SUMMER TRAINING PROJECT REPORT

ON

SUCCESS STORY OF JETKING

A report submitted to Ishan Institute of Management & Technology, Greater Noida as a partial fulfillment to full time Post Graduate Diploma in Business Management

SUBMITTED TO: Dr. D. K. Garg Chairman Sir IIMT, Greater Noida Batch: 17th

SUBMITTED Vikash Kr. Gupta ENR: 6023 (MM) Section: B

ISHAN INSTITUTE OF MANAGEMENT & TECHNOLOGY 1A, KNOWLEDGE PARK -1, GREATER NOIDA, DIST. G. B. NAGAR (U.P.) Website www.ishanfamily.com, E-mail student@ishanfamily.com
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PREFACE
The project which is being studied here is related to the Success Story of Jetking. The main objective of this project is to discuss about the how Jetking is successfully run in India. The project also discusses some rules and regulation in the capital market. And what is the operating system of the stock exchange over the entire world and how they do the trading. The project also consist the overview about the stock exchange in the developed, developing and underdeveloped countries. Also there is another process which is being carried out after the trading process is the clearing and settlement process. In this project there has been the analysis of the various steps being involved in the clearing and settlement process and also to study the various parties involved in the clearing and settlement. When there is the discussion and detailed study about the capital market then it is necessary to clear the basics involved in the capital market and to make clear the background of the capital market. In this process the objective of preparing this project was to give a complete study about the capital market and the types of the capital market which are the primary market and the secondary market. Also there has been a detailed study of the money market and the instruments involved in the money market. Actually the basic study of the market starts from this end. Through this project there has been a complete study on the various types of market. Also without knowing the various regulations involved in the trading process it is very difficult to involve in the capital market. There has been a detailed study of the various regulations involved in the capital market and the study of the regulatory framework of the capital market so as to give you an overview of the rules and regulation being made by SEBI and their proper implementation. Also there has been the detailed study of the Stock broker including the evolution of the stock broker and their role and the functions of the stock broker And there is detail comparative study of the different stock exchange over the entire world, along with at last project also suggest some recommendation, suggestion, and learning.

ACKNOWLEDGEMENT
With immense pleasure, I would like to present this project report for the topic SUCCESS STORY OF JETKING. As a student of ISHAN INSTITUTE OF MANAGEMENT AND TECHNOLOGY, I owe my gratitude to all the people who have made this dissertation possible. First and foremost, I would like to thank my guide Mr. Shariq Shiddiqui (Business Manager) for giving me an invaluable opportunity to work on challenging and extremely interesting projects during my summer training. He always made himself available for help and advice. It has been a pleasure to work with and learn from such extraordinary person. In addition, I am very thankful for the enormous support of Mr. Dhiman (Branch Manager) that have provided by him to make my project successfully completed. I am thankful to our college for organizing such training programme, especially Chairman Sir Dr. D.K. Garg who gave me an opportunity to gain experience of working in an organization and to know the working culture of the corporate and to analyze about the working how to take appointment. I would like to express my sincere thanks to my Professors & other faculty members of management department of IIMT, Greater Noida, for developing their guidance & help. I would like to thanks my seniors for their support and guidance which made my project fruitful. Without their guidance and support this project was incomplete. I also convey my love & regard to staffs & workers, who made my stay at Jetking Infotrain, a memorable part of my life. I owe my deepest thanks to my family - my mother and father who have always stood with me & guided me through my career, and have supported me with every endeavour I take on. They guided me in proper and right way and encouraged me to make this project in a proper way. Words cannot express the gratitude I owe them. Lastly I would like to thank God to give me enough strength to prepare this project with sincerity and honesty and with proper dedication so as to make it successful.

DECLARATION
The summer training project on SUCCESS STORY OF JETKING. under the guidance of Mr. Shariq Shiddiqui (name of the guide & Business manager) is the original work done by me. This is the property of the Institute & use of this report without prior permission of the Institute will be illegal & actionable.

Date: 09/07/2012

Signature: (Vikash Kumar Gupta) ENR NO.: MMR 6023

REVIEW OF THE LITERATURE

I had chosen this particular topic as we gone through many magazines; I had seen many times that why there are many difficulties in capital market. During the summer training program I choose this particular topic because I want to see the how the Capital market sold his product in this competitive market. I know there are many research on capital market. I want to reviews all that research and try to analysis all that researched. And try to give a detail knowledge about the capital market in India and Global Market. And after summer training I found that there is very big difference between to read about the stock market and work in the stock market. With the help of my senior I worked on my project report and under them guideline I choose the topic which explore my knowledge about the stock market

Table of Content Page No.

CHAPTER- 1 Introduction Executive summary CHAPTER- 2 About share khan ltd. Historical background Joint venture Founders and promoters Products and Services COMPANY PROFILE:Key events and milestones/ Brand identity Vision and mission CHAPTER-3 Capital market in India Components of capital market Products and services in capital market Global market Products and services in global markets 9-10 9 10 11-24 12 13 14 15 17 20 21 22 25-61 25 26 27 31 48 62-115

CHAPTER-4

Trading in capital market in India Trading in global capital market

62 99 116-124 116

CHAPTER-5 Rules and regulation in Indian capital market

Rules and regulation in global capital market

121 125-159 125 129 131 160-188 160 170 176

CHAPTER-6 Different countries share market indices Worlds leading stock market Operating system in different stock market

CHAPTER-7 Stock market in developed countries Stock market in developing countries Stock market in under developed countries

CHAPTER-8 Comparative study between Indian capital market and Global Capital market

189-223 189

CHAPTER-9 Working process of sharekhan ltd.

224-225 224 226-233 226 227 228 230 231

CHAPTER-10 LIMITATIONS SUGGESTIONS LEARNINGS AND FINDINGS RECOMMENDATIONS BIBLIOGRAPHY

ANNEXURE

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Chapter:-1
EXECUTIVE SUMMARY

New ideas and innovations have always been the hallmark of progress made by mankind. At every stage of development, there have been two core factors that drive man to ideas and innovation. These are increasing returns and reducing risk, in all facets of life. The financial markets are no different. The endeavor has always been to maximize returns and minimize risk. A lot of innovation goes into developing financial products centered on these two factors. It has spawned a completely new area called financial engineering. In the current scenario everything is examined on the global parameter. And capital market have no difference from other thing. So it is our try to understand global capital market . and compare it with indian capital market. And try to see what the difference why one market is growing fastly and other faces losses. And try to understand capital market in developed, developing and underdeveloped countries. We have tried to present in a lucid and simple manner, the capital market, so that the individual investor is educated and equipped to become a dominant player in the market.

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Introduction:Here I am giving the introduction of my project report. In this project report you will find the complete knowledge about the Indian capital market, Global capital market and along with this you will find the detail about the Sharekhan Ltd. the structure of company the working process of company and many more. In this project I defined the Indian capital market and the product of India capital market. And with this I also defined the global market capital market. There are no any international capital market where all the country stock exchange jointly worked so in the Global capital market I explained the different stock market of U.S., ASIA and Europe. I defined the rules and regulation, trading process, and operating system of different stock market And at the last I compared the different countries stock market with Indian capital market. Along with that I also try to define the capital market condition in developed, developing and underdeveloped countries.

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Chapter-2

SHAREKHAN- ONE OF THE FASTEST GROWING FINANCIAL SERVICES COMPANY IN INDIA

Company profile
INTRODUCTION Sharekhan is one of the top retail brokerage houses in India with a strong online trading platform. The company provides equity based products (research, equities, derivatives, depository, margin funding, etc.). It has one of the largest networks in the country with 1288 share shops in 325 cities and Indias premier online trading portal www.sharekhan.com. With their research expertise, customer commitment and superior technology, they provide investors with end-to-end solutions in investments. They provide trade execution services through multiple channels - an Internet platform, telephone and retail outlets.

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It is the retail broking arm of the Mumbai-based SSKI [SHANTILAL SHEWANTILAL KANTILAL ISWARNATH LIMITED] Group. .Sharekhan is online stock trading company of SSKI Group, provider of India-based investment banking and corporate finance service. Sharekhan is one of the largest stock broking houses in the country. Shri Shantilal Shewantilala Kantilal Ishwarlal Securities Limited (SSKI) has been among Indias leading broking houses for more than a century. It has a client base of 1.5 Corers. Launched on 8th February, 2000 as an online trading portal, Sharekhan offers its clients trade execution facilities for cash as well as derivatives, on BSE and NSE, depository services, equities, initial public offerings (IPOs), and commodities trading facilities on MCX and NCDEX. Besides high quality investment advice from an experienced research team Sharekhan provides market related news, stock quotes fundamental and statistical information across equity, equities, IPOs and much more. Sharekhan is also about focus. Sharekhan does not claim expertise in too many things. Sharekhans expertise lies in stocks and that's what he talks about with authority. To sum up, Sharekhan brings to you a user- friendly online trading facility, coupled with a wealth of content that will help you stalk the right shares.

History of ShareKhan Sharekhan is online stock trading company of SSKI Group, provider of India-based investment banking and corporate finance service. Sharekhan is one of the largest stock broking houses in the country. Shri Shantilal Shewantilal Kantilal Ishwarlal Securities Limited (SSKI) has been among Indias leading broking houses for more than a century.

SSKI which is established in 1930 is the parent company of Sharekhan ltd. With a legacy of more than 80 years in the stock markets, the SSKI group ventured into institutional broking and corporate finance over a decade ago. Presently SSKI is one of the leading players in institutional broking and corporate finance activities. Sharekhan offers its customers a wide range of equity related services including trade execution on BSE,
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NSE, and Derivatives. Depository services, online trading, Investment advice, Commodities, etc. Sharekhan Ltd is India's leading online retail broking house with its presence through 1288'Share Shops' in 398 cities. It has a client base of 1.5 Corers. Sharekhan Ltd. is a brokerage firm which is established on 8th February 2000 and now it is having all the rights of SSKI. The Company's online trading and investment site - www.Sharekhan.com - was also launched on Feb 8, 2000. This site gives access to superior content and transaction facility to retail customers across the country. Known for its jargon-free, investor friendly language and high quality research, the content-rich and research oriented portal has stood out among its contemporaries because of its steadfast dedication to offering customers best-of-breed technology and superior market information. Launched on 8th February, 2000 as an online trading portal, Sharekhan offers its clients trade execution facilities for cash commodities as well as derivatives, on BSE and NSE, depository services, equitiess, initial public offerings (IPOs), and commodities trading facilities on MCX and NCDEX. On April 17, 2002 Sharekhan launched Speed Trade, a net-based executable application that emulates the broker terminals along with host of other information relevant to the Day Traders. This was for the first time that a net based trading station of this caliber was offered to the traders. In the last six months Speed Trade has become a de facto standard for the Day Trading community over the net. The company was awarded the 2005 Most Preferred Stock Broking Brand by Awwaz Consumer Vote. It is first brokerage Company to go online. Sharekhans ground network includes over 331 centers in 137 cities in India which provide a host of trading related services. Sharekhan's management team is one of the strongest in the sector and has positioned Sharekhan to take advantage of the growing consumer demand for financial services
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products in India through investments in research, pan-Indian branch network and an outstanding technology platform. Further, Sharekhan's lineage and relationship with SSKI Group provide it a unique position to understand and leverage the growth of the financial services sector. We look forward to providing strategic counsel to Sharekhan's management as they continue their expansion for the benefit of all shareholders."

Sharekhan has always believed in investing in technology to build its business. The company has used some of the best-known names in the IT industry, like Sun Microsystems, Oracle, Microsoft, Cambridge Technologies, Nexgenix, Vignette, Verisign Financial Technologies India Ltd, Spider Software Pvt Ltd. To build its trading engine and content. The Morakhiya family holds a majority stake in the company.

HSBC, Intel & Carlyle are the other investors. With a legacy of more than 80 years in the stock markets, the SSKI group ventured into institutional broking and corporate finance 18 years ago. Presently SSKI is one of the leading players in institutional broking and corporate finance activities. SSKI holds a sizeable portion of the market in each of these segments. SSKIs institutional broking arm accounts for 7% of the market Institutional portfolio for Foreign

investment and 5% of all Domestic Institutional portfolio

investment in the country. It has 60 institutional clients spread over India, Far East, UK and US. Foreign Institutional Investors generate about 65% of organizations revenue, with a daily the turnover of over US$ 2 million. The

Corporate Finance section has a list of very prestigious clients and has many firsts to its credit, in terms of the size of deal, sector tapped etc. The group has placed over US$ 1 billion in private equity deals. Some of the clients include BPL Cellular Holding, Gujarat Pipavav, Essar, Hutchison, Planetasia, and Shoppers Stop. Share khan has one of the best states of art web portal providing fundamental and statistical information across equity, equities and IPOs. One can surf across 5,500 companies for in-depth information, details about more than 1,500 equities schemes and IPO data. One can also access other market related details such as board meetings, result announcements, FII transactions, buying/selling by equities and much more.

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SSKI Corporate Finance Private Limited (SSKI) is a leading India-based investment bank with strong research-driven focus. Their team members are widely respected for their commitment to transactions and their specialized knowledge in their areas of strength. The team has completed over US$5 billion worth of deals in the last 5 years - making it among the most significant players raising equity in the Indian market. SSKI, a veteran equities solutions company has over 8 decades of experience in the Indian stock markets. "Sharekhan has always believed in collaborating with like-minded Corporate into forming strategic associations for mutual benefit relationships" says Jaideep Arora, Director - Sharekhan Limited.

SHAREKHAN LIMITEDS MANAGEMENT TEAM

TOP MANAGEMENT

Mr.Tarun.Shah CEO,Sharekhan A Science graduate from St. Xaviers College, Mumbai, Tarun Shah started his professional life in sales and marketing in a chemicals company. His hands-on approach and rich experience in sales led him to higher challenges that the capital markets provided.

In 1987, Mr Shah joined SSKI, a brokerage firm with over five decades of legendary service to its credit. The capital market at that time was undergoing a sea change in terms of character and SSKI under the vision and guidance of Shripal Morakhia and the commitment and hard work of Mr Shah was able to change and adopt the new business practices to achieve a significant growth in a competitive environment. Since then SSKI has achieved growth in each of its businesses: Institutional broking, retail broking and corporate Finance. Starting with the retail broking business of SSKI in Bombay and
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developing a sub-broker network across the country, Mr Shah was also instrumental in successfully setting up the Institutional Trading Desk of SSKI.

Accepting new challenges is a way of life for Mr Shah. To ensure that SSKIs foray into retail stock broking business through Sharekhan is as successful as every other venture of SSKI, Mr Shah moved in to spearhead this new effort as the CEO of Sharekhan, the retail broking arm of SSKI.

Mr.Jaideep.Arora Director,Product.Development Jaideep Arora, completed his B.Tech from IIT (Kanpur) and his PGDM from IIM, Kolkata.

He worked with ICICI for 8 years where his work spanned a gamut of functions, which included project finance, equity sales and brokerage, investments etc. During his tenure there he set up and headed the Institutional Equity Brokerage Desk at ICICI Securities & Finance Co. Ltd.

Mr Arora joined Sharekhan in June 2000 as the head of the Product development division. A year later he took over the reins of the online business of Sharekhan. At present Mr Aroras responsibilities include spearheading Sharekhans online foray as well as its overall customer acquisition effort.

Mr.Shanker.Vailaya Director, Operations, Finance and Legal Functions

A graduate in Commerce from the University of Mangalore and an Associate of The Member of the Institute of Chartered Accountants of India, Shankar Vailaya heads the operations, finance and legal functions of Sharekhan. He is responsible for settlements, depository operations, risk and compliance, regulatory and other legal commitments and treasury.
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Mr Vailaya has managed Sharekhans broking operations through the most turbulent times in the aftermath of the securities scam in 1992 and successfully steered the company clear of a flurry of bad papers that hit the market during 1994-95. 4. Pathik Gandotra 5. Rishi kohili 6. Nikhil Vora : Head of Research : Vice President of Equity Derivatives : Vice President of Research

The different types of products and services offered by Sharekhan Ltd. are as follows:

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Get anything you need at a sharekhan outlet. All you have to do is walk into any of our 640 share shops across 280 cities in India to get a host of trading related serviced our friendly customer service staff will also help you with any account related queries you may.

A sharekhan outlet offer the following services . 1. Online BSE and NSE execution (through blot and neat terminal). 2. Free access to the investment advice from share khans research team. 3. Sharekhan value line ( a monthly population with review of recommendation, stock to watch out for etc.) 4. Daily research reports and market review (High Noon & Eagle Eye) 5. Pre-market Report (Morning Cuppa) 6. Daily trading calls based on Technical Analysis 7. Cool trading products (Daring Derivatives and Market Strategy) 8. Personalized Advice 9. Live Market Information 10. Depository Services: Demat & Remat Transactions 11. Derivatives Trading (Futures and Options) 12. Commodities Trading 13. IPOs & Equities Distribution 14. Internet-based Online Trading: SpeedTrade

FINANCIAL CAPABILITY Taking in to consideration all its assets and liabilities company is valued at around Rs. 750-850 crores.

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USP OF SHAREKHAN LTD. 1. Experience SSKI has more than eight decades of trust and credibility in the Indian stock market. In the Asia Money broker's poll held recently, SSKI won the 'India's best broking house for 2004' award. Ever since it launched Sharekhan as its retail broking division in February 2000, it has been providing institutional-level research and broking services to individual investors.

