time is at 3:15 and an investor can buy up to 4 times the value in his account. 3. Trading account can be linked with popular private banks like HDFC Bank, ICICI Bank, UTI bank etc. 4. Trading is available in both BSE and NSE.

Disadvantages of Angel Trade

Online money transfer from trading account to bank account is not available :

Trading account can be linked with popular private banks like HDFC Bank, ICICI Bank, UTI bank etc. A trader can transfer money from his bank to the trading account online. But the reverse transactions are not yet available online.

WORKING OF BROKING FIRMS IN INDIA Page 51 Protection of Investors Rights and interest

The Securities and Exchange Board of India (SEBI) has been mandated to protect the interests of investors in securities and to promote the development of and to regulate the securities market so as to establish a dynamic and efficient Securities Market contributing to Indian Economy.

SEBI strongly believes that investors are the backbone of the securities market. They not only determine the level of activity in the securities market but also the level of activity in the economy.

However, many investors may not possess adequate expertise/knowledge to take informed investment decisions. Some of them may not be aware of the complete risk-return profile of the different investment options. Some investors may not be fully aware of the precautions they should take while dealing with market intermediaries and dealing in different securities. They may not be familiar with the market mechanism and the practices as well as their rights and obligations.

1. What are the rights of shareholder?

 To receive the share certificates, on allotment or transfer (if opted for transaction in physical mode) as the case may be, in due time.

 To receive copies of the Annual Report containing the BalanceSheet, the Profit & Loss account and the Auditor’s Report.

 To participate and vote in general meetings either personally or through proxy.  To receive corporate benefits like rights, bonus, etc. once approved.

 To apply to Company Law Board (CLB) to call or direct the Annual General Meeting.

 To inspect the minute books of the general meetings and to receive copies thereof.

 To proceed against the company by way of civil or criminal proceedings.

 To apply for the winding up of the company.

 To receive the residual proceeds.

 To receive offer to subscribe to rights shares in case of further issues of shares.

WORKING OF BROKING FIRMS IN INDIA Page 52  To receive offer under takeover or buyback offer under SEBI Regulations.

 Besides the above rights, which you enjoy as an individual shareholder, you also enjoy the following rights as a group:

 To requisite an Extra-ordinary General meeting.

 To apply to CLB to investigate the affairs of the company.

 To apply to CLB for relief in cases of oppression and/or mismanagement.

2. What are my rights as a debenture holder?

 To receive interest/redemption in due time.  To receive a copy of the trust deed on request.

 To apply before the CLB in case of default in redemption of debentures on the date of maturity.

 To apply for winding up of the company if the company fails to pay its debts.

 To approach the Debenture Trustee with your grievance.

 You may note that the above mentioned rights may not necessarily be absolute. For example, the right to transfer securities (in physical mode) is subject to the company’s right to refuse transfer as per statutory provisions.

3. What are my responsibiliti e s a s a security holder?

 While you may be happy to note that you have so many rights as a stakeholder in the company that should not lead you to complacency; because you have also certain responsibilities to discharge.

 To be specific.  To remain informed.  To be vigilant.  To participate and vote in general meetings. WORKING OF BROKING FIRMS IN INDIA Page 53  To exercise your rights on your own or as a group.

4. What are the advantages I have, of dealing through a Stock Exchange?

If you choose to deal (buy or sell) directly with another person, you are exposed to counter party risk, i.e. the risk of nonperformance by that party. However, if you deal through a Stock Exchange, this counter party risk is reduced due to trade/settlement guarantee offered by the Stock Exchange mechanism. Further, you also have certain protections against defaults by your broker.

5. Are my se c urities li s ted with S E BI?

No. Your securities are not listed with SEBI. The securities of companies are listed on recognized Stock Exchange(s).

6. How can I enter in a deal through a Stock Exchange?

If you decide to operate through an exchange, you have to avail the services of a SECURITIES AND EXCHANGE BOARD OF INDIA registered broker/sub- broker. You have to enter into a broker- client agreement and file a client registration form. Since the contract note is a legally enforceable document, you should insist on receiving it. You have the obligation to deliver the securities in case of sale or pay the money in case of purchase within the time prescribed. If you have opted for transaction in physical mode, in case of bad delivery of securities by you, you have the responsibility to rectify them or replace them with good ones.

7. Whether investors/shareholders can file application before Consumer Forum?

Shares of debentures after they have been issued or allotted to investor are regarded as goods. In case of deficiency of service by an intermediary or listed company, an investor can approach the Consumer Forum.

WORKING OF BROKING FIRMS IN INDIA Page 54 8. What steps are taken by SEBI to make investors aware of their rights?

• SEBI launched a comprehensive education campaign aimed at creating awareness among investors about securities market, which has been christened – “Securities Market Awareness Campaign” (SMAC). The motto of the campaign is – ‘An Educated Investor is a Protected Investor.’ • The campaign was launched at the national level by the then Prime Minister, Shri Atal Bihari Vajpayee, on January 17, 2003.The national launch was closely followed by launches in 12 states. • The structural foundation of the campaign is based on workshops that are being conducted all across the country with the continued and active participation of market participants, market intermediaries, Investors Associations etc, to spread SEBI’s message of “Invest With Knowledge”. • Workshops- At workshops, the aim is to acclimatize the investors with the functioning of the securities market, the basic fundamentals of investment and risk management and their rights and responsibilities. Till date, more than 2188 workshops have been conducted in around 500 cities/towns across the country.

9. What kinds of grievances are undertaken by SEBI?

There will be occasions when you have a grievance against a listed company/ intermediary registered with SEBI. In the event of such grievance you should first approach the concerned company/ intermediary against whom you have a grievance. However, you may not be satisfied with their response. Therefore, you should know whom you should turn to, to get your grievance redressed. Given below are types of grievances for which you could approach SEBI.

 Type-I : Refund Order/ Allotment Advise

 Type-II: Non-receipt of dividend.

 Type-III: Non-receipt of share certificates after transfer.

WORKING OF BROKING FIRMS IN INDIA Page 55  Type-IV: Debentures.

 Type-V: Non-receipt of letter of offer for rights.

 Type VI: Collective Investment Schemes

 Type VII: Mutual Funds/ Venture Capital Funds/ Foreign Venture Capital Investors Foreign Institutional Investors/ Portfolio Managers, Custodians.

 Type VIII: Brokers/ Securities Lending Intermediaries/ Merchant Bankers/ Registrars and Transfer Agents/ Debenture Trustees/ Bankers to Issue Underwriters/ Credit Rating Agencies/ Depository Participants.

 Type IX: Securities Exchanges/ Clearing and Settlement

 Type X: Derivative Trading

18. CONCLUSION

On the basis of this study on ‘Working of broking firms in India’ how does the Indian brokerage market works. There are so many broking firms in India who offer so many services. Through the help of brokers investors are switched on to online trading.

At last I conclude that doing this project is really tough job but once u enjoys it, no one can put u down. This project is really a platform for us to apply theory knowledge to practical field. After this there are so many things which could be consider as learning outcome but it’s really difficult to describe. I Understood finance sector and stock market in depth.

WORKING OF BROKING FIRMS IN INDIA Page 56 19. BIBLIOGRAPHY

BOOKS REFERED:

 KotlerPhilip,Marketing

 Management: 13th Edition, 2006, Prentice Hall of India Ltd., New Delhi. Delhi.

MAGAZINE:

 Business World

 News Papers

 Forbes

WORKING OF BROKING FIRMS IN INDIA Page 57 WEBSITES:-:-

 www.angelbroking.com

 www.icicidirect.com  www.motilalostwal.com  www.wikipedia.com  www.scribd.com  www.investopedia.com  www.sharekhan.com

 www.indiabulls.com

 www.5paisa.com

THANK

WORKING OF BROKING FIRMS IN INDIA Page 58 YOU! WORKING OF BROKING FIRMS IN INDIA Page 59

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