SECURITIES LAW AND MARKET OPERATIONS

Important TWO Marks:

1. What is capital market?
Capital market is a market where buyers and sellers engage in trade of financial
securities like bonds, stocks, etc.
2. What are the sources of investment information?
economic indicators, market indexes, and company performance.
3. What are the forms of borrowing capital?
It is also called loan capital like bank loans, personal loans, overdraft agreements,
credit card debt.
4. What is private placement?
A sale of stocks, bonds, or securities directly to a private investor like UTI,
Mutual funds, Insurance Companies, merchant banking rather than as part of a
public offering.
5. What is right issue?
A rights issue is an invitation to existing shareholders to purchase additional new
shares in the company. This type of issue gives existing shareholders securities
called rights.
6. Define the term underwriting.
It is the guarantee given by the underwriter to take specified number of shares in
the event of public not subscribed shares.
7. Define the term price band.
A price band is a value-setting method in which a seller indicates an upper and
lower cost range, between which buyers are able to place bids.
8. State the objectives of securities contract(Regulation)Act.

9. What is speculation?
Speculation involves trading a financial instrument involving high risk, in
expectation of significant returns. The motive is to take maximum advantage from
fluctuations in the market.
10. Who is Tarawaniwalas?
He is an active member of Bombay stock exchange, he is similar to jobber. He
can acts as both as a broker or jobber.
11. Write any 3 merits of listing of shares?
It provides liquidity to investments; Ease of entering into either buy or sell
transactions; Listing safeguards investors interests
12. What is margin trading?
 In the stock market, margin trading refers to the process whereby individual
investors buy more stocks than they can afford to. Margin trading involves buying
and selling of securities in one single session.
13. What are the kinds of speculators?
Bull; Bear, Stag; Lame Duck
14. How will you classify financial markets in India?
Money market; Capital market
15. What is public issue?
Under this method, the issuing company offers to public, a fixed number of shares
through a legal document called prospectus.
16. What are the content of a prospectus?
The prospectus contains the main objectives of the company, the name and
addresses of the signatories of the memorandum of association and the number of
shares held by them.
The name, addresses and occupation of directors and managing directors.
The number and classes of shares and debentures issued.
17. What is origination?
Origination is the work which begins before an issue is actually floated in the
market. It is the stage where initial ‘spade work’ is conducted to find out the
investment climate and to be sure that if the issue is floated it will be subscribed
to by the public.
18. Who is remisers?
In Bombay stock exchange, a sub-broker is referred to as remiser. He is not a
member of stock exchange. The broker pays a part of his commission to his sub-
broker and she is known as “half commission man”
19. What is listing of shares?
Listing refers to the securities that are included in the official list of the stock
exchange for the purpose of trading.
20. What is internet broking?
An online broker is a broker that interfaces with customers over
the Internet instead of face-to-face. It is a brokerage firm that people visit online,
rather than in a physical office. ... They also offer resources so that the customer
can engage in investment trading.
21. State the features of NSE.
Confidential trading in NSE; Transparency of NSE: ...
Effective matching of order in NSE: ...Borrowings made easy in NSE

22. Define mutual fund.

SEBI (Mutual funds) Regulation 1996 define a ,mutual funds “a fund established
in the form of a trust by a sponsor to raise moneys by the trustees through the sale
of units to the public under one or more schemes for investing in securities in
accordance with these regulations”
23. Give the objectives of depository.
It removes the occurrences of forgery, duplicate share certificates, and bad
deliveries.
This can increase the liquidity of securities by making a way for easy transfer.
 Also, it can avoid the delay caused in the transfer of securities.
24. What is insider trading?
Insider is any person connected with the company such as directors, promoters
etc. These insiders have sensitive information which effect to the price of security.
Insiders get privileged information to make profit is known as insider trading.
25. What is derivatives?
A derivative is a contract between two parties which derives its value/price from
an underlying asset. The most common types of derivatives are futures, options,
forwards and swaps.
26. Give any two difference between money market and capital market.
Money market deals with Treasury Bills, Capital market deals with Shares, Debentures,
Commercial Papers, Certificate of Deposit, Bonds, Retained Earnings, Asset Securitization,
Trade Credit etc. Euro Issues etc.

Money Market fulfill short term credit needs Capital market fulfill long term credit needs of the
of the business. business.