2. Technology With their online trading account one can buy and sell shares in an instant from any PC with an internet connection. Customers get access to the powerful online trading tools that will help them to take complete control over their investment in shares.

3. Accessibility Sharekhan provides services for investors. These services are accessible through many centers across the country (Over 650 locations in 150 cities), over the Internet (through the website www.sharekhan.com) as well as over the Voice Tool.

4 .Knowledge In a business where the right information at the right time can translate into direct profits, investors get access to a wide range of information on the content-rich portal, www.sharekhan.com. Investors will also get a useful set of knowledge-based tools that will empower them to take informed decisions.

5.Convenience One can call Sharekhans Dial-N-Trade number to get investment advice and execute his/her transactions. They have a dedicated call-center to provide this service via a Toll Free Number 1800-22-7500 & 39707500 from anywhere in India.

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6. Customer Service Its customer service team assists their customer for any help that they need relating to transactions, billing, Demat and other queries. Their customer service can be contacted via a toll- free number, email or live chat on www.sharekhan.com.

7. Investment Advice Sharekhan has dedicated research teams of more than 30 people for fundamental and technical research. Their analysts constantly track the pulse of the market and provide timely investment advice to customer in the form of daily research emails, online chat, printed reports etc.

PROFILE OF THE COMPANY

Name of the company

Sharekhan ltd.

Year of Establishment Headquarter House,

: :

1922 ShareKhan SSKI A-206 Phoenx

Phenoix mills Compound lower parel Mumbai Maharashtra , INDIA400013

Nature of Business

Service Provider

Services :

:
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Depository services

Online Services and Technical Research Number of Employees : Over 3500

Website Slogan :

www.sharekhan.com Your Guide to The isition effort.

ACHIEVEMENTS OF SHAREKHAN A rated among the top 20 wired companies along with Reliance, HUJl, Infosys, etc by Business Today, January 2004 edition. Awarded Top Domestic Brokerage House four times by Euro money and Asia money. Pioneers of online trading in India amongst the top 3 online trading websites from India. Most preferred financial destination amongst online broking customers. Winners of Best Financial Website award. Indias most preferred brokers within 5 years. Awaaz customers Award 2005.

Future Plans 2,00,000 plus retail customers being serviced through centralized call centers/ web solutions. Branches / Semi branches servicing affluent / aggressive traders through high skill financial advisor. 250 independent investment managers/ franchisee servicing 50,000 highly valued clients
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 New initiative Portfolio management Services and commodities trading.

Vision: To be the best retail brokering brand in the retail business of stock marketing. Mission: To educated and empower the individual investor to make better investment better decision through the quality advice and superior services. Sharekhan is infect: 1. Among the top three branded retail service provider. 2. No.1 player in the on line trading business. 3. Largest network of branded broking outlet in the country service more than 700000 clients.

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HIERARCHY IN SHAREKHAN

CEO

Vice president
Assistant vice president manager Country head regional sales manager(Branch manager) Area sales manager

Territory manger Assistant sales manager/HNI Sales Asst.Manager/Relationship Manager/Equity advisor. Senior sales executives

Sales executives/dealer

Super trainees

Trainees

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HIERARCHY IN SHAREKHAN

There are 13 main hierarchical levels in Sharekhan: 1) Trainees 2) Super trainees 3) Sales executives/dealer 4) Senior sales executives 5) Assistant sales manager/HNI Sales Asst.Manager/Relationship Manager/Equity advisor. 6) Territory manger 7) Area sales manager 8) regional sales manager(Branch manager) 9) Country head 10) Assistant vice president manager 11) Vice president 12) Directors 13) CEO

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Chapter-3
Indian capital market overview
Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years ago. The earliest records of security dealings in India are meagre and obscure. The East India Company was the dominant institution in those days and business in its loan securities used to be transacted towards the close of the eighteenth century. By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers recognized by banks and merchants during 1840 and 1850. The 1850's witnessed a rapid development of commercial enterprise and brokerage business attracted many men into the field and by 1860 the number of brokers increased into 60. In 1860-61 the American Civil War broke out and cotton supply from United States of Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers increased to about 200 to 250. However, at the end of the American Civil War, in 1865, a disastrous slump began (for example, Bank of Bombay Share which had touched Rs 2850 could only be sold at Rs. 87). At the end of the American Civil War, the brokers who thrived out of Civil War in 1874, found a place in a street (now appropriately called as Dalal Street) where they would conveniently assemble and transact business. In 1887, they formally established in Bombay, the "Native Share and Stock Brokers' Association" (which is alternatively known as " The Stock Exchange "). In 1895, the Stock Exchange acquired a premise in

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the same street and it was inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated.

Components of capital market

Capital Market in India The capital market has 3 components - the equity market, the debt market, and the derivative market. It consists of all those connected with issuing and trading in equity shares and also medium and long term debt instruments, namely, bonds and debentures. It is well accepted that tenures less than one year are considered as short term; while tenures more than one year and up to three years may be taken as medium term while more than three years can be considered as long term. Both equity and debt market have 2 segments - the primary market dealing with new issues of equity and debt instruments and the secondary market which facilitates trading in equity and debt instruments thereby imparting liquidity to the instruments and making it possible for people with different liquidity preferences to participate in the market. The capital market operations are regulated by the Securities and Exchange Board of India [SEBI] Part of capital market 1. Equity market 2. Debt market 3. Derivative market Primary Market

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The primary market provides a channel for sale of new securities. This market provides opportunity to issuers of securities, the government as well as corporate, to raise resources to meet their requirements of investments and/or discharge their obligations. They may issue securities at face value, discount, or premium. They may also issue the securities in the domestic market and/or the international market. Secondary Market The secondary market facilitates trading in equity and long term debt instruments, and therefore imparts liquidity and price discovery. It is an equity-trading venue in which the already existing or pre-issued securities are traded among investors. This market could be either the auction-market or the dealer market. While stock exchange is the part of the auction market, OTC is a part of the dealer market. Derivatives Derivative is a product whose value is derived from the value of one or more basic variables, called underlying. The underlying asset can be equity, index, foreign exchange (Forex), commodity, or any other asset.

Product and services in Indian capital market

In primary market 1. Initial Public Offering [IPO] - An initial public offering is when an unlisted company makes either a fresh issue of securities of an offer for sale of its existing securities or both for the first time to the public. 2. Further Issue - A follow on public offering is known as further issue. This is offered through an offer document when an already listed organization makes either a fresh issue of securities to the public or an offer for sale to the public.

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3. Rights Issue - Here, a listed organization proposes to issue fresh securities to its existing shareholders as on a record date. The rights are offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for organizations who would like to raise capital without diluting the stake of its existing shareholders. 4. Preferential Issue - This is an issue of either shares or convertible securities by listed organizations to a select group of people under Section 81 of the Companies Act,1956. This issue is neither a Rights issue nor Public issue and is a faster way for any organization to raise capital.

In secondary market
EQUITY: The ownership interest in a company of holders of its common and preferred stock. The various kinds of equity shares are as follows EQUITY SHARES: An equity share, commonly referred to as ordinary share also represents the form of fractional ownership in which a shareholder, as a fractional owner, undertakes the maximum entrepreneurial risk associated with a business venture. The holders of such shares are members of the company and have voting rights. A company may issue such shares with differential rights as to voting, payment of dividend, etc. RIGHTS ISSUE/ RIGHTS SHARES: The issue of new securities to existing shareholders at a ratio to those already held. BONUS SHARES: Shares issued by the companies to their shareholders free of cost by capitalization of accumulated reserves from the profits earned in the earlier years. PREFERRED STOCK/ PREFERENCE SHARES: Owners of these kind of shares are entitled to a fixed dividend or dividend calculated at a fixed rate to be paid regularly before dividend can be paid in respect of equity share. They also enjoy priority over the equity shareholders in payment of surplus. But in the event of liquidation, their claims rank below the claims of the companys creditors, bondholders / debenture holders.

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CUMULATIVE PREFERENCE Shares.

A type of preference shares on which

dividend accumulates if remains unpaid. All arrears of preference dividend have to be paid out before paying dividend on equity shares. CUMULATIVE CONVERTIBLE PREFERENCE SHARES: A type of preference shares where the dividend payable on the same accumulates, if not paid. specified date, these shares will be converted into equity capital of the company. PARTICIPATING PREFERENCE SHARE: The right of certain preference shareholders to participate in profits after a specified fixed dividend contracted for is paid. Participation right is linked with the quantum of dividend paid on the equity shares over and above a particular specified level. SECURITY RECEIPTS: Security receipt means a receipt or other security, issued by a securitisation company or reconstruction company to any qualified institutional buyer pursuant to a scheme, evidencing the purchase or acquisition by the holder thereof, of an undivided right, title or interest in the financial asset involved in securitisation. GOVERNMENT SECURITIES (G-Secs): These are sovereign (credit risk-free) coupon bearing instruments which are issued by the Reserve Bank of India on behalf of Government of India, in lieu of the Central Government's market borrowing programme. These securities have a fixed coupon that is paid on specific dates on half-yearly basis. These securities are available in wide range of maturity dates, from short dated (less than one year) to long dated (upto twenty years). DEBENTURES: Bonds issued by a company bearing a fixed rate of interest usually payable half yearly on specific dates and principal amount repayable on particular date on redemption of the debentures. Debentures are normally secured/ charged against the asset of the company in favour of debenture holder. BOND: A negotiable certificate evidencing indebtedness. It is normally unsecured. A debt security is generally issued by a company, municipality or government agency. A bond investor lends money to the issuer and in exchange, the issuer promises to repay the
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After a

loan amount on a specified maturity date. The issuer usually pays the bond holder periodic interest payments over the life of the loan. The various types of Bonds are as followsZERO COUPON BOND: Bond issued at a discount and repaid at a face value. No periodic interest is paid. The difference between the issue price and redemption price represents the return to the holder. The buyer of these bonds receives only one payment, at the maturity of the bond CONVERTIBLE BOND: A bond giving the investor the option to convert the bond into equity at a fixed conversion price. COMMERCIAL PAPER: A short term promise to repay a fixed amount that is placed on the market either directly or through a specialized intermediary. It is usually issued by companies with a high credit standing in the form of a promissory note redeemable at par to the holder on maturity and therefore, doesnt require any guarantee. Commercial paper is a money market instrument issued normally for tenure of 90 days. TREASURY BILLS: Short-term (up to 91 days) bearer discount security issued by the Government as a means of financing its cash requirements.

IN DERIVATIVES MARKET
Types of derivatives: Various types of derivatives relating to shares are:

Forwards - This is a customized contract between two entities, where settlement takes place on a specific date in the future at todays pre-agreed price.

Futures - It is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price.

Options - An option is a contract which gives the right, but not an obligation, to buy or sell the underlying at a stated date and a stated price.
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Warrants - Options generally have lives of up to one year. Most of the options on exchanges have maximum maturity of nine months. Longer dated options are called warrants and these are generally traded over-the-counter

Interest rate derivatives: Swaps involve exchange of one stream of interest payments for another stream of interest payments. For example, an organization that has taken a loan at fixed interest rate may like to convert it to a floating rate loan. The organization can enter into a swap transaction with a bank to get interest at fixed rate and pay interest on the same notional capital, the amount of the loan at floating rate. Banks offer interest rate swaps to its customers. Commodity derivatives: A commodity exchange is an organization, such as stock exchange, organizing futures trading in commodities. The main commodity exchanges in India are the NCDEX and MCX both of which offer on line trading facility. These markets trade contracts for which the underlying asset is commodity. It can be an agricultural commodity such as wheat, soybeans, rapeseed, cotton, or precious metals like gold.

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Global market
Global capital market mainly consists and depends on three continents: 1. US 2. ASIA 3. EURPOE

1.US CAPITAL MARKET

A. NEW YORK STOCK EXCHANGE The New York Stock Exchange (NYSE) is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at US$13.39 trillion as of Dec 2010. Average daily trading value was approximately US$153 billion in 2008. The NYSE is operated by NYSE Euronext, which was formed by the NYSE's 2007 merger with the fully electronic stock exchange Euronext. The NYSE trading floor is located at 11 Wall Street and is composed of four rooms used for the facilitation of trading. A fifth trading room, located at 30 Broad Street, was closed in February 2007. The main building, located at 18 Broad Street, between the corners of Wall Street and
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Exchange Place, was designated a National Historic Landmark in 1978, as was the 11 Wall Street building. B. DOW JONES STOCK EXCHNAGE

The Dow Jones Industrial Average (Dow or DJIA) is one of the most closely followed stock market indexes in the world. Although the Dow is watched by millions of people on a daily basis, many of its viewers neither understand what the Dow really measures or represents, nor do they understand how to capitalize on the information provided to them. Lets look at the structure of the Dow, an important type of investment vehicle that replicates the performance of the Dow, and three investment strategies you can use to bolster your investment knowledge, experience and net worth.

Structure of the Dow Jones Industrial Average

The DJIA was created in 1896, and it is the second-oldest stock market index in the U.S. Only the Dow Jones Transportation Average has a longer history. The DJIA consists of 30 large-cap blue chip companies that are, for the most part, household names. Ironically, the DJIA is no longer a true proxy for the industrials sector, because only a fraction of the companies that make up the Dow are classified as industrials. The remaining companies are assigned to one of the remaining sectors found in the Global Industry Classification System. As the chart below shows, the only sector that is not represented by a company in the DJIA is the utilities sector.

In addition to the sector diversity of the Dow, further diversification is provided by the multinational operations of its constituents. This means that investors can gain indirect exposure to the international markets, and use the global diversification of the companies in the index to hedge against the negative impact of a weak U.S. economy. Moreover, the

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companies that make up the Dow generate a significant amount of revenue each year. This helps to reduce the business risk of the companies that make up the index

Introduction to NASDAQ Stock Exchange Introduction NASDAQ, the first electronic securities market without a trading hall, was founded in 1971. The shares in the market had been more than 5700 by May 31, 2004. The Chinese public companies here have been 15. Three parts make up NASDAQ stock exchange: The NASDAQ National Market, NASDAQ Small Cap Market, and OTCBB (Over The Counter Bulletin Board). Among the public companies in NASDAQ, finance category occupies 19%, technology 18%, manufacturing 11%, communication 70%. At present 93.6% of the software industry, 84.8% of the semiconductor industry, 84.5% of the computer and peripheral units, 87.1% of the communication industry have been public in NASDAQ. The famous high-tech companies like Microsoft, Intel, Yahoo, ipod and Dell as well as some foreign companies like TOYOTA, Ecricsson, Canon, NEC, China Qiaoxing Universal, China.com, Yaxin, Sina, Netease, are listing in the market too. The trading volume of the NASDAQ from 1990 to 1998 has been increased 1120%, far higher than the 452% of the NYSE. And NASDAQ has been the winner of the shares trading volume increase. Not long ago many companies have been proud of being public in NASDAQ. NASDAQ becomes the names for technology and new public companies. In 2002, the fall of the four kings in NASDAQ Microsoft, Cisco, Intel and Dell leads to the lowest return rate in the composite Index in the history, that is, 39.2%. Meanwhile NASDAQ is the most speculative stock market. The listed Qualcomm in here increase d by 3000% in 1999, eToys (ETYS) 99%.

2. ASIA stock market

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A. Tokyo Stock Exchange Location Tokyo, Japan Founded 1878 Owner Tokyo Stock Exchange Group, Inc. Key people Taizo Nishimuro, Chairman Atsushi Saito, President & CEO Yasuo Tobiyama, MD, COO & CFO Currency Japanese yen No. of listings 2,292 MarketCap US$3.8 trillion (Dec 2010)[1] Volume US$3.7 trillion (Dec 2009) Indexes TOPIX Nikkei 225 Website TSE.or.jp

The main trading room inside TSE Arrows of the Tokyo Stock Exchange, where trading is currently completed through computers. The Tokyo Stock Exchange, called Tsh or TSE for short, is located in Tokyo, Japan and is the third largest stock exchange in the world by aggregate market capitalization of its listed companies. The Tokyo Stock Exchange had 2,292 listed companies with a combined market capitalization of US$3.8 trillion as of Dec 2010. Structure
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The TSE is incorporated as a kabushiki kaisha with nine directors, four auditors and eight executive officers. Its headquarters are located at 2-1 Nihonbashi-kabutocho, Ch, Tokyo. "Kabutocho" is the largest financial district in Japan. Its operating hours are from 9:00 to 11:00 am, and from 12:30 to 3:00 pm. From April 24, 2006, the afternoon trading session started at its usual time of 12:30 p.m. Stocks listed on the TSE are separated into the First Section for large companies, the Second Section for mid-sized companies, and the Mothers (Market of the high-growth and emerging stocks) section for high-growth startup companies. As of October 31, 2010, there are 1,675 First Section companies, 437 Second Section companies and 182 Mothers companies. The main indices tracking the TSE are the Nikkei 225 index of companies selected by the Nihon Keizai Shimbun (Japan's largest business newspaper), the TOPIX index based on the share prices of First Section companies, and the J30 index of large industrial companies maintained by Japan's major broadsheet newspapers. 92 domestic and 10 foreign securities companies participate in TSE trading. See: Members of the Tokyo Stock Exchange On 15 June 2007, the TSE paid $303 million to acquire a 4.99% stake in Singapore Exchange Ltd.

B.

NIKKEI 225 STOCK EXCHANGE

The Nikkei 225 , more commonly called the Nikkei, the Nikkei index, or the Nikkei Stock Average is a stock market index for the Tokyo Stock Exchange (TSE). It has been calculated daily by the Nihon Keizai Shimbun (Nikkei) newspaper since 1950. It is a price-weighted average (the unit is yen), and the components are reviewed once a year. Currently, the Nikkei is the most widely quoted average of Japanese equities, similar to

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the Dow Jones Industrial Average. In fact, it was known as the "Nikkei Dow Jones Stock Average" from 1975 to 1985. The Nikkei 225 began to be calculated on September 7, 1950, retroactively calculated back to May 16, 1949. Since January 2010 the index is updated every 15 seconds during trading sessions. The Nikkei 225 Futures, introduced at Singapore Exchange (SGX) in 1986, the Osaka Securities Exchange (OSE) in 1988, Chicago Mercantile Exchange (CME) in 1990, is now an internationally recognized futures index. The Nikkei average has deviated sharply from the textbook model of stock averages which grow at a steady exponential rate. The average hit its all-time high on December 29, 1989, during the peak of the Japanese asset price bubble, when it reached an intra-day high of 38,957.44 before closing at 38,915.87, having grown sixfold during the decade. Subsequently it lost nearly all these gains, closing at 7,054.98 on March 10, 2009 81.9% below its peak twenty years earlier. Another major index for the Tokyo Stock Exchange is the Topix. On March 15, 2011, the second working day after the massive earthquake in the northeast part of Japan, the index dropped over 10% to finish at 8605.15, a loss of 1,015 points. This put it at its lowest close since March 10, 2009.

C. Straits Times Index stock exchange The FTSE Straits Times Index (STI) is a capitalization-weighted stock market index that is regarded as the benchmark index for the Singapore stock market. It tracks the performance of the top 30 companies listed on the Singapore Exchange. It is jointly calculated by Singapore Press Holdings (SPH), Singapore Exchange (SGX) and FTSE Group (FTSE).
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History The STI has a history dating back to 1966. Following a major sectoral re-classification of listed companies by the Singapore Exchange, which saw the removal of the "industrials" category, the STI replaced the Straits Times Industrials Index (STII) and began trading on 31 August 1998 at 885.26 points, in continuation of where the STII left off. At the time, it represented 78% of the average daily traded value over a 12-month period and 61.2% of total market capitalization on the exchange. The STI was constructed by SPH, the Singapore Exchange and SPH's consultant, Professor Tse Yiu Kuen from the Singapore Management University (formerly from the National University of Singapore). It came under formal review at least once annually and was also reviewed on an ad-hoc basis when necessary. One such review, for instance, raised the number of stocks from 45 to 50, which took effect when trading resumed on 18 March 2005. This change reduced the index representation of the average daily traded value to 60%, while increasing its total market capitalization to 75%. The STI was again revamped and relaunched in January 2008. As part of a new partnership between SPH, SGX and FTSE, the number of constituent stocks was reduced from about 50 to 30 and the index was re-calculated using FTSE's methodology. Besides the STI, the partners also developed a family of indices including the FTSE ST Dividend Index, FTSE ST China Top tradable index, FTSE ST Catalist Index and FTSE ST Maritime Index as well as 19 Supersector and 39 Sector indices. For the purposes of computing the indices, stocks are classified using the Industry Classification Benchmark (ICB). D. HANG SENG STOCK EXCHANGE Type Stock exchange Location Victoria, Hong Kong, Hong Kong Founded 1891

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Owner Hong Kong Exchanges and Clearing Currency Hong Kong dollar No. of listings 1,421 Market Cap USD$2.67 trillion (Feb 2011) Indexes Hang Seng Index Website hkex.com.hk

Hang Seng Index (HSI) is one of the best-known indexes in Asia , Hang Seng Index (HSI) is the benchmark of the Hong Kong stock market, and is widely used by fund managers as their performance benchmark. Hong Kong Futures Exchange (HKFE) first introduced Hang Seng futures contracts in May 1986 followed by the introduction of Hang Seng options contracts in March 1993. These contracts provide investors with a set of effective instruments to manage portfolio risk and to capture index arbitrage opportunities. The popularity of Hang Seng futures and options has developed gradually, with increasing domestic and international investors' participation. The Hang Seng Index (HSI) is a market capitalization-weighted index (shares outstanding multiplied by stock price) of the thirty-three constituent stocks. The influence of each stock on the Index's performance is directly proportional to its relative market value. Constituent stocks with higher market capitalization will have greater impact on the Index's performance than those with lower market capitalization. The thirty-three constituent stocks are grouped under Commerce and Industry, Finance, Properties, and Utilities sub-indices. These stocks account for about 70% of the total market capitalization of all stocks listed on The Stock Exchange of Hong Kong Ltd.

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E.

Introduction of TWSE

TWSE, Taiwan Stock Exchange Corporation, maintains stock price indices, to allow investors to grab both overall market movement and different industrial sectors' performances conveniently. The indices may be grouped into market value indices and price average indices. The former are similar to the Standard & Poor's Index, weighted by the number of outstanding shares, and the latter are similar to the Dow Jones Industrial Average and the Nikkei Stock Average. The Taiwan Stock Exchange Capitalization Weighted Stock Index ("TAIEX") is the most widely quoted of all TWSE indices. The base year value as of 1966 was set at 100. TAIEX is adjusted in the event of new listing, de-listing and new shares offering to offset the influence on TAIEX owing to non-trading activities. TAIEX covers all of the listed stocks excluding preferred stocks, full-delivery stocks and newly listed stocks, which are listed for less than one calendar month. The other market value indices are calculated and adjusted similarly to that of TAIEX only with different groupings of stocks included for calculation. Non-Finance Sub-Index, Non-Electronics Sub-Index, and Non-Finance Non-Electronics Sub-Index include stocks in non-finance sector, non-electronics sector, and non-finance non-electronics sector, out of the TAIEX Component Stocks. The Industrial Sub-Indices are calculated for different industrial sectors. Starting December 1986, eight Industrial Sub-Indices were introduced, i.e. Glass and Ceramic, Textile, Food, Plastic and Chemical, Electrical, Paper and Pulp, Building Material and Construction, Finance and Insurance. In August 1995, TWSE introduced additional 14 Industrial Sub-Indices, i.e. Cement, Plastic, Electric Machinery, Electric and Cable, (Chemical, Biotechnology, and Medical Care), Glass and Ceramic, Iron and Steel, Rubber, Automobile, Electronics, Shipping and Transportation, Tourism, Trading and Consumers' Goods, Other. In July 2007, TWSE also introduced additional 11 Industrial Sub-Indices, i.e. Chemical, Biotechnology and Medical Care, (Oil, Gas and Electricity), Semiconductor, Computer and Peripheral Equipment, Optoelectronic, Communications
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and Internet, Electronic Parts/Components, Electronic Products Distribution, Information Service, Other Electronic. This expansion is to give a broader perspective of industrial performances and a more comprehensive comparison with the overall market trend.

3.STOCKEXCHANGE IN EUROPE

A. London stock exchange

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Type Stock Exchange Location London, United Kingdom Founded 1801 Owner London Stock Exchange Group Christopher S. Gibson-Smith, Key people (Chairman) Xavier Rolet, (CEO) Currency GBX No. of listings 2,966 (Dec 2010) MarketCap US$3.6 trillion (Dec 2010)[1] Volume US$1.7 trillion (Dec 2009) FTSE 100 Index Indexes FTSE 250 Index FTSE 350 Index
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FTSE SmallCap Index FTSE All-Share Index Website londonstockexchange.com

The London Stock Exchange is a stock exchange located in the City of London, London, United Kingdom. As of December 2010, the Exchange had a market capitalization of US$3.6 trillion, making it the fourth-largest stock exchange in the world by this measurement (and the largest in Europe). The Exchange was founded in 1801 and its current premises are situated in Paternoster Square close to St Paul's Cathedral in the City of London. The Exchange is part of the London Stock Exchange Group

B. CAC 40 STOCK EXCHNAGE Foundation 1987 Operator Euronext Exchanges Euronext Paris Constituents 40 Type Large cap Market cap 1.031 trillion (end 2009) Weighting Market value-weighted method Related CAC Next 20, CAC Mid 60, CAC
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indices Small Website www.nyse.com/cac40

The CAC 40 is a benchmark French stock market index. The index represents a capitalization-weighted measure of the 40 most significant values among the 100 highest market caps on the Paris Bourse (now Euronext Paris). It is one of the main national indices of the pan-European stock exchange group Euronext alongside Brussels' BEL20, Lisbon's PSI-20 and Amsterdam's AEX. The CAC 40 takes its name from the Paris Bourse's early automation system Cotation Assiste en Continu (Continuous Assisted Quotation). Its base value of 1,000 was set on 31 December 1987, equivalent to a market capitalisation of 370,437,433,957.70 French francs.[2] In common with many major world stock markets, its all-time high to date (6922.33 points) was reached at the peak of the dot-com bubble in September 2000. In 1 December 2003, the index's weighting system switched from being dependent on total market capitalisation to free float market cap only, in line with other leading indices.

C. DAX DAX 30 chart in the Frankfurt Stock Exchange Foundation 1 July 1988 Operator Deutsche Brse Exchanges Frankfurt Stock Exchange Constituents 30 Type Large cap

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Market cap 442.5 billion (end 2008) Weighting Market value-weighted method Related MDAX, TecDAX, koDAX indices Website DAX homepage The DAX (Deutscher Aktien IndeX, formerly Deutscher Aktien-Index (German stock index) is a blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. Prices are taken from the electronic Xetra trading system. According to Deutsche Brse, the operator of Xetra, DAX measures the performance of the Prime Standards 30 largest German companies in terms of order book volume and market capitalization. The L-DAX Index is an indicator of the German benchmark DAX index's performance after the Xetra electronic-trading system closes based on the floor trading at the Frankfurt Stock Exchange. The L-DAX Index basis is the "floor" trade (Parketthandel) at the Frankfurt stock exchange; it is computed daily between 09:00 and 17:30 Hours CET. The L-DAX index (Late DAX) is calculated from 17:30 to 20:00 CET. The Eurex, a European electronic futures and options exchange based in Zurich, Switzerland with a subsidiary in Frankfurt, Germany, offers options (ODAX) and Futures (FDAX) on the DAX from 08:00 to 22:00 CET. The Base date for the DAX is 30 December, 1987 and it was started from a base value of 1,000. The Xetra system calculates the index after every 1 second since January 1, 2006.

PRODUCT AND SERVICE IN GLOBAL MARKET

Product and service in U.S. capital market: U.S. capital markets cover the two main stock exchanges which are following.
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i.

Product and service in Dow Jones Stock Exchange

DOW JONES INDEX Dow Jones Indexes licenses its index families to qualified institutions for use as the basis of investment products, such as ETFs, mutual funds, exchange-traded derivatives and structured products. Available for licensing are all Dow Jones-branded equity indexes as well as fixed-income, alternative and portfolio indexes. If you are interested in licensing Dow Jones Indexes as the basis of investment products, please contact your local product licensing representative. To view indexes currently licensed as the basis of investment products, please view our client list.

DATA SERVICES Dow Jones Indexes licenses its index data and other related data in various packages and formats designed to meet the needs of financial institutions and media. Real-time and delayed index values are available for licensing for display and distribution on a variety of media and platforms. End-of-day index values and index component data are offered for research and analysis, and for use as the basis for financial products. Total-return data services are offered for U.S.-traded companies seeking to fulfill proxy compliance requirements.

CUSTOM SOLUTION Dow Jones Indexes is your premier partner for customized indexes to suit your special requirements. With our wealth of expertise and resources we can help you find a new approach to measuring most any equity market. We'll develop a methodology to meet

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your index needs and can calculate and disseminate the index according to your specifications. Whether you are looking for a unique basis for a range of investment products, require Intraday Indicative Values (IIVs), or would like to align an existing index with your specific investment mandates, the possibilities are endless. Through Dow Jones Indexes Custom Solutions, we provide pension plans, consultants, asset managers, brokerages, research firms, media and exchanges with indexes made to measure the markets from new angles. For examples of custom indexes currently calculated or maintained by Dow Jones Indexes, please visit our Custom Indexes page.

ii.

Product and service in NASDAQ

NASDAQ OMX Global Data Products NASDAQ OMX Global Data Products is focused on creating innovative data products that provide unsurpassed market transparency to institutional, retail and individual investors. Product offerings include real-time data feeds, web-based reports and plug-and-play technology for instant access to market data. Covering the exchanges in the United States, Copenhagen, Stockholm, Helsinki, Iceland, Riga, Tallinn and Vilnius, and most recently NASDAQ OMX Europe, Global Data Products is your source for market information worldwide. Global Data Products is a recognized exchange leader in the market data space and we continue to provide all customers with innovative data products that provide transparency into the market and help to facilitate strong business decisions when making investments.

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NASDAQ OMX Global Data Products offers customers:

World-Class Products Providing superior speed and incomparable market depth through innovative, global market data products designed to meet new industry challenges.

World-Class Service Representing the best data feeds from the leading exchange, achieving recognition from the Software & Information Industry Associations (SIIA) Financial Information Services Division (FISD) for exemplary customer service and communications.

World-Class Distribution revolutionizing the market data industry with new plug-and-play applications.

World-Class

Transparency

Delivering

unsurpassed

market

transparency and constantly striving to improve upon the best and most complete view of the market.

PRODUCT AND SERVICE IN ASIA MARKET

i. Product and service in NIKKEI 225 Stock exchange

Product & Services

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The basic definition of stock index is a statistical measure of the changes in a portfolio of stocks representative the overall market. In doing an investment, investor will face come risk from the changes of the stock price. There is alternative investment in trading stock that could minimize the risks and would protect from the adverse of price fluctuating, this kind of investment is called future contacts or index future. A future contract is an obligation to receive or to deliver a financial instrument or contract sometime in the future but a price that is agreed upon today. In index future investor is able to take a short position first or sell the contract on hopes that the price will go down or the investor may able to take long position or buy the contracts on hope that the price will go up. Nikkei 225 Nikkei 225 is based on the Nikkei 225 Index (Nikkei Stock Average), a well-known global benchmark index representative the trend of Japanese stocks. Nikkei 225 consists of 225 stocks that are listed on Tokyo Stock Exchange (TSE). Until now Nikkei 225 is a best indicator to representative the movement stock of prices in TSE. The index was introduced by Nihon Keizai Shimbun on May 16th 1949. Today Nikkei 225 futures continue to be one of the worlds leading stock INDEX Futures products

ii.

Product service in hang seng stock exchange

Funds ETF Indexes under the Hang Seng Family of Indexes are widely used by investors worldwide to create index-linked products and derivatives including structured products, index funds and Exchange-traded funds("ETFs"). A licence is required for the creation of ETFs and index funds which track the performance of a particular index in the Hang Seng Family of Indexes. Data Dissemination

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The Hang Seng Family of Indexes offers valuable information for market analysis and product creation. Real-time index data and Delayed index data for the Hang Seng Family of Indexes is available from Hang Seng Indexes or from Hang Seng Indexes major information vendors. Licences are available from Hang Seng Indexes for the dissemination of the Hang Seng Family of Indexes regardless on a real-time or delayed basis.

Data Products The Hang Seng Family of Indexes offers valuable information for market analysis and product creation. 1. Data Product Service Data Product Service is available for subscription by companies and includes the following data files: Index Files: provides end-of-day and next day open reference index level data, including daily high, low and close values Constituent Files: provides end-of-day and next day open reference data, including number of issued shares, market capitalisation, freefloat-adjusted factor and constituents' weighting Corporate Action File: summarizes constituents' corporate actions (e.g. Rights Issues, Bonus Issues, Stock Splits, and Stock Consolidation) Dividend File and Post ex-date Adjustment File: provides constituents' dividend data and ex-dividend dates Data files will be available on daily basis and distributed directly through us via email or through our designated data vendors. For product specification and sample data files, please contact us for more information. 2. Historical Data

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The following data packages are available for subscription by companies or individuals: Daily intraday index value Daily open-high-low-close index value

Customised Indexes In addition to the compilation of the Hang Seng Family of Indexes, Hang Seng Indexes also provides tailor-made indexing solutions for different clients according to their benchmarking or product structuring requirements.

Classification System

The Hang Seng Industry Classification System (HSICS) is a comprehensive industry classification system designed for the Hong Kong stock market. Prompted by the listing of a wide variety of companies in different industries in Hong Kong, it meets the need for a detailed industry classification that reflects stock performance in different sectors. Covering 11 industries and 28 sectors, the two-tier HSICS caters for the unique characteristics of the Hong Kong stock
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market while maintaining international compatibility with mapping to international industry classification systems. Classification Guidelines The primary parameter of industry classification is the sales revenue from each business area of a listed company. Profit or assets will also be taken into consideration where these better reflect the companys business. A company will be assigned to a sector if the majority of its sales revenue (or profit or assets if relevant) are derived from that sector or its business fits most closely within that sector. To preserve stability in the classification of a company, once a company is classified to a sector, it will remain there unless there is a significant change in how the company derives its revenue (or profit or assets if relevant). Source of Information The industry classification of each listed company is based on audited financial information of the latest financial year contained in the companys annual report. Other publicly available information, such as prospectuses, interim reports or company announcements will be used if relevant. Newly Listed Companies Industry classification of an IPO stock will be undertaken before a company is listed. The assessment of sector classification of an IPO stock will be based on information obtained from the companys IPO prospectus.

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System Review A review of the HSICS will be conducted annually. Changes to the HSICS, if any, will be made in line with the developments in the market environment

Product and service in Shanghai comp. stock exchange 1Course of Development

Pan-China Assets Appraisal Co., Ltd. is reformed from the former China Financial Consulting Co., Ltd., Pan-China Assets Appraisal Co., Ltd. and Beijing Dewai Appraisal Co., Ltd.

Of these companies, the former Pan-China Assets Appraisal Co., Ltd. used to be a most important role in the assets appraisal sector in China, and was one of the most influential assets appraisal institutions in China;

The former China Financial Consulting Co., Ltd. used to be a professional institution established by the Ministry of Finance in 1982, which was one of the earliest professional institutions in China to provide consulting services for enterprises including assets appraisal service and one of the largest assets appraisal companies in the assets appraisal sector in China;

And the former Beijing Dewai Appraisal Co., Ltd., formed in 1993, used to be the earliest professional institution specializing in assets approval in China, which completed its reorganization by the end of the year 1999 and became one of the large-scale assets appraisal institutions in China.

Pan-China Assets Appraisal Co., Ltd. after the merger has maintained its leading position in the assets appraisal sector in terms of the scope of service, the number of appraisers, the

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level of expertise and the concept of service, ranking itself as one of the most competitive and innovative institutions in the sector of certified public assets appraisal in China.

2.Core Values

Seek Credibility with Quality Adhering to Moral Ethics Abide by the profession tenet of service, dedication, cooperation, excellence Persist in the profession principle of independence, objectivity, fairness and justice People-oriented Common Development Uphold people-oriented development concept Seek coordination of personal and collective interests Realize common development of Tianjian Xingye and customers Professionalism Combination of Chinese and Western Elements Inherit excellent traditions of Chinese culture Win market with superior professional service Gain social recognition with outstanding expertise Progressive Innovation Seeking Superiority Keep abreast with the times Aim at revitalizing, pushing forward and reinforcing Chinese certified public valuer industry Work persistently Avail of superior expertise to offer top professional value-increasing service to customers .

3. Staff composition

After nearly two decades of growth, our professional team has attracted and gathered a galaxy of experts and talents who are equipped with professional knowledge, strong business quality, pioneering spirit, commitment to work, organization skill, service awareness,and rich experience. In the process of years of work, a team consisting of senior and medium level engineering technology experts, covering steel iron,
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petrol-chemicals, non-ferrous metals, building materials, agriculture, pharmaceuticals, machinery and new high-tech companies, pools efforts together. The Company boasts over its team of 200 experts, nearly 100 Chinese certified public valuers and over 10 mineral right appraisers, many of whom hold multiple professional qualifications at hand including Certified Public Accountant, Certified Real Estate Appraiser, Land Value Estimator, and Cost Engineer, etc.

4. Distribution of Service Departments

The Head Office of the Company is located in Biejing, with branches established in Shanghai, Shenzhen, Liaoning, Jiangsu, Sandong, Hunan and Anhui and representative offices in Wulumuqi, Shijianzhuang, Xian, Taiyuan, Chongqing, Wuhan, Chengdu, Zhengzhou and Fuzhou. In addition, the Company has closely-cooperated structures in many other cities in China, which are able to arrange the Companys branches to provide their convenient and fast services based on the distribution of the assets of the customers and on the basis of the principle of vicinity.

9. Professional Supeirority

Professional Team

The Company takes pride in its over 200 professional workers, more than 100 certified public valuers,more than 30 real estate appraisers, and more than 10 land valuers, a large part of whom hold certified public accountant qualification, adept at finance, accounting and financial analysis, capable of appraisal from financial analysis perspective, while cooperating impeccably with accounting firms. Hundreds of technological experts specialized in various sciences such as steel iron, petrol-chemicals, non-ferrous metals, building materials, agriculture, pharmaceuticals, machinery and new high-tech, are cooperating with the Company to ensure professional
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standard of the appraisal services.

Professional Experience

The Company offers asset evaluation and the relevant consulting services of over ten thousand items of appraisal businesses for various purposes to hundreds of enterprises engaged in all industries in the national economy. These services extend to all the provinces and cities in China. Areas of service cover finance, insurance electricity, petroleum, chemicals, telecommunications, broadcasting, metallurgy, machinery, electronics, building material, business, agriculture, etc. Thd aculmulated appraised asset has surpassed RMB 15, 000 billion, which makes the Company leader in the domestic asset appraisal industry. The income of asset appraisal business has also stayed in the leading position of the industry for years running.

Professional Technology

The Company has formulated its strict working procedure and confidential working quality control principle, proud of its advanced software and hardware support system and complete knowledge base, as well as scientific work flow, a perfect internal control system and a professional continuing education and training system. The Company has an expert back-up team composed of experienced experts in the related science working in research institutes. With the strong support by the related government authorities and the science and research institutes, a high-level professional guidance over various complicated projects can be ensured.

Professional Network

The success of the Group asset appraisal business based on superior expertise lies in the concerted cooperation among the local business divisions of Beijing, Shanghai, Shenzhen,

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Liaoning, Jiangshu, Shandong, Hunan and Anhui, etc. and the local offices covering Wulumuqi, Wuhan, Chengdu, Xian, Chongqing, Jinani, ShiJiazhuang, Taiyuan, Zhengzhou and Fuzhou, etc, under the leadership of project control center; thanks to state-of-the-art software and hardware support system, complete knowledge base, scientific work flow and perfect internal control system, which provide convenient, simple, low cost network services for the customers of the Group.

Professional Communication

The Company is known for its honesty, rigorousness, cooperation and innovation, and its quality of work has been highly acclaimed by the relevant government supervision department, industry supervision department and customers. Zero penalty from supervisiory organs at all levels and departments, zero complaints from customers, and perfect occupational reputation have, as a result, established a good communication channel with the government supervisory authorities, the industry supervisory authorities and the other cooperated institutions.

10. Research and Innovation Research and Innovations not just a slogan, but, rather, an action taken. This strategy has long been sustaining the technological superiority in the industry.

From: Huaneng Power International ,Inc.( N-share and H-share as well as A-share listed) is the first Chinese mainland company listed in the New York Stock Exchange, and its appraisal report is the exclusive one recognized by the New York Stock Exchange, which was prepared by a China appraisal company.

To: The international merger of Huaneng Power with Shandong Huaneng (H-share and N-share listed company) is approved by the state gaverment, achieving the enterprise value maximization. It is the first case of major acquisition in international

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capital markets in the Chinese mainland where international capital market evaluation practice is adopted.

To: CATIC Shenzhen Company Limited is an H-share listed enterprise, the first A-stock company in China to be listed overseas as a capital-injected company.

To: The restructuring and listing of China Bank of Communications, which is the first large-scale state-owned bank in China to undergo restructuring and listing.

We have solved one tough professional problem after another for our customers and, in the meantime, provide one classical example after another for Chinas appraisal industry.

In the appraisal of the bank bad assets, we employ generalized non-linear regression theory in the evaluation of batch assets, and work in cooperation with four major assets management companies in the in-depth researches of the fair value of the bank bad assets.

In the appraisal of insurance industry, we undertake appraisal of life insurances of many companies like China Life Insurance Company, China Xinhua Insurance Company, and China Re-insurance Company as well as property insurances, pioneeringly suggesting that the value of a life insurance company is composed of the book value and the business value as reflected in the financial statements and reports.

In the appiasal of derivative fiancial instruments, we apply Monte Carlo Simulation approach to achieve the probability of future interest rate, having initiated the beginning of derivative fiancial instruments appraisal in China.

In the appiasal of power enterprises, we conduct evaluations of coal-fired power, hydropower, wind-mill power, and nuclear power by adopting cost method, income
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approach and market method respectively, having thus accumulated rich experiences. In the appiasal of intellectual property rights, we, as entrusted by the National Property Right Bureau, undertake financial analyses and researches on the intellectual property right assessment, and decode the mystery of the assessment of the intellectual property right from the financial prospective.

We take an active part in the stipulation of appraisal criteria, solely undertaking the compilation of guides to appraisal of state-owned financial assets and contributing to the development of the evaluation industry.

11. International Professional Platform

Hanhua Appraisal Value Co., Ltd. is a professional platform for international appraisal businesses of our Company, which has, ever since its formation, provided customers with appraisal services in areas including industry, business land property, machine equipment, intangable assets and infra-structure facilities, overall enterprise value and various derivative financial projects.

Hanhua Appraisal Value Co., Ltd. is a professional appraisal value service company registered in Hong Kong. Since its formation in 1997, the company has provided, with its comprehensive, rich international experiences, independent, objective and impartial professional appraisal value services for domestic and overseas companies and entities that invest in China. Its headquarters is located in Hong Kong, with its operation general office in Beijing. To satisfy the ever-growing domestic demands, the company has set up its business representative offices in Shanghai, Chongqing and Fuzhou respectively and its liason offices in Chongqing, Fuzhou, Guangzhou and Harbin. In addition, the company has expanded its allies in Asian-Pacific regions (including Australia and Japan), Europe (Britain), and America (the United States), as well as mainland of China, Hong Kong, Macao and Taiwan. The principal members of the company are all qualified for professional practice in

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countries and regions including Britain, the United States, Australia and Hong Kong, rich in experiences in appraisal theory and practice, and having acted in important positions in world-famous appraisal value companies and accomplished a great number of major appraisal projects.

Product and service in Europe capital market

a. Product and service in FTSE stock exchange Real time Data A real time market data service provides all the activity of the London Stock Exchange markets, live, as it happens. This section provides more details on the different levels of data available Trading in Domestic and international services Our trading platforms are designed to maximise liquidity in the stocks traded on them. Issuer Services and Annual Report Services Generate Global Visibility The London Stock Exchanges Annual Reports Service will build awareness for your company through a global network of media partners reaching 100 million individual investors. The Annual Reports Service puts your companys information in the hands of interested investors while helping you maximize the efficiencies of your IR budget. Matching and reconcilation

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UnaVista is a global, hosted platform for all matching, validation & reconciliation needs. UnaVista offers a range of business solutions including Post-Trade Services, Data Solutions & Reconciliations.

Connectivity The Exchange currently offers several types of connectivity with varying levels of management and performance. This section provides more information about connecting to the Exchange

References and Historical data Every second of the trading day the London Stock Exchange generates masses of information ranging from data on individual trades and share price movements to company announcements.

b. Product and service in DAX Stock exchange

Direct Data Feeds Deutsche Brses real-time data feeds provide market participants with trading relevant information at highest speed. Algo Trading Products Deutsche Brse offers a full range of data solutions to support algo traders in the development and execution of sophisticated trading algorithms. Our state-of-the-art network infrastructure ensures that our clients receive data with minimum latency. Market Data Our market data Information Products contain data from a wide range of sources and satisfy the needs of traders, algo traders, investment advisors, fund managers, data vendors and other market participants.

Historical Market Data

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Historical Market Data from Deutsche Brse provides a reliable and solid basis for the development and execution of investment strategies and risk analyses. News Services Deutsche Brse provides leading edge news services to its clients. AlphaFlash and the Market News International (MNI) products benefit from the fact that our subsidiary MNI is a fully accredited news agency whose experienced journalists have direct access to government lock-up rooms and embargoed news.

Analytics & Reporting Services Our analytics and reporting services support our clients when it comes to fulfilling reporting requirements and risk management needs. Reference Data Deutsche Brse offers a range of reference data services that help market participants improve process and settlement quality. Most of the services are based on WSS (Securities Service System) which is also used to feed Deutsche Brses trading and settlement systems.

Chapter-4
Trading Pattern of the Indian Stock Market
Trading in Indian stock exchanges is limited to listed securities of public limited companies. They are broadly divided into two categories, namely, specified securities (forward list) and non-specified securities (cash list). Equity shares of dividend paying, growth-oriented companies with a paid-up capital of atleast Rs.50 million and a market capitalization of atleast Rs.100 million and having more than 20,000 shareholders are, normally, put in the specified group and the balance in non-specified group. Two types of transactions can be carried out on the Indian stock exchanges: (a) spot delivery transactions "for delivery and payment within the time or on the date stipulated
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when entering into the contract which shall not be more than 14 days following the date of the contract" : and (b) forward transactions "delivery and payment can be extended by further period of 14 days each so that the overall period does not exceed 90 days from the date of the contract". The latter is permitted only in the case of specified shares. The brokers who carry over the outstandings pay carry over charges (cantango or backwardation) which are usually determined by the rates of interest prevailing. A member broker in an Indian stock exchange can act as an agent, buy and sell securities for his clients on a commission basis and also can act as a trader or dealer as a principal, buy and sell securities on his own account and risk, in contrast with the practice prevailing on New York and London Stock Exchanges, where a member can act as a jobber or a broker only. The nature of trading on Indian Stock Exchanges are that of age old conventional style of face-to-face trading with bids and offers being made by open outcry. However, there is a great amount of effort to modernize the Indian stock exchanges in the very recent times.

Over The Counter Exchange of India (OTCEI) The traditional trading mechanism prevailed in the Indian stock markets gave way to many functional inefficiencies, such as, absence of liquidity, lack of transparency, unduly long settlement periods and benami transactions, which affected the small investors to a great extent. To provide improved services to investors, the country's first ringless, scripless, electronic stock exchange - OTCEI - was created in 1992 by country's premier financial institutions - Unit Trust of India, Industrial Credit and Investment Corporation of India, Industrial Development Bank of India, SBI Capital Markets, Industrial Finance Corporation of India, General Insurance Corporation and its subsidiaries and Can Bank Financial Services.

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Trading at OTCEI is done over the centres spread across the country. Securities traded on the OTCEI are classified into:

Listed Securities - The shares and debentures of the companies listed on the OTC can be bought or sold at any OTC counter all over the country and they should not be listed anywhere else

Permitted Securities - Certain shares and debentures listed on other exchanges and units of mutual funds are allowed to be traded

Initiated debentures - Any equity holding at least one lakh debentures of a particular scrip can offer them for trading on the OTC.

OTC has a unique feature of trading compared to other traditional exchanges. That is, certificates of listed securities and initiated debentures are not traded at OTC. The original certificate will be safely with the custodian. But, a counter receipt is generated out at the counter which substitutes the share certificate and is used for all transactions. In the case of permitted securities, the system is similar to a traditional stock exchange. The difference is that the delivery and payment procedure will be completed within 14 days. Compared to the traditional Exchanges, OTC Exchange network has the following advantages:

OTCEI has widely dispersed trading mechanism across the country which provides greater liquidity and lesser risk of intermediary charges.

Greater transparency and accuracy of prices is obtained due to the screen-based scripless trading.

Since the exact price of the transaction is shown on the computer screen, the investor gets to know the exact price at which s/he is trading.

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Faster settlement and transfer process compared to other exchanges. In the case of an OTC issue (new issue), the allotment procedure is completed in a month and trading commences after a month of the issue closure, whereas it takes a longer period for the same with respect to other exchanges.

Thus, with the superior trading mechanism coupled with information transparency investors are gradually becoming aware of the manifold advantages of the OTCEI. National Stock Exchange (NSE) With the liberalization of the Indian economy, it was found inevitable to lift the Indian stock market trading system on par with the international standards. 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, selected commercial banks and others. Trading at NSE can be classified under two broad categories: (a) Wholesale debt market and (b) Capital market. Wholesale debt market operations are similar to money market operations - institutions and corporate bodies enter into high value transactions in financial instruments such as government securities, treasury bills, public sector unit bonds, commercial paper, certificate of deposit, etc. There are two kinds of players in NSE: (a) trading members and (b) participants.

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Recognized members of NSE are called trading members who trade on behalf of themselves and their clients. Participants include trading members and large players like banks who take direct settlement responsibility. Trading at NSE takes place through a fully automated screen-based trading mechanism which adopts the principle of an order-driven market. Trading members can stay at their offices and execute the trading, since they are linked through a communication network. The prices at which the buyer and seller are willing to transact will appear on the screen. When the prices match the transaction will be completed and a confirmation slip will be printed at the office of the trading member. NSE has several advantages over the traditional trading exchanges. They are as follows:

NSE brings an integrated stock market trading network across the nation. Investors can trade at the same price from anywhere in the country since intermarket operations are streamlined coupled with the countrywide access to the securities.

Delays in communication, late payments and the malpractices prevailing in the traditional trading mechanism can be done away with greater operational efficiency and informational transparency in the stock market operations, with the support of total computerized network.

Unless stock markets provide professionalized service, small investors and foreign investors will not be interested in capital market operations. And capital market being one of the major source of long-term finance for industrial projects, India cannot afford to damage the capital market path. In this regard NSE gains vital importance in the Indian capital market system.

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Timing Trading on the BOLT System is conducted from Monday to Friday between 9:15 a.m. and 3:30 p.m. normally. Refer Notice No. 20101014-8 for call auction. Groups The scrips traded on BSE have been classified into various groups. BSE has, for the guidance and benefit of the investors, classified the scrips in the Equity Segment into 'A', 'B', 'T' and 'Z' groups on certain qualitative and quantitative parameters. Criteria for "A" Group Companies The "F" Group represents the Fixed Income Securities. The "T" Group represents scrips which are settled on a trade-to-trade basis as a surveillance measure. Trading in Government Securities by the retail investors is done under the "G" group. The 'Z' group was introduced by BSE in July 1999 and includes companies which have failed to comply with its listing requirements and/or have failed to resolve investor complaints and/or have not made the required arrangements with both the depositories, viz., Central Depository Services (I) Ltd. (CDSL) and National Securities Depository Ltd. (NSDL) for dematerialization of their securities. BSE also provides a facility to the market participants for on-line trading of odd-lot securities in physical form in 'A', 'B', 'T' and 'Z' groups and in rights renunciations in all groups of scrips in the Equity Segment. With effect from December 31, 2001, trading in all securities listed in the Equity segment takes place in one market segment, viz., Compulsory Rolling Settlement Segment (CRS). The scrips of companies which are in demat can be traded in market lot of 1. However, the securities of companies which are still in the physical form are traded in the market lot of generally either 50 or 100. Investors having quantities of securities less than the market lot are required to sell them as "Odd Lots". This facility offers an exit route to investors to dispose of their odd lots of securities, and also provides them an opportunity to consolidate their securities into market lots. This facility of selling physical shares in compulsory demat scrips is called an Exit Route Scheme. This facility can also be used by small investors for selling up to 500 shares in physical form in respect of scrips of companies where trades are required to be compulsorily settled by all investors in demat mode.

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Listed Securities The securities of companies, which have signed the Listing Agreement with BSE, are traded as "Listed Securities". Almost all scrips traded in the Equity segment fall in this category. Permitted Securities To facilitate the market participants to trade in securities of such companies, which are actively traded at other stock exchanges but are not listed on BSE, trading in such securities is facilitated as " Permitted Securities" provided they meet the relevant norms specified by BSE Tick Size: Tick size is the minimum difference in rates between two orders on the same side i.e., buys or sells, entered in the system for particular scrip. Trading in scrips listed on BSE is done with the tick size of 5 paise. However, in order to increase the liquidity and enable the market participants to put orders at finer rates, BSE has reduced the tick size from 5 paise to 1 paise in case of units of mutual funds, securities traded in "F" group and equity shares having closing price up to Rs. 15 on the last trading day of the calendar month. Accordingly, the tick size in various scrips quoting up to Rs.15 is revised to 1 paise on the first trading day of month. The tick size so revised on the first trading day of month remains unchanged during the month even if the price of scrips undergoes a change. Computation Of Closing Price Of Scrips The closing price of scrips is computed by BSE on the basis of weighted average price of all trades executed during the last 30 minutes of a continuous trading session. However, if there is no trade recorded during the last 30 minutes, then the last traded price of scrip in the continuous trading session is taken as the official closing price. Basket Trading System BSE has commenced trading in the Derivatives Segment with effect from June 9, 2000 to enable investors to hedge their risks. Initially, the facility of trading in the Derivatives Segment was confined to Index Futures. Subsequently, BSE has introduced the Index Options and Options & Futures in select individual
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stocks. Investors in the cash market had felt a need to limit their risk exposure in the market to the movement in Sensex. With a view to provide investors the facility of creating Sensex-linked portfolios and also to create a linkage of market prices of the underlying securities of Sensex in the Cash Segment and Futures on Sensex, BSE has provided to the investors as well as to its Members a facility of Basket Trading System on BOLT with effect from August 14, 2000. In the Basket Trading System, the investors through the Members are able to buy/ sell all 30 scrips of Sensex in one go in the proportion of their respective weights in the Sensex. The investors need not calculate the quantity of Sensex scrips to be bought or sold for creating Sensex-linked portfolios and this function is performed by the system. The investors can also create their own baskets by deleting certain scrips from 30 scrips in the Sensex. Further, the investors can alter the weights of securities in such profiled baskets and enter their own weights. The investors can also select less than 100% weightage to reduce the value of the basket as per their own requirements.

To participate in this system, the Members need to indicate the number of Sensex basket(s) to be bought or sold, where the value of one Sensex basket is arrived at by the system by multiplying Rs.50 to the prevailing Sensex. For example, if the Sensex is 15,000, the value of one basket of Sensex would be 15000 x 50= i.e., Rs. 7,50,000/-. The investors can also place orders by entering value of Sensex portfolio to be brought or sold with a minimum value of Rs. 50,000 for each order.

The Basket Trading System provides the arbitrageurs an opportunity to take advantage of price differences in the underlying Sensex and Futures on the Sensex by simultaneous buying and selling of baskets comprising the Sensex scrips in the Cash Segment and Sensex Futures. This would provide a balancing impact on the prices in both cash and futures markets.

The Basket Trading System thus meets the need of investors and also improves the depth in cash and futures markets.

The trades executed under the Basket Trading System are subject to intra-day trading and gross exposure limits available to the Members. The VaR, MTM margins etc, as are applicable to normal trades in the Cash Segment, are also recovered from the Members.

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Settlement Compulsory Rolling Settlement All transactions in all groups of securities in the Equity segment and Fixed Income securities listed on BSE are required to be settled on T+2 basis (w.e.f. from April 1, 2003). The settlement calendar, which indicates the dates of the various settlement related activities, is drawn by BSE in advance and is circulated among the market participants. Under rolling settlements, the trades done on a particular day are settled after a given number of business days. A T+2 settlement cycle means that the final settlement of transactions done on T, i.e., trade day by exchange of monies and securities between the buyers and sellers respectively takes place on second business day (excluding Saturdays, Sundays, bank and Exchange trading holidays) after the trade day. The transactions in securities of companies which have made arrangements for dematerialization of their securities are settled only in demat mode on T+2 on net basis, i.e., buy and sell positions of a memberbroker in the same scrip are netted and the net quantity and value is required to be settled. However, transactions in securities of companies, which are in "Z" group or have been placed under "trade-to-trade" by BSE as a surveillance measure ("T" group) , are settled only on a gross basis and the facility of netting of buy and sell transactions in such scrips is not available. The transactions in 'F' group securities representing "Fixed Income Securities" and " G" group representing Government Securities for retail investors are also settled at BSE on T+2 basis. In case of Rolling Settlements, pay-in and pay-out of both funds and securities is completed on the same day. Members are required to make payment for securities sold and/ or deliver securities purchased to their clients within one working day (excluding Saturday, Sunday, bank & BSE trading holidays) after the payout of the funds and securities for the concerned settlement is completed by BSE. This is the timeframe permitted to the Members to settle their funds/ securities obligations with their clients as per the Byelaws of BSE. The following table summarizes the steps in the trading and settlement cycle for scrips under CRS :

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DAY T

ACTIVITY
o

Trading on BOLT and daily downloading of statements showing details of transactions and margins at the end of each trading day.

Downloading of provisional securities and funds obligation statements by member brokers.

6A/7A* entry by the member-brokers/ confirmation by the custodians.

T+1

Confirmation of 6A/7A data by the Custodians upto 1:00 p.m. Downloading of final securities and funds obligation statements by members

T+2

Pay-in of funds and securities by 11:00 a.m. and pay-out of funds and securities by 1:30 p.m. The member-brokers are required to submit the pay-in instructions for funds and securities to banks and depositories respectively by 10:40 a.m.

T+2

Auction on BOLT at 2.00 p.m.

T+3

Auction pay-in and pay-out of funds and securities by 09:30 a.m. and 10:15 a.m. respectively.

The pay-in and payout of funds and securities takes places on the second business day (i.e., excluding Saturday, Sundays and bank and BSE trading holidays) of the day of the execution of the trade.
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The settlement of the trades (money and securities) done by a Member on his own account or on behalf of his individual, corporate or institutional clients may be either through the Member himself or through a SEBI registered custodian appointed by him/client. In case the delivery/payment in respect of a transaction executed by a Member is to be given or taken by a registered custodian, the latter has to confirm the trade done by a Member on the BOLT System through 6A-7A entries. For this purpose, the custodians have been given connectivity to the BOLT System and have also been admitted as clearing member of the Clearing House. In case a registered custodian does not confirm a transaction done by a Member within the time permitted, the liability for pay-in of funds or securities in respect of the same devolves on the concerned Member.

The following statements can be downloaded by the Members in their back offices on a daily basis.

h. Statements giving details of the daily transactions entered into by the Member. i. Statements giving details of margins payable by the Member in respect of the trades executed by him. j. Statements of securities and fund obligation. k. Delivery/Receive orders for delivery /receipt of securities. BSE generates Delivery and Receive Orders for transactions done by the Members in A, B1, B2 and F and G group scrips after netting purchase and sale transactions in each scrip whereas Delivery and Receive Orders for "T", "C" & "Z" group scrips and scrips which are traded on BSE on "trade-to-trade" basis are generated on a gross basis, i.e., without netting of purchase and sell transactions in a scrip. However, the funds obligations for the Members are netted for transactions across all groups of securities.

The Delivery Order/Receive Order provides information like the scrip and quantity of securities to be delivered/received by the Members through the Clearing House. The Money Statement provides scrip wise/item wise details of payments/receipts of monies by the Members in the settlement. The
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Delivery/Receive Orders and Money Statement can be downloaded by the Members in their back office Pay-in and Pay-out for 'A', 'B', 'T', 'C', "F", "G" & 'Z' Group of Securities The trades done on BOLT by the Members in all securities in CRS are now settled on BSE by payment of monies and delivery of securities on T+2 basis. All deliveries of securities are required to be routed through the Clearing House,

The Pay-in /Pay-out of funds based on the money statement and that of securities based on Delivery Order/ Receive Order issued by BSE are settled on T+2 day. Demat pay-in : The Members can effect pay-in of demat securities to the Clearing House through either of the Depositories i.e. the National Securities Depository Ltd. (NSDL) or Central Depository Services (I) Ltd. (CDSL). The Members are required to give instructions to their respective Depository Participants (DPs) specifying details such as settlement no., effective pay-in date, quantity, etc.

Members may also effect pay-in directly from the clients' beneficiary accounts through CDSL. For this, the clients are required to mention the settlement details and clearing member ID through whom they have sold the securities. Thus, in such cases the Clearing Members are not required to give any delivery instructions from their accounts.

In case a Member fails to deliver the securities, the value of shares delivered short is recovered from him at the standard/closing rate of the scrips on the trading day.

Auto delivery facility : Instead of issuing delivery instructions for their securities delivery obligations in demat mode in various scrips in a settlement /auction, a facility has been made available to the Members of automatically generating delivery instructions on their behalf from their CM Pool accounts maintained with NSDL and CM Principal Accounts maintained with CDSL. This auto delivery facility is available for CRS (Normal &
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Auction) and for trade-to-trade settlements. This facility is, however, not available for delivery of non-pari passu shares and shares having multiple ISINs. Members wishing to avail of this facility have to submit an authority letter to the Clearing House. This auto delivery facility is currently available for Clearing Member (CM) Pool accounts and Principal accounts maintained by the Members with the respective depositories. Pay-in of Securities in Physical Form In case of delivery of securities in physical form, the Members are required to deliver the securities to the Clearing House in special closed pouches along with the relevant details like distinctive numbers, scrip code, quantity, etc., on a floppy. The data submitted by the Members on floppies is matched against the master file data on the Clearing House.If there is no discrepancy, the securities are accepted. Funds Pay-in The bank accounts of Members maintained with the clearing banks, viz., Axis Bank Ltd.,Bank of India, Bank of Baroda, Canara Bank, Citi Bank, Corporation Bank, Dhanalaxmi Bank, HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd., ICICI Bank Ltd, Indusind Bank Ltd., IDBI Bank, Kotak Mahindra Bank, Oriental Bank of Commerce., Punjab National Bank, State Bank of India, Standard Chartered Bank, Union Bank of India, Yes Bank are directly debited through computerized posting for their funds settlement obligations.

In case of Members whose funds pay-in obligations are not cleared at the scheduled time, action such as levy of penalty and/or deactivation of BOLT TWSs , is initiated as per the prescribed penalty norms. Securities Pay-out Demat securities are credited by the Clearing House in the Pool/Principal Accounts of the Members. BSE has also provided a facility to the Members for transfer of pay-out securities directly to the clients' beneficiary owner accounts without routing the same through their Pool/Principal accounts in NSDL/ CDSL. For this, the concerned Members are required to give a client wise break up file which is uploaded by the Members from their offices to the Clearing House. Based on the break up given by the Members, the Clearing House instructs the depositories, viz., CDSL & NSDL to credit the securities to the Beneficiary
75

Owners (BO) Accounts of the clients. In case delivery of securities received from one depository is to be credited to an account in the other depository, the Clearing House does an inter-depository transfer to give effect to such transfers. In case of physical securities, the Receiving Members are required to collect the same from the Clearing House on the pay-out day. Funds Payout The bank accounts of the Members having pay-out of funds are credited by the Clearing House with the Clearing Banks on the pay-in day itself In case a Member fails to deliver the securities, the value of shares delivered short is recovered from him at the standard/closing rate of the scrips on the trading day. Penalty Norms For Settlement (Pay-in) Defaults Violation/s Non-fulfillment of funds obligation (viz. Normal payin, securities a) If the shortage a) - 1% of such shortage amount, and - additional 0.07% per day of the shortage amount. - Also, the trading facility of such member shall be withdrawn and the securities pay-out shall be withheld. b) If the funds shortage b) - 1% of such shortage amount, and - additional 0.07% per day of the shortage amount. - In cases where the shortage amount exceeds 20% of the BMC but less than the BMC on 6 occasions within a period of three months, then
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Shortage amount

Late fees/fines/penalty

amount is more than the Base Minimum Capital (at

shortage pay-in and present Rs.10 lakhs) : auction pay-in) and failure to deposit additional capital towards capital cushion requirement as per SEBI norms within stipulated time.

is less than the Base Minimum Capital (at present Rs.10 lakhs) :

also the trading facility of the member shall be withdrawn* and the securities pay-out due to the member shall be withheld. (*In case the members trading facility has been withdrawn on account of (b) above, then upon recovery of the complete shortages, the member shall be permitted to trade, subject to such members providing a deposit equivalent to his cumulative funds shortage amount as the funds shortage collateral. Such deposit shall be kept with the Exchange for a period of ten rolling settlements and shall be released thereafter. Such deposit shall not be available against margin liabilities and also such deposit will not earn any interest. Such deposit may be by way of cash, fixed deposit receipts of banks and/or bank guarantee.)

less than 20% of BMC, a penalty equivalent to his obligation amount or Rs.5,000/- whichever is less will be levied: -in obligations of a normal settlement, auction settlement and that of securities delivered short in the pay-in for the same settlement, then such instances of default would be considered as a single instance for the purpose of counting violations and levying penalties as above. on requirement would be considered as a
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separate instance for the purpose of counting instances of violation and levying fines/penalties as above.

Shortages The Clearing House arrives at the shortages in delivery of various scrips by the Members on the basis of their delivery obligations and actual delivery. The Members can download the statement of shortages in delivery of scrips in A, B1, B2,T, Z, F, Odd-lot & G group scrips on T+2 day, i.e., Pay-in day. After downloading the shortage details, the Members are expected to verify the same and report discrepancy, if any, to the Clearing House immediately. If no discrepancy is reported within the stipulated time, the Clearing House assumes that the shortage of a Member is in order and proceeds to auction/ close-out the same. Moreover, the value of shares delivered short is recovered from the Member at the standard/closing rate of the scrips on the trading day. Auctions An Auction Tender Notice is issued by BSE to the Members informing them about the names of the scrips short or not delivered, quantity slated for auction and the date and time of the auction session on the BOLT. The auction for the undelivered quantities is conducted on T+2 day between 2:00 p.m. and 2.45 p.m. for all the scrips under Compulsory Rolling Settlements except those in "Z" group and scrips on "trade to trade" basis which are directly closed-out. A Member who has failed to deliver the securities of a particular company on the pay-in day is not allowed to offer the same in auction. The Members, who participate in the auction session, can download the Delivery Orders in respect of the auction obligations on the same day, if their offers are accepted. The Members are required to deliver the shares in the Clearing House on the auction Pay-in day, i.e, T+3. Pay-out of auction shares and funds is also done on the same day, i.e., T+3. Self-Auction The Delivery and Receive Orders are issued by BSE to the Members after netting off their purchase and sell transactions in scrips where netting of purchase and sell positions is permitted. It is likely in some cases, a selling client has failed to deliver the shares sold in a settlement to a Member. However, this may not result in failure of the Member to deliver the shares to the Clearing House as there was a purchase transaction of his some other buying client in the same scrip and the same was netted off for the purpose of
78

settlement. In such a case, the Member would require shares so that he can deliver the same to his buying client, which otherwise would have taken place from the delivery of shares by his selling client. To provide shares to the Members in such cases, they have been given an option to submit the details of such internal shortages on floppies on pay-in day for conducting self-auction (i.e., as if they have defaulted in delivery of shares to the Clearing House). These shortages are clubbed with the normal shortages in a settlement arrived at by the Clearing House and the auction is conducted by the Clearing House for the combined shortages.

Close-out Close-out is effected for cases when no offer for a particular scrip is received in an auction or when Members who offer the scrips in auction, fail to deliver the same or shortages pertaining to those groups of securities for which auctions are not conducted. The close-out rates for different segments are as under
o

'A', 'B' and 'F' group The close-out rate is higher of the following rates : a) The highest rate of the scrip from the trading day to the day on which the auction is conducted for the respective settlement. b) 20% above the closing rate as on the day of auction/close out of the respective settlement.

"Odd Lot", "T" and "Z" group and Patawat objections The closeout rate is higher of the following rates: a) The highest rate of the scrip from the day of trading to the day of auction of the respective settlements; b) 10% above the closing rate as on the day of auction/ close out of the respective settlement.

"G" group

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In case of shortages in "G" group, the shortages are closed out at Zero Coupon Yield Curve (ZCYC) plus a 5% penalty. The closeout amounts are debited to the bank accounts of those Members who have failed to deliver the securities against their sale obligations and credited to the bank accounts of those Members who had bought the securities but did not receive the same. Rectification of Bad Deliveries

One of the biggest problems faced by the investors in the secondary market while dealing in physical securities is that of bad delivery arising out of various reasons. Based on the reasons, these bad deliveries are classified into two categories, namely;
o o

Patawat (Settlement) Objections Company Objections Patawat (Settlement) Objections The physical securities received in payout are required to be checked by the Members for good delivery as per the norms of good and bad delivery of documents prescribed by the SEBI. If the securities are not considered good delivery, the receiving Member has to participate in " Patawat Objection Cycle" given below:

Transfer Deed is out of date. Cheques for the dividend adjustment for new shares where distinctive numbers are given in the BSE Notice is not enclosed.

Stamp of the Registrar of Companies on the Transfer Deed is missing. Details like distinctive numbers, transferors names, etc. are not filled in the Transfer Deeds.

Delivering Member's stamp on the reverse of the Transfer Deed is missing. Witness stamp or signature on Transfer Deed is missing. Signature of the transferor is missing. Death Certificate (in cases where one or more of the transferors is/ are deceased) is

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missing. A penalty at the rate of Rs.100 per Delivery Order is recovered by BSE on the delivering Members for delivering shares, which are not in order. Company Objections Bad deliveries arising out of rejection of physical shares sent to the companies by the buyers for getting them transferred in their names are termed as Company Objections. In order to help the buyers, BSE has set up a Bad Delivery Cell (BDC), which conducts its operations based on the Uniform Norms for Good/Bad Deliveries formulated by SEBI.

BDC follows a weekly cycle for acceptance of Objections and Rectifications. The cycle commences every Tuesday, when the Objections are accepted in the Clearinghouse. The Members have a facility of directly uploading the bad delivery claims in the BDC system, and download the various reports through the same. The physical/objection documents are accepted in the Clearinghouse only if the data has been successfully uploaded in the BDC system. The Objections, which have been forwarded to the Clearinghouse by the Buying Clearing Members on the first day of the cycle, need to be rectified by the Seller Clearing Members and submitted to Clearinghouse on the 21st day of that particular cycle. BDC issues notices every Monday, Tuesday and Thursday informing the market about various activities to be carried out by them. The notice issued on Monday contains the details of the Clearing Members against whom the Buyer Member has lodged an Objection. The notice issued on Tuesday is information to the Market about the Bad Delivery Schedule for the next week's cycle. And the Thursday's notice contains the details about the shares going in Auction for the un-rectified securities, if any. After receipt of the Objections, the Seller Member can approach the verification officers of the BDC for obtaining the Award for Invalid Objections, if any. The BDC officers, on the basis of the guidelines issued by SEBI for Good and Bad Deliveries of Documents and on the basis of provisions of other relevant Acts, give an Award stating "Not in Order/In Order". If the Award is given as "In Order", the Seller Member is required to accept the objections and to rectify the same within 21 days. If the objections are not rectified within the prescribed period of 21 days, the
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relevant transactions are auctioned or closed out as per the procedure laid down in this regard. If the Objection is "Not In Order", the Seller Members are required to deliver back the shares to the Clearing House, who in turn returns the same to the Buyer Members. After the award session for invalid objections, the deletion/modification entries are made and a statement titled Permanent Claim Status is generated. The same is available to the Seller Members and the Buyer Members in order to enable the Seller Members to submit rectifications on a floppy. To minimise the interfaces, the Members can also upload rectification directly through BDC system and can download the error report. The rectification will be accepted only if the data is properly uploaded in the BDC system. Along with the award for invalid objections, the award for the invalid rectifications, if any, is also given. If the Seller Member has not properly submitted the rectifications, an award is given as "Not In Order". In that case the Buyer Members are required to deliver back the shares to the Clearing House who, in turn, returns the same to the Seller Member. Thus, all Invalid Rectifications go for auction/close-out along with all Unrectified Objections.

The auction is conducted on 30th day and the Buyer Member receives the shares in auction pay-in after 3 days. The Buyer Member also receives the close out amount, for the shares not received in auction offer, and for the un-rectified objections in Group Z and T on the same day.

The disputed matters are referred to arbitration. The BDC accepts the objections only if the Company Objection Memo is forwarded or the Patawat Objection Memo duly signed by the Arbitrator is forwarded The share documents which have been returned under objection by a company for the second time, can be reported in the BDC system, as Second Time Objection. The seller in this case is not given a chance to rectify the objections and the claim is closed out on the 10th day after the commencement of the particular cycle.

In case of objection reported with the BDC as Fake/Forged and Missing/Lost/Stolen shares, the rectification is allowed only in Demat mode.

After every BDC auction, a report is generated for bad deliveries submitted under the reason 'fake/forged shares'. Members are cautioned against introducing fake/forged shares. They have to follow the policy of 'Know your client', and be careful while choosing their clients.
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In case the amount of fake/forged shares introduced by a Member exceeds Rs.10 lakhs in a year, he has to submit an explanation for the same to BDC In case where the value of fake/forged shares introduced by a Member exceeds a certain level, stringent action is taken against him. The list of members who have introduced fake/forged shares exceeding Rs. 5 lakhs in one quarter is also circulated to all the stock exchanges.

BDC also maintains the data of lost/ stolen/ fake/ duplicate shares of all listed companies. BDC has informed all listed companies to forward updated database of such shares in soft copy or through Email, so that the Members and the Clearing House can download the same. This enables the Members to check the bad shares at the entry point i.e., at the time when shares are delivered. This procedure prevents circulation of bad shares in the market, so that the same cannot be lodged with the company for transfer. Bulk Deals Disclosures in the Cash Segment With a view to imparting transparency in BULK Deal so as to prevent rumors/speculation about deals causing volatility in the scrip prices, disclosures shall be made with respect to all transactions in scrip where total quantity of shares brought/sold is more than 0.5% of the number of equity shares of the company listed on the stock exchange. Trading member shall disclose to the stock exchange the name of the scrip, name of the client, quantity of shares bought/sold and the traded price. Please refer to the Exchange notice no.20090505-10 dated the May 05, 2009 for Modalities for Bulk and Block deal reporting.

Block Deals Disclosures in the Cash Segment In order to facilitate execution of large trades, a separate trading window is provided. A trade, with a minimum quantity of 5,00,000 shares or minimum value of Rs.5 crore executed through a single transaction on this separate window of the stock exchange will constitute a BLOCK Deal. The

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Stock Exchanges shall disseminate the information of BLOCK Deal such as the name of the scrip, name of the client, quantity of shares brought/sold, traded price, etc to the general public on the same day, after the market hours.

Please refer to latest Exchange notice no.20090505-10 dated the May 05, 2009 for Modalities for Bulk and Block deal reporting. Risk Management Cash Market The expansion of BOLT across the country has led to a significant increase in volumes and liquidity. This has also consequently increased the risk of default by the Members in meeting their settlement obligations. BSE has initiated several risk management measures in order to maintain the safety of the market and to avert defaults by the BSE Members in meeting their payment and delivery obligations. Total Liquid Assets The core of the risk management system is the liquid assets deposited by the Members with BSE. These liquid assets cover the following five requirements:

Base Minimum Capital (BMC) All Members are required to maintain a BMC of Rs.10 lakhs with BSE in the prescribed manner at all times. The composite corporate Members are required to maintain BMC in multiple of the membership rights held by them. The BMC, as prescribed by SEBI, is required to be kept in the form of cash (minimum 12.5%), Fixed Deposit Receipt(s) or Bank Guarantee(s) issued by bank(s) (minimum 37.5%) and balance in the form of eligible shares. The eligible shares for the purpose of the securities portion of the BMC are A and B1 group securities forming part of Group I classified as per the parameters of volatility and liquidity as stipulated in SEBI circular No. MRD/DoP/SE/Cir-07/2005 dated February 23, 2005. BMC is not available for adjustment towards margins.

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Additional Capital b. Members are also allowed to deposit Additional Capital (AC) over and above the BMC with BSE as follows : c. MTM (Mark-To-Market) Losses: Mark-to-market losses on outstanding settlement obligations of the Member. d. VaR Margins: Value at risk margins to cover potential losses for 99% of the days. e. Extreme Loss Margins: Margins to cover the expected loss in situations that lie outside the coverage of the VaR margins. f. Base Minimum Capital: Capital required for all risks other than the market risk (for example, operational risk and client claims). g. Special Margin : Special margin collected as a surveillance measure. Members are required to maintain the liquid assets (collateral) to cover all the above five requirements. There are no other margins in the risk management system.
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Single Trade Cumulative Trades for the Day

The valuation of shares deposited by the Members with BSE is done on a daily basis, and a hair-cut equivalent to the respective VaR of individual scrip is applied i.e., only the residual value of eligible shares deposited is considered for the purpose of evaluation of capital(collateral) deposited by the Members with BSE.. The eligible shares deposited by the Members towards BMC are accepted by BSE in demat form only.

The cash can be deposited by the Members towards capital by submitting instructions to their clearing banks to debit their bank accounts and credit the amount to BSE's account.

As regards the Fixed Deposit Receipts (FDRs) of banks, the duly discharged FDRs are required to be submitted by the Members to BSE in the name of " Bombay Stock Exchange Ltd. A/c - trade name of the Member" issued by any Mumbai-based branch or payable at any Mumbai-based branch of any scheduled commercial or co-operative bank.

The bank guarantees submitted by the Member towards the capital have to be in the approved format in favour of BSE either issued or payable by any Mumbai-based branch of a scheduled commercial bank only. However, in case FDRs/ bank guarantees are issued by the outstation
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branches of scheduled commercial banks (i.e., branches outside Mumbai), the payment of the proceeds on encashment of FDRs and invocation of bank guarantees by BSE has to be assured by a Mumbai-based branch of the concerned issuing bank. b. For every instance of deactivation of BOLT TWSs due to non-availability of total liquid assets, fines/penalties are levied as Description per the structure given below : No. of instances in a financial year Fines/penalties for de-activation of BOLT TWSs due to non1 st to 5 th instance. Rs. 10,000/- per instance or 0.25% of the amount of shortfall of total liquid assets on account of violation of trading limits, whichever is higher. 16 th to 30 th instance Rs. 15,000/- per instance or 0.25% of the amount of shortfall of total liquid assets on account of violation of trading limits, whichever is higher. 31 st instance onwards. Rs. 20,000/- per instance or 0.25% of the amount of shortfall of total liquid assets on account of violation of trading limits, whichever is higher. Rs. 5,000/- per instance. Fines/penalties ( Rs. )

availability of Total Liquid Assets 6 th to 15 th (collateral) during the trading instance. session and in case of deactivation of BOLT TWSs due to non-availability of total liquid asset at the end of day because of shortfall of Total Liquid Assets due to expiry of Bank Guarantees/Fixed Deposit Receipts, evaluation of securities, etc.

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BSE, as a precautionary measure, provides on-line warnings to its Members on the BOLT TWSs when they reach 70%, 80% and 90% of the utilisation of Total Liquid Assets (TLA). When a Member crosses 100% of the utilization of TLA , a message is flashed on his BOLT TWSs which says "Capital Violated : Member Trading Suspend" and immediately thereafter, all his BOLT TWSs get deactivated. The BOLT TWSs of the Members in such cases are reactivated only after they deposit the required additional liquid assets. To avoid de-activation of BOLT TWSs and levy of fines/penalties, the additional liquid assets should be deposited with BSE sufficiently in advance.
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Liquidity Categorization of Securities

The securities are classified into three groups based on their liquidity: Group Trading Frequency (over the previous six months see Note A) Liquid Securities (Group I) At least 80% of the days Less Liquid Securities (Group II) Illiquid Securities (Group III) Monthly Review
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Impact Cost (over the previous six months see Note A Less than or equal to 1% More than 1%

At least 80% of the days

Less than 80% of the days

N/A

The trading frequency and impact cost is calculated on the 15th of each month on a rolling basis considering the previous six months for impact cost and previous six months for trading frequency. On the basis of the trading frequency and impact cost so calculated, the securities move from one group to another group from the 1st of the next month.

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Categorisation of Newly-listed Securities For the first month and till the time of monthly review as mentioned above, a newly listed stock is categorised in that group where the market capitalization of the newly listed stock exceeds or equals
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the market capitalization of 80% of the stocks in that particular group. Subsequently, after one month, whenever the next monthly review is carried out, the actual trading frequency and impact cost of the security is computed, to determine the liquidity categorization of the security.

In case any corporate action results in a change in ISIN, the securities bearing the new ISIN is treated as newly listed scrip for group categorization.

Calculation of mean impact cost:

The mean impact cost is calculated in the following manner: a. Impact cost is calculated by taking four snapshots in a day from the order book in the past six months. These four snapshots are randomly chosen from within four fixed ten-minutes windows spread through the day. b. The impact cost is the percentage price movement caused by an order size of Rs.1 lakh from the average of the best bid and offer price in the order book snapshot. The impact cost is calculated for both, the buy and the sell side in each order book snapshot. Dissemination of Information The lists of securities forming part of groups I, II and III are disseminated on the BSE website on a monthly basis. Margins In order to contain the risk arising out of transactions entered into by the members in various scrips either on their own account or on behalf of their clients, BSE has a well designed riskmanagement system which inter-alia, includes collection of margins from the Members. BSE accordingly imposes various kinds of margins on the Members based on their outstanding positions in the market. The margining system followed by BSE is described below :

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Computation of Margins
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For securities that have been listed for less than six months, the trading frequency and the impact cost is computed using the entire trading history of the scrip.

VaR Margin As mandated by SEBI, the Value at Risk (VaR) margining system, which is internationally accepted as the best margining system, is applicable on the outstanding positions of the Members in all scrips. a. The VaR Margin is a margin intended to cover the largest loss that can be encountered on 99% of the days (99% Value at Risk). For liquid stocks, the margin covers one-day losses while for illiquid stocks, it covers three-day losses so as to allow the Exchange to liquidate the position over three days. This leads to a scaling factor of square root of three for illiquid stocks.

For liquid stocks, the VaR margins are based only on the volatility of the stock while for other stocks, the volatility of the market index is also used in the computation. Computation of the VaR margin requires the following definitions:
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Scrip sigma means the volatility of the security computed as at the end of the previous trading day. The computation uses the exponentially weighted moving average method applied to daily returns in the same manner as in the derivatives market.

Scrip VaR means the higher of 7.5% or 3.5 scrip sigma.

Index sigma means the daily volatility of the market index (S&P CNX Nifty or BSE Sensex) computed as at the end of the previous trading day. The computation uses the exponentially weighted moving average method applied to daily returns in the same manner as in the derivatives market.

Index VaR

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means the higher of 5% or 3 index sigma. The higher of the Sensex VaR or Nifty VaR would be used for this purpose. The VaR Margins are specified as follows for different groups of stocks: Liquidity Categorization Liquid Securities (Group I) Less Liquid Higher of Scrip VaR 1.73 (square root of 3.00) 1.73 (square root of 3.00) Collection of VaR Margin : a. The VaR margin is collected on an upfront basis by adjusting against the total liquid assets of the Member at the time of trade. b. The VaR margin is collected on the gross open position of the Member. The gross open position for this purpose is the gross of all net positions across all the clients of a Member including his proprietary position. c. For this purpose, there would be no netting of positions across different settlements. d. Dissemination of Information : The VaR amount applicable in respect of the scrips is disseminated on the BSE website on a daily basis. Extreme Loss Margin : Higher of 1.73 times Scrip VaR and 5.20 times Index VaR 8.66 times Index VaR Scrip VaR One-Day VaR Scaling factor for illiquidity 1.00 Scrip VaR VaR Margin

Securities (Group II) and three times Index VaR Illiquid Securities (Group III) Five times Index VaR

The term Extreme Loss Margin replaces the terms "exposure limits" and "second line of defense"

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that have been used hitherto. It covers the expected loss in situations that go beyond those envisaged in the 99% value at risk estimates used in the VaR margin. e. The Extreme Loss Margin for any stock is higher of:

5%, and 1.5 times the standard deviation of daily logarithmic returns of the stock price in the last six months. This computation is done at the end of each month by taking the price data on a rolling basis for the past six months and the resulting value is applicable for the next month.

f. The Extreme Loss Margin is collected/adjusted against the total liquid assets of the member on a real time basis. g. The Extreme Loss Margin is collected on the gross open position of the Member. The gross open position for this purpose means the gross of all net positions across all the clients of a member including his proprietary position. h. For this purpose, there is no netting of positions across different settlements. i. The Extreme Loss margin so collected is released alongwith the pay-in. j. Dissemination of Information :

The ELM amount applicable in respect of the scrips is also disseminated on the BSE website.
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Special Margin :

Special margin may be imposed by BSE from time to time on certain scrips as a surveillance measure and informed to the Members through notices.
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Mark-to-Market Margin (MTM) : a. The MTM margin is collected on the gross open position of the Member. The gross open position for this purpose would mean the gross of all net positions across all the clients of a member including his proprietary position. For this purpose, the position of a client is netted across his various securities and the positions of all the clients of a Member is grossed. Further, there is no netting across two different settlements. b. There is no netting off the positions and setoff against MTM profits across 2 rolling
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settlements i.e. T day and T-1 day. However, for computation of MTM profits/losses for the day, netting or setoff against MTM profits is permitted. Collection and Release of Margins All statements pertaining to daily margins viz., VaR, MTM, ELM and Special Margin computed by BSE on the outstanding positions of the Members are available for downloading by them in their back-offices at the end of the day.
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VaR Margin The VaR margin is collected on an upfront basis by adjusting against the total liquid assets of the Member at the time of trade.

Extreme Loss Margin (ELM) The ELM is collected/ adjusted from the total liquid assets of the Member on a real time basis. Mark-to-Market Margin (MTM) The MTM is computed after trading hours on T day on the basis of closing price, of that day. In case the security has not been traded on a particular day, the latest available closing price is considered as the closing price. MTM margins is also recomputed in respect of all the pending settlements on the basis of closing prices of T day and the difference due to increase/decrease in MTM margins on account of such recomputation is adjusted in the MTM obligation of the Member for the day. Such MTM is collected from the Members in the evening on the T day itself, first by adjusting the same from the available cash and cash equivalent component of the liquid assets and the balance MTM in form of cash from the Members through their clearing banks on the same day.

Special Margins The Special Margin as applicable is collected along with MTM from the Members, first, by adjusting the same from the available liquid assets and the balance Special Margin in form of cash from the Members through their clearing banks on the same day. Release of Margins The above-referred margins are released on completion of pay-in of the settlement Fines / Penalty for Margin Default

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Cases where there are insufficient balances in bank accounts of the Members at the time of debit of margin amounts payable in cash on the relevant day, are treated as margin defaults. The norms for levy of fines/ penalty for delay in clearance of margin obligations are as follows : Violation/s Non-fulfillment Late fees/fines/penalty of In case of non-fulfillment of margin obligation, the trading

margin obligations to the facility of such members shall be withdrawn immediately and Exchange. fine/penalty of 1% of the unpaid margin amount will be levied. In addition, the trading facility of the member shall be withdrawn immediately. The trading facility shall be restored after fulfillment of the margin obligation by the member. Exemption from Payment of Margins

The following trades executed on the BOLT are exempted from payment of margins on Trade Day. However the same are margined to the Custodians/members on T+1 day in case of acceptance / rejection of the 6A7A entry: a. Institutional business. For this purpose, institutional investors include : 1. Foreign Institutional Investors registered with SEBI. 2. Mutual Funds registered with SEBI. 3. Public Financial Institutions as defined under Section 4A of the Companies Act, 1956. 4. Banks, i.e., a banking company as defined under Section 5(1)(c) of the Banking Regulations Act, 1949. 5. Insurance companies registered with IRDA. 6. Pension Funds In cases where early pay-in of securities is made, the outstanding position of the client to the extent of early pay-in. Early Pay-in Facility

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The early pay-in of securities done upto 3.45 p.m. on a day are considered for on-line release of blocked liquid assets on account of margins on that day. The benefits of early payin done after 3.45 p.m. on a day are available on the next trading day.

Members are also able to do early pay-in of securities before execution of the trade on T day to avail benefit of margin exemption.

For availing the benefits of margin exemptions through early pay-in of securities, the members are required to upload a file containing details in respect of the early pay-in at client level to the Clearing House-BOISL (Notice No.20050526-20). The details in the file is matched against the transaction files received from CDSL and NSDL. Only the matched records are uploaded for Early Pay-In. Capital Cushion Requirements SEBI has advised BSE to build an administrative mechanism to encourage members to hold capital cushions while operating in the Cash and Derivatives Segments. Accordingly, the following methodology, as advised by SEBI, is being followed by BSE:

At the end of each calendar month, Members who have exceeded 90% of utilization of capital during the day for more than 7 days in the current month are identified.

In the derivatives segment, the utilisation is monitored after considering initial margins, exposure margins and premium.

The capital requirement to bring the utilisation to a level of 85% at the time of violating the trigger point of 90% on each of those occasions is noted for the Members. The highest of such amounts for the identified members during the month is called for as additional capital.

The requirement is communicated to the members on the first day of the subsequent month. The Members are provided a time limit of three working days to provide the amount of additional capital in the form of Cash, FDRs and Bank Guarantees only.

The additional capital so collected is retained with the Clearing House for a period of one calendar month.

No benefit including exposure, margin etc is available to the Member on the amount of additional capital so collected.
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In case of non- payment of additional capital within the stipulated time limit a penalty as applicable for funds shortage is levied on the Member for the period of default.

In case a Member is liable to provide additional capital in the subsequent month, the amount of additional capital shall be recomputed and the excess /deficit is refunded /called for.

Monitoring Business of Brokers BSE closely monitors the outstanding positions of the main Members on a daily basis. For this purpose, it has developed various market monitoring reports based on certain pre-set parameters. These reports are scrutinized by officials of the Surveillance Department to ascertain whether a Member has built up excessive purchase or sale position compared to his normal level of business. Further, it is examined whether purchases or sales are concentrated in one or more scrips, whether the margin cover is adequate and whether transactions have been entered into on behalf of institutional clients. Even the quality of scrips, i.e., liquid or illiquid, is looked into in order to assess the quality of exposure. Based on an analysis of these factors, the margins already paid and the total capital deposited by the Member with BSE, an advance pay-in is called from the concerned Member.

BSE also scrutinizes the pay-in position of the Members and such Members who have larger funds pay-in positions are , at the discretion of BSE, asked to make advance pay-in on the T+1 day instead of on the T+2 day. BOLT Deactivation The BOLT TWSs of a Member are deactivated for non-payment / late payment of margins or settlement dues or on apprehension of financial difficulties or on detection of serious irregularities or for frequent violations of trading restrictions. Such decisions are taken on a case-to-case basis. The overall objective in resorting to this ultimate step is to ensure that questionable trading behavior of a Member does not compromise the safety of the market or jeopardize the integrity of the market. Brokers Contingency Fund

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BSE operates a Brokers' Contingency Fund, since July 21, 1997 with a view to : A Member desirous of availing of an advance would be required to give a request letter in writing to the Clearing & Settlement Department of BSE stating that as and when there is a shortfall in meeting his funds pay-in obligation, BSE may automatically advance him an amount up to Rs. 10 lakhs to meet such shortfall. A Member would be eligible to avail of advance from the Fund up to a maximum of Rs 25 lakhs at any point of time. The advance would be available only for meeting shortfall in his funds pay-in obligations in a settlement arising out of delivery based transactions and not for any other obligations in a settlement. The advance would be available for a maximum period of 30 days from the date of disbursement. A Member would be eligible to avail of advance from the Fund up to a maximum of six times in a financial year. The amounts advanced from the BCF would be at the following interest rates:

For the first three times in a financial year @12% p.a. For the next three times in a financial year @15% p.a.

The advance may be availed of by a Member against the value of his pay-out securities (in dematerialised form only) after applying a haircut of 30%. BCF is managed by a Committee comprising of the Managing Director, Chief Operating Officer and three non-elected directors. BSE contributed Rs.9.51 crores to the corpus of this Fund. All active Members are required to make an initial non-refundable contribution of Rs.2,50,000 to the Fund. The corpus of the fund as on 31/03/08 (unaudited) is Rs. 56 crores. Members are eligible to get advances from this Fund upto a maximum of Rs.25 lakhs at the rate of 12% per annum. BCF has ensured that the settlement cycles at BSE are not affected due to the temporary financial problems faced by its Members, further strengthening the credibility of the stock exchange
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settlement system. Trade Guarantee Fund SEBI requires BSE to have a system of guaranteeing settlement of trades or set up a Clearing Corporation to ensure that the market equilibrium is not disturbed in case of payment default by the members. BSE has accordingly instituted a system to guarantee settlement of bonafide transactions of Members which form part of the settlement system. BSE has a Trade Guarantee Fund, in operation since May 12, 1997, with the following objectives : p. To guarantee settlement of bonafide transactions of BSE Members inter-se which form part of the Stock Exchange settlement system, so as to ensure timely completion of settlements of contracts and thereby protect the interest of investors and Members. TGF is managed by the Defaulters' Committee, which is a Standing Committee constituted by BSE, the constitution of which is approved by SEBI. The declaration of a member, who is unable to meet his settlement dues as a defaulter is a pre-condition for invoking the provisions of this Fund. BSE has contributed an initial sum of Rs.60 crores to the corpus of the Fund. All active members are required to make an initial contribution of Rs.10,000 in cash to the Fund and also contribute Re. 0.01 for every Rs.1 lakh of gross turnover in all the groups of scrips by way of continuous contribution which is debited to their settlement account in each settlement. All active Members are required to maintain a base minimum capital of Rs.10 lakhs each with BSE. This contribution has also been transferred to the Fund and has been treated as refundable contribution of the Members. Each Member is also required to provide to the Fund a bank guarantee of Rs.10 lakhs from a scheduled commercial or co-operative bank as an additional contribution to the Fund. The present corpus, as on 31/03/2008 ( unaudited ), is Rs 181 crores (cash component

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excluding collaterals & additional capital) TGF has eliminated the age-old counter party risk, so that if a Member is declared a defaulter, other Members do not suffer. Trade Guarntee Fund - G -Sec Segment In 2003, BSE had set up a distinct Trade Guarantee Fund known as GSEC Trade Guarantee Fund for trading in the Central Government Securities and such fund was created with an initial contribution of Rs. 5 crores by transferring the said amout from the free reserves of BSE The present corpus as on 31/03/08 (unaudited) is Rs.7 crores. q. To inculcate confidence in the secondary market traders including the global investors to attract larger participation. r. To protect the interests of the investors and to promote the development and regulation of the secondary market.

make temporary refundable advance(s) to the Members facing temporary financial mismatch as a result of which they may not be in a position to meet their financial obligations to BSE in time;

protect the interest of the investors dealing through the BSE Members by ensuring timely completion of settlement

inculcate confidence in investors regarding safety of their bonafide transactions

DAY \T + 3

ACTIVITY Patawat Arbitration session : Arbitration awards to be obtained from officials of the Bad Delivery Cell

TIME 10:30 a.m. to 11:30 a.m.

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Securities under objection to be submitted in the Clearing House. The delivering members to collect such securities under objection from the clearing house Arbitration awards for invalid objection to be obtained from members of the Arbitration Review Committee/officials of the Bad Delivery Cell. T+4 Members and institution to submit rectified securities, confirmation forms and invalid objections in the clearing house. Rectified securities/invalid objections will be delivered to the receiving members T+5

11:00 a.m. to 12:00 noon

2:00 p.m. to 3:00 p.m.

5:00 p.m. to 5:30 p.m.

1:00 p.m. to 2:00 p.m.

3:00 p.m. to 4:00 p.m.

Arbitration Awards for invalid 11:30 a.m. to 12:30 p.m. rectification to be obtained from officials of the Bad Delivery Cell Securities to be lodged with the clearing house unto 1:00 p.m

The transactions pertaining to un-rectified and invalid rectification of securities are directly closed-out by BSE as per the formula.

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The shares in physical form returned under objection to the Clearing House as explained earlier are required to be accompanied by an arbitration award (Chukada) except in certain cases where the receiving Members are permitted to submit securities to the Clearing House without "Chukada" or arbitration award in the following cases:

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Trading in global capital market

1. Trading in U.S. capital market
a.)Trading in NASDAQ Stock exchange The NASDAQ is a virtual listed exchange, where all of the trading is done over a computer network. The process is similar to the New York Stock Exchange. However, buyers and sellers are electronically matched. One or more NASDAQ market makers will always provide a bid and ask price at which they will always purchase or sell 'their' stock.[4] The Paris Bourse, now part of Euronext, is an order-driven, electronic stock exchange. It was automated in the late 1980s. Prior to the 1980s, it consisted of an open outcry exchange. Stockbrokers met on the trading floor or the Palais Brongniart. In 1986, the CATS trading system was introduced, and the order matching process was fully automated. From time to time, active trading (especially in large blocks of securities) have moved away from the 'active' exchanges. Securities firms, led by UBS AG, Goldman Sachs Group Inc. and Credit Suisse Group, already steer 12 percent of U.S. security trades away from the exchanges to their internal systems. That share probably will increase to 18 percent by 2010 as more investment banks bypass the NYSE and NASDAQ and pair buyers and sellers of securities themselves, according to data compiled by Boston-based Aite Group LLC, a brokerage-industry consultant.[5] Now that computers have eliminated the need for trading floors like the Big Board's, the balance of power in equity markets is shifting. By bringing more orders in-house, where clients can move big blocks of stock anonymously, brokers pay the exchanges less in fees and capture a bigger share of the $11 billion a year that institutional investors pay in trading commissions as well as the surplus of the century had taken place.

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Market participants A few decades ago, worldwide, buyers and sellers were individual investors, such as wealthy businessmen, usually with long family histories to particular corporations. Over time, markets have become more "institutionalized"; buyers and sellers are largely institutions (e.g., pension funds, insurance companies, mutual funds, index funds, exchange-traded funds, hedge funds, investor groups, banks and various other financial institutions). The rise of the institutional investor has brought with it some improvements in market operations. Thus, the government was responsible for "fixed" (and exorbitant) fees being markedly reduced for the 'small' investor, but only after the large institutions had managed to break the brokers' solid front on fees. (They then went to 'negotiated' fees, but only for large institutions. However, corporate governance (at least in the West) has been very much adversely affected by the rise of (largely 'absentee') institutional 'owners'

1. Trading in Asia capital market

a)Trading in Taiwan Stock exchange

Listing of Securities A public company applying for listing has to meet certain financial and operational criteria. After close examination by TWSEs listing functions, the application is submitted to the Securities Listing Review Committee for consideration. Thereafter, the application needs to be confirmed by a resolution from the Board of Directors for endorsement, before being submitted to the Securities and Futures Bureau (SFB) for final approval. After the listing application has been approved by the SFB, the public company pays listing fees, and submits its quarterly certified financial reports to TWSE for examination.

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TWSE actively promotes corporate governance of listed companies, supervises and regulates listed companies financial and operational status on a routine basis, and carries out investigations into unusual circumstances, and verifies material information disclosed by listed companies. In addition, in order to enhance the quality of information disclosure in the securities market, TWSE works with GreTai Securities Market to manage a Market Observation Post System, and an Information Disclosure Evaluation System. TWSE has focused on developing new products to enhance diversification of securities and provide investors with hedging tools. TWSE began to accept listing applications of put warrants in January 2003, launched the first Exchange Traded Fund (ETF) on June 30, 2003, and launched ETF warrants in July 2004. Listed securities on TWSE currently include stocks, entitlement certificates of convertible bonds, convertible bonds, government bonds, beneficiary certificates, call warrants, put warrants, ETFs and Taiwan Depository Receipts (TDRs). Trading of Securities When TWSE was established, trading in the centralized market place was carried out on an open trading floor. However, to meet the changing needs of the market environment, the trading system has progressed through several phases. In August 1985, the open trading floor was gradually replaced by a computer-aided trading system (CATS), which was eventually upgraded to a fully automated securities trading (FAST) system in 1993. The fully computerized trading system has helped boost the trading capacity and efficiency of the stock market. The trading hours of the centralized market trading session are as follows: Trading Days Monday Friday Monday -

Trading Sessions

Trading Hours

Regular Trading Off-hour Trading

09:00 ~ 13:30 14:00 ~ 14:30

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Friday Odd-lot Trading Monday Friday 13:40 ~ 14:30

Non-paired Monday Trade Block Trading Paired Trade Monday Friday Friday

09:00 ~ 17:00 08:00 ~ 08:30 Pre-opening trading hours 09:00 ~ 17:00 In case of settlement on T Day, the quote shall be completed by 13:50.

Investors may place an order in person, by phone, fax or Internet. Orders are entered via terminals on securities firms premises into TWSEs main computer, and are processed and executed by the trading system on a price-and-time-priority principle. In special cases, listed stocks may be traded through negotiation, auction, tender or other means. Trading prices are decided by call auction. TWSE conducts intra-day volatility interruptions to prevent over-volatility of stock prices, and also discloses prices and a volume of unexecuted orders at the 5 best bids/asks. At the end of the trading session, the trading system accumulates orders for 5 minutes (from 1:25 p.m. to 1:30 p.m.) before the closing call auction in order to form fair closing prices. Computer and Information Safety

The computerized trading, settlement, and information transmission of TWSE is highly efficient. For the purpose of maintaining market integrity and safeguarding investor rights, TWSE pays close attention to information and communication safety mechanisms. TWSE has a full capacity back-up computer system to guard against any possible system failure. TWSE has been awarded an ISO9001 quality system certificate for its computer system, and received ISO27001 authentication for its IT Security Management System.

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Market Surveillance A healthy and orderly market should be able to protect investors rights and privileges, and suppress manipulation and insider trading. In accordance with the Market Surveillance Regulations, TWSE daily discloses information about abnormal securities trading to alert investors, thereby protecting investors rights. TWSE may take disciplinary measures, as defined in the Regulations, to constrain abnormal market behavior, and prevent damage to the market. Clearing and Settlement According to the Securities and Exchange Act and TWSEs own operational rules, TWSE acts as clearinghouse for all trades executed in the market. All securities firms have to fulfill settlement obligations to TWSE, which takes on the final responsibility for ensuring the completion of the settlement process in the market. TWSE employs a multilateral net settlement to calculate the net amounts of securities and funds receivables and payables between securities firms and TWSE. The settlement of shares and payments between securities firms and TWSE is processed on T+2. In cases of block trades, investors can choose the settlement day to be either T+2 or T. The securities broker and dealer is responsible to TWSE for completing all the obligations of clearing and settlement and other related responsibilities arising from trading on TWSE. If the securities firm can not fulfill securities settlement obligations because of a defaulting client, erroneous trade, or other reasons, it may apply to TWSE to borrow securities to complete the settlement through the securities borrowing system. When the securities firm applies to borrow securities, it deposits collateral with TWSE. When the securities firm can not borrow a sufficient amount of securities through the securities borrowing system, TWSE issues a due bill to cover the gap. The securities firm has to provide collateral as well. If any securities firm fails to fulfill its settlement obligations, TWSE designates other securities brokers or dealers to complete its settlement. The resultant price differences and the expenses incurred are first covered by the Joint Settlement and Clearing Fund (JSCF)

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contributed by the defaulting securities firm, and then the Special Clearing Fund maintained by TWSE, followed by the left portion of JSCF contributed by other securities firms. TWSE Securities Borrowing and Lending System TWSE established a Securities Borrowing and Lending System (SBL) on June 30, 2003. Participants include institutional investors such as securities firms, banks, insurance companies and foreign institutional investors, while TWSE serves as an intermediary. The system provides three kinds of transactions: fixed-rate transactions, competitive auction transactions and negotiated transactions. Upon collecting borrowers collateral in fixed-rate and competitive auction transactions, TWSE assumes the role and risks of a guarantor. The introduction of SBL mechanism in Taiwan not only increases the liquidity of the Taiwan securities market, but also attracts foreign investors to our market and makes our market more competitive. Internationalization of Securities Market

In order to enhance international information-exchange and cooperation, TWSE has entered into Memoranda of Cooperation with more than 20 foreign stock exchanges, and actively participated in international securities meetings and organizations, such as WFE, EAOSEF, ANNA and IOSCO. To speed up the liberalization and internationalization of the Taiwan securities market, TWSE has actively reached out to the world in recent years. We have held promotional tours to the major financial centers in the world and other promising areas such as the Middle East. We wish to connect the entrepreneurial spirit of Taiwan with foreign investors funds, and in turn enhance the market depth of the stock market. In addition, TWSE has held conferences or meetings, at which famous foreign scholars or experts are invited to talk to the local market about current market trends and at the same time inform foreign investors of the continuing liberalization of our stock market. In order to keep up with the international trend of developing index-related products, TWSE, in association with FTSE, has launched a series of tradable indices in Taiwan: the

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TWSE Taiwan 50 Index on October 29, 2002, TWSE Taiwan Mid-cap 100 Index and TWSE Taiwan Technology Index on November 29, 2004, TWSE Taiwan eight industries Index and TWSE Taiwan dividend+ Index on January 15, 2007. TWSE will continue to cooperate with FTSE, in accordance with international standards, to compile more indices to be used as underlying indices of new financial products. Monitoring of Securities Firms

According to the Securities and Exchange Law, the establishment of a securities firm and its branch has to be approved and licensed in advance by the relevant authority. Prior to participating in the market, a securities firm must sign a contract with TWSE and deposit a settlement and clearing fund with TWSE, who then set up a fund management committee to manage this fund. The securities firm is responsible for its employees in both sales representation and ethical behavior when conducting centralized market business. To enhance the financial structure and risk management, all securities firms must meet the regulatory capital adequacy ratio to maintain regular business. All securities dealers are required to set aside a monthly trading-loss reserve, and securities brokers are required to set aside a defaulting-loss reserve. All reserves are accumulated up to a specified amount. To maintain an orderly and safe market, TWSE regularly sends inspectors to check the securities brokers and dealers on-site to see whether their business operations and financial status meet all these requirements. In addition, TWSE maintains a warning system for scrutinizing the operational risk of securities firms, and also sets up a risk control database for margin trading to strengthen the risk management of securities firms. For the purpose of simplifying and reducing paperwork of trading participants, TWSE established a unified reporting system in 1999 for securities brokers to file all TWSErequired reports through a single electronic user interface. TWSE also provides securities brokers with e-mail trading and direct market access (DMA) to make full use of the most advanced technology. Furthermore, TWSE has relaxed securities firms sites and facilities requirements and encouraged their automation effort so as to reduce operation cost.

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Investors Service

An investor wishing to conduct securities transactions first opens an account with a securities brokerage firm, and signs a Trustee Agreement to grant the broker permission to act as his/her agent. Following the Executive Yuans revision of the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals and the abolition of the QFII system, TWSE has simplified the process of admitting foreign investment into the Taiwan stock market. The review process for foreign investment has changed from a permission to a registration system. As a result, foreign investors can now qualify for domestic investment after completing registration at TWSE. TWSE employs television, newspapers, magazines, posters and other media for promotional purposes, and holds various promotional activities such as workshops and seminars to inform and educate investors as regards investment and finance. Investors are welcome to ask questions concerning securities investments by calling the Investor Service Center (886-2) 8101-3101 or 8101-3873. To enhance and protect investors rights and interests, TWSE and other securities-related institutions jointly established the Securities Investors Protection Fund. Following the promulgation of the Securities Investors and Futures Traders Protection Act, which became effective on January 1, 2003, the Securities and Futures Investors Protection Center was established. The Center manages the protection fund to compensate investors should securities or futures companies be unable to do so due to financial difficulties. According to Article 18 of the Act, TWSE and other securities-related institutions are required to contribute funds to the Center. TWSE has implemented a investor personal data inquiry system. This system helps to reduce the manual handling of personal data processing. It also provides speedy and convenient responses to personal information inquiries, thus helping to lower the possibility of fraud or forgery.

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Securities Information

To enhance the fairness and efficiency of securities trading, as well as providing a computer system for stock trading and matching, TWSE uses various channels such as a website and publications to give investors easy access to securities information. TWSEs website ( http://www.twse.com.tw/ ) carries official announcements concerning securities listing and trading, as well as other securities information for investors consultation. In addition, the following 3 websites established by TWSE can be accessed from TWSEs home page. 1. Market Information System ( http://mis.twse.com.tw/ ): This website provides real-time trading information about the market and individual stocks, including Market Summary, Sector Group Quotes, Five Best Bids and Asks, ETF Quotes, Stock Borrowing Quotes and Market Announcements, etc. 2. Market Observation Post System ( http://emops.twse.com.tw/emops_all.htm ): This website provides financial and operational information about listed companies, including company profiles, financial statements, operational summaries and material information. 3. Data e Shop ( http://dataeshop.twse.com.tw/ ): This website provides data vendors and investors with on-line subscriptions to data services, including end-of-day market data, index constituents data and historical trading data. To provide investors with versatile reference data, TWSE publishes a Stock Chart of Taiwan Stock Exchange Capitalization Weighted Stock Index and Trading Volume & Value at the beginning of each year, showing market trends since 1977 (in Chinese only). In addition, TWSE also puts out the following periodicals, which are also available on TWSEs website: 1. Taiwan Stock Exchange Review Monthly (monthly) 2. Taiwan Stock Exchange Statistical Data (annual) 3. Highlights of TWSE Listed Securities (annual) 4. Status of Securities Listed on Taiwan Stock Exchange (monthly) 5. Taiwan Stock Exchange Annual Report (annual)

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6. Fact Book (annual) To inform and educate investors, TWSE has compiled a series of booklets. Investors can either access the booklets on TWSEs website ( http://www.twse.com.tw/ ), or obtain hard copies at securities firms premises. TWSE has established an Investors Reading Room (3F, No. 7, Sec. 5, Xinyi Rd., Taipei) to display prospectuses and quarterly financial reports of all listed companies, as well as monthly and semiannual financial reports of all securities brokers and dealers. To bring the public closer to the stock market, TWSE set up an Information Center in mid2008. The Center provides the following information: market data displays such as trading graphs, international stock market data, foreign exchange rates, trade data displays etc. current trends in TWSE trading simulation systems and educational network services interactive inquiries and display systems live broadcasts of ceremonies and speeches

c) Trading in KOSPI Stock exchange General Procedures of Trading In order for an investor to trade in the KRX securities markets, he/she has to first open a trading account at one of the security companies (or Financial Investment Business entities as defined in the 'Capital Markets and Financial Investment Business Act') with KRX membership (member firms). With such trading account, the investor are able to place trading orders to the member firms, which will subsequently submit (quote) those customer orders to the Exchange. Member firms entrusted with customer orders are obliged to immediately submit (quote) those orders to the KRX. Trading orders from foreign investors should by-pass FSS (Financial Supervisory Service) Foreign Investors Management System (FIMS) for
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foreign investors' share-holding cap check on certain issues. Non-member firms also have to quote customer orders to designated member firms. All trading orders submitted to the KRX by member firms shall be traded in accordance with the matching principles specified in business regulations of the KRX. Immediately after the transaction, KRX shall inform (in electronic format) member firms of the trading results which shall then be notified to respective customers. Customers shall conduct settlement of their transaction with member firms by deposit of money or relevant securities for buying or selling securities on T+2 (exact time for settlement deadlines are set by each member firms). Entire process of a trade will be complete when every member firms complete their required settlement transaction with KRX (as a CCP) by 16:00 of T+2. Trading Hours Quotation Receiving Hours Trading Hours Regular Session 08:00 ~ 15:00 09:00 ~ 15:00 07:30 ~ 08:30 15:10 ~ 18:00

Off-hours Pre-hours 07:30 ~ 08:30 Session Post-hours 15:00 ~ 18:00 Contents Manager :

KOSPI Market Division/Stock Trading Rules & Regulations/Joong-Suk Han(02-3774-8595) Data and information on the KRX website are provided for the purpose of improving availability of information for investment, not for trading securities. In spite of the efforts made in ensuring the accuracy of data and information, the KRX recognizes that unintentional and chance errors and delays occur. The KRX is not responsible for any loss resulted from the investments made using the data and information provided on its website

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d)Trading in Shanghai comp. Stock exchange Trading Overview Trading Overview Trading business falls into two categories depending on whether it is provided through the trading system, namely, trading system-based business and non-trading system-based business. Trading system-based business can be further grouped into two types: centralized trading business and trading-related services. Non-trading system-based business cancellation, includes negotiated transfer, warrant creation and etc.

Centralized trading refers to the change of securities ownership effected through price inquiry, quotation and auction via the trading system of the stock exchange. Trading-related services refer to the services provided by the stock exchange through the trading system that relate to offering, entitlement or trading relationship that is closely associated with the centralized trading of securities. Compared with similar services offered through over-the-counter market, centralized trading has the following main differences: (1) services are provided through the trading system; (2) specific securities codes are assigned; and (3) trading is conducted through a broker.

SSE is open for trading from Monday to Friday. In the morning session, the market opens with a call auction between 9:15 am and 9:25 am, which is followed by a continuous auction between 9:30 am and 11:30 am. The afternoon session begins with a continuous auction between 13:00 pm to 15:00 pm and then block trading takes place between 15:00 am -15:30 am. The market is closed on the weekends and other public holidays as announced by SSE.

Securities are traded on SSE on a market-driven and free auction basis. Limit orders and market orders are accepted in line with market conditions. At present, trading in A Shares, B Shares and securities investment funds is subject to a 10% daily price up

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and down limit, except for the first trading day. Special treatment shares, or ST shares, are subject to a 5% daily price up and down limit. The price limits on warrants are based on that of their corresponding underlying securities and are determined by multiplying the conversion ratio by a certain coefficient. The price of a block trade of securities with a price limit is determined by the buyer and seller within the price limit applicable to such securities on the day of trading. The price of a block trade of securities without any price limit is negotiated by the buyer and seller within 30% of the previous closing price or between the highest and lowest traded prices on the day of trading. In the absence of any transaction for a particular stock, the closing price of the previous trading day will be the execution price.

Securities trading on SSE are conducted on an agency basis. All the investors that trade securities on SSE must first appoint a member of SSE as an agent and sign an agreement with the agent for trading and clearing securities on their behalf. No trading is allowed before the investor's trading account is registered with the member's trading seat.

SSE has adopted a primary dealer system in warrant trading. Primary dealers are the securities firms that are designated by SSE for providing bilateral quotations for warrant trading. In addition, institutional market participants recognized by SSE may provide daily bilateral quotations for bonds traded on SSE's block trading system, with the specific bonds and the spreads to be determined at their discretion to the extent permitted by SSE rules.

SSE makes timely releases of trading data and information to members and investors. Daily real-time market quotations, stock indices, clearing data, market reports and daily transaction data are transmitted to member's counter terminals via satellite communications system or optical fiber communications system. The transaction data is instantaneously transmitted to each member via a two-way satellite system and optical fiber communications system. Since September 22, 2003, SSE has started disclosing five best quotations. Block trade data is published in SSE-designated
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media and released simultaneously on SSE's website (www.sse.com.cn). Apart from that, SSE also discloses more detailed information about the daily top gainers and losers on the securities market in line with the trading rules.

2. Trading in Europe Capital market

a)Trading in Russia Stock exchange "Russian Trading System" Stock Exchange Established in 1995, as the first regulated stock market in Russia, RTS Stock Exchange now trades the full range of financial instruments from cash equities to commodity futures. The RTS Index first calculated on September 1, 1995, has since become the main benchmark for the Russian securities industry and is based on the Exchanges 50 most liquid and capitalized shares. Todays RTS product line includes:

RTS Standard, a new front-rank equity market for the most liquid Russian securities characterized by absence of 100% asset depositing, standard T+4 settlement in roubles, use of CCP technology, consolidated cash position on RTS Standard and on FORTS, RTS derivatives section and portfolio-style approach to margining spot and derivatives markets positions.

RTS Classica, the only trading platform in Russia that allows for settlement in both rubles and foreign currency. RTS Classica is equally accessible to both Russian and foreign investors. The standard settlement cycle is T+4 DVP. There are no requirements to deposit securities and cash before a trade. Over 500 securities are trading on this market.

RTS T+0 Market, securities trading for retail investors with full preliminary deposit of assets and ruble settlement.
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RTS Board, the quote-driven market for unlisted stocks and bonds. FORTS, futures and options market with ruble settlement. Trading since 2001. Today, 47 contracts are offered (34 futures and 13 options) on shares of Russian companies, bonds, short term interest rates, currency, RTS Indices, oil, oil products, metals and sugar. The most active contract is futures on the RTS Index.

RTS Group operates the central counterparty, the settlement securities depository and the settlement house for rubles and foreign currencies. International members of RTS include Deutsche Bank, CSFB, UBS, Morgan Stanley etc. Both the RTS Stock Market and the FORTS market are traded on robust international standard electronic platforms which allow for direct market access and algorithmic trading. The core of the RTS Group is Open Joint Stock Company RTS where the trading is facilitated. The key shareholders include global investment banks, like UBS, Credit Suisse, Deutsche Bank. RTS website - http://www.rts.ru/en/ President - Roman Goryunov Public Relations Varvara Inozemtseva Head of Market Data Denis Avetisyan For additional information please contact international@rts.r

b)Trading in DAX Stock exchange Trading Hours The trading hours of Frankfurt stock exchange run from 9am to 5.30pm. Late DAX runs from 5.45pm to 8pm and the X-DAX runs from 5.45pm to 10pm. The stock trading of the

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Trading Time Floor starts from 9am and ends at 8pm while the stock trading for Trading Time Xetra starts from 9am and ends at 5.30pm. Normally, there is trading from Monday to Friday with the exception of a few holidays which would be declared by the exchange in advance. Some of these holidays are Christmas Eve, New Year's Eve, Good Friday, Easter Monday and Boxing Day. Trading Segments The Frankfurt stock exchange encompasses the full spectrum of services and products that are part of exchange trading. These include trading from derivatives and securities by means of provision of market information and transactions and also the operation and development of electronic trading systems. The trading process is carried out by brokers on the traditional floor trading and also by Xetra, the electronic trading system. The companies that are quoted on the Frankfurt stock exchange can enter the market in any of these three ways:

Prime Standard - If the company chooses this method of entry to the market then it must observe the EU rules.

General Standard - The companies that chooses this method to enter the market are regulated by the EU rules, just like the Prime Standard method.

Entry Standard - This is a very easy way of entering the capital market. The exchange authorities supervise companies choosing this method directly.

Main Stock Indices The main stock indices of the Frankfurt stock exchange are:

DAX - This is a blue chip index which consists of thirty of the major companies in Germany that are trading on the FSE. The Xetra trading system provides the prices. This index also measures the performance of the German companies of Prime Standard in terms of their market capitalization and order book volume.

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MDAX - This is a stock index which comprises of German companies. Its owner, Deutