4.SEBI – Securities and Exchange Board of India

      The Securities and Exchange Board of India (SEBI) is the Regulator for the Securities market in India owned by Government of India.

It was established in 1988 and given Statutory Powers on 30 January 1992 through the SEBI Act, 1992. It regulates process of issuing securities using the Securities Contracts Regulation act, 1956.

Regulates places (Depositories, stock exchanges, commodity exchanges etc.), persons (Individual investor, brokers, etc.), collective investment scheme (Chit fund scam, etc.). SEBI has to protect the Investors and increase their participation.

All the stock exchange of the country is brought under annual inspection of SEBI to ensure growth of stock market and protect investors’ interest.  It regulates the mutual funds also. Merchant banking is also brought under the purview of SEBI.

4.1 Various aspects of Securities market

Insider Trading

Whenever company launches new products, wins unique patents (or) undergoes merger and acquisition – its share prices will increase. If a person associated with company uses such confidential information for buying / selling shares to make wind fall gains. Such insider trading is illegal.

Algorithmic Trading

Some large brokers / companies use algorithmic trading, computer programmes to automatically buy / sell securities at a speed and frequency that is impossible by human. This can be misused for manipulating the share prices. So, SEBI issued technical measure like a investor, broker can’t place more than 100 on line orders per second.

Commodity Market

A commodity market/exchange is a Place where buyers and sellers trade goods in lot such as food grains, oil / gas, etc. These associations determine rules and set procedures for trading commodities. The main objective is to protect the participants from adverse movement of prices.

Commodity futures – types of contracts for future delivery and settlement of commodity. It was under Forward Market Commission but now merged with SEBI. There are 91 commodities notified for future trading in India. (SEBI, 2019). There are 21 national and regional exchanges for commodity in the country.

DEMAT Account

      DEMAT – De Materialized form of Account.  Investors are to trade not in Paper – form but in Electronic (i.e.) DEMAT Account. Customer has to open Demat Account in a depository – partner which can be Bank (or) NBFC. SEBI regulates them under Depositories Act 1996. Eg are → Central Depository Services Ltd. (CDSL) & National Securities Depository Ltd. (NSDL).

DEMAT account compulsory for trading in Secondary Market. SEBI makes it Mandatory.

Types of Investors

1. Depending on Buying Capacity
2. Depending on Buying Behaviour

Depending on Buying Capacity

1. Qualified Institutional buyers (QIB): These Investors with expertise and financially good to make large investments in Capital Market. E.g., Mutual funds, Insurance Company, Foreign Venture Capital Funds etc.

2. Anchor Investors: They are QIB’s who are offered shares before IPO – Launch. This gives confidence to another Investor to subscribe IPO.
3. Retail Investor: Retail investor refers to Individual investors.

Depending on Buying Behaviour

1. Jobbers – full time engaged in buying / selling securities using money from their own pockets.
2. STAG – buys newly issued securities from primary market and sell in Secondary Market for quick Profit.
3. Bullish market

      Just like a bull tends to throw his victim up in the air. Optimistic Speculator who hopes share prices will raise – so purchases.

4. Bear market

      A bear usually presses its victim down to ground. A pessimistic speculator who fears prices will fall, so he sells.