27. What is new issue market?

Securities available for the first time are offered through the primary securities
market. The issuer may either be a new company or an existing company.
28. What is secondary market?
The stock exchanges is a secondary market for securities which have already been
issued and listed on a recognised stock exchange.
29. Mention merits of underwriting.
Give expert advice to the issuing company
To Assures the company to raise funds within reasonable time
To enhance the goodwill of the company
30. What do you mean by brokers?
A broker is one who works on commission basis. He does not buy and sell
securities in his own name.
31. What is Gilt Edged securities?
Government securities are instruments issued by the government to borrow
money from the market. They are also known as gilts or gilt edged securities
32. What is stock exchange?
A stock exchange is a place or electronic market where owners of businesses get
together to buy and sell their shares of stock.
33. Define OTECI.
The over-the-counter exchange of India (OTCEI) is an electronic stock exchange
based in India that is comprised of small- and medium-sized firms looking to gain
access to the capital markets
34. What are the various types of listing?
Open Listing; Exclusive Agency Listing; Exclusive Right-to-Sell Listing
35. What is Scripples trade?
Scripless trading is a method of securities trading in which the settlement of
transactions take place via book entry instead of physical exchange and delivery
 of securities certificates. The major objective is to ensure the safety of securities
certificates and to improve the liquidity position of the stock markets both in
primary and secondary markets.
36. What do you understand by demating?
Dematerialisation or Demat in short is the process through which an investor's
physical share certificate gets converted to electronic format which is maintained
in an account with the Depository Participant
37. What is meant by securities?
A security, in a financial context, is a certificate or other financial instrument that
has monetary value and can be traded. Securities are generally classified as
either equity securities, such as stocks and debt securities, such as bonds and
debentures.
38. What is a debt instrument?
A debt instrument is a paper or electronic obligation that enables the issuing
party to raise funds by promising to repay a lender in accordance with terms of a
contract. Types of debt instruments include notes, bonds, debentures,
certificates, mortgages, leases or other agreements between a lender and a
borrower.
39. Who does regulate the securities market?
The Securities and Exchange Board of India (SEBI) is the regulatory authority
established under the SEBI Act 1992 and is the principal regulator
for StockExchanges in India. SEBI's primary functions include protecting investor
interests, promoting and regulating the Indian securities markets.
40. What is Nifty?
Nifty, also called NIFTY 50, is the market index consisting of 50 well-
established and financially sound companies listed on National Stock
Exchange of India (NSE).
41. Write a note on Securities Contract(Regulation)Act 1956.
The Securities Contract (Regulation) Act, 1956 deals with stock
exchanges, contracts in securities, and listing of securities on stock
exchanges, and keeps a vigil over all the stock exchanges of India and prevents
undesirable contracts in Securities market through a process of recognition and
continued supervision.
42. What is investor protection?
investor protection involves various measures established to protect the
interests of investors from malpractices. Securities and Exchange Board of India
(SEBI) is responsible for regulations of the Mutual Funds and safeguard the
interests of the investors.
43. Explain the term screen based trading.
The stock exchanges now provide an on-line fully automated ‘screen based
trading system (SBTS)’. It cuts down on time, cost and risk of error, as well as
fraud resulting in improved operational efficiency.
44. Give the meaning of depository.
A depository is an organisation which holds the securities of a share holder in
electronic form at the request of the share holder. Depository system paved the
way for demating.
45. Write a note on AMC.
 An Asset Management Company manages money collected from diverse
investors. A fund house decides when, where and how to invest this money.
46. Give the meaning of Balanced Funds.
A balanced fund is a mutual fund that contains a stock component, a bond
component and sometimes a money market component in a single portfolio.
47. Give a note on SEBI.
Securities and Exchange Board of India (SEBI) is a regulatory body of the
Government of India. It controls the securities market. It was established on April
12, 1992 under the SEBI Act, 1992. SEBI plays an important role of regulating all
the players operating in the Indian capital markets. It attempts to protect the
interest of investors and aims at developing the capital markets by enforcing
various rules and regulations.
48. Who is a jobber?
He is an independent broker who purchases and sell securities in his own name. A
jobber is capable of forecasting the future price movement of securities.
49. What is meant by open or Discretionary order?
It is one which does not specify any time or price for the purchase or sale of
securities. The broker uses his discretion to buy or sell shares at whatever price he
thinks reasonable.
50. What is CDSL?
The Central Depository Services, CDSL was set up with the objective of
providing convenient, dependable and secure depository services at affordable
cost to all market participants.
51. Who is a depository participation?
Scheduled commercial banks, All India financial institutions, state level financial
institutions, Clearing house of a stock exchange with necessary infrastructure and
resources.
52. What is merchant banking/Who is a lead manager?
A merchant banker is any person who is engaged in the business of issue
management either by making arrangements regarding selling, buying or
subscribing to securities or acting as manager, consultant, advisors or rendering
corporate advisory services in relation to such issue management.
53. What is sensex?
Sensex, otherwise known as the S&P BSE Sensex index, is the benchmark index
of the Bombay Stock Exchange (BSE) in India. Sensex comprises 30 of the
largest and most actively-traded stocks on the BSE, providing an accurate gauge
of India's economy.
54. What is money market?
Money market basically refers to a section of the financial market where
financial instruments with high liquidity and short-term maturities are traded.
55. What do you mean by stock market indicator?
Market indicators are used in technical analysis to forecast market trends.
Market Breadth indicators compare the number of stocks moving in the same
direction as a larger trend.
Market Sentiment indicators compare price and volume to determine whether
investors are bullish or bearish on the overall market.
56. What is Nifty?
 The word Nifty originates from 2 words, `National' and 'Fifty'. Nifty basically
means the index of the 50 most actively traded stocks from across all sectors.
Nifty represents the top stocks of the NSE
57. What are the types of share brokers?
Jobber; Tarawaniwalas; Remisers; Authorised Clerks; Commission brokers
58. What is Lame Duck?
Lame duck refers to a trader who has defaulted on a debt or gone bankrupt due
to an inability to cover trading losses
59. What are the objectives of BSE-SENSEX?
To measure market movements. Benchmark for funds performance.
60. Write a note on NSDL?
National Securities Depository Limited (NSDL) is a financial organization created
to hold securities such as bonds, shares etc. in the form of physical or non-
physical certificates i.e. in dematerialized format.
61. Explain the term growth fund.
A growth fund is a mutual fund which invests in the stocks of the companies
which are expected to grow at a rate faster than the overall stock market. The
primary goal of growth funds is capital appreciation.
62. What is stock market index?
A stock index or stock market index is a measurement of a section of
the stock market. It is computed from the prices of selected stocks (typically a
weighted average). It is a tool used by investors and financial managers to
describe themarket, and to compare the return on specific investments
63. What are the major stock market indices?
the Nasdaq composite, Dow Jones industrial average and Standard and Poor's
500index – operate. All are based on different stock pools and vary greatly in
the size and number of companies as well as how they are weighted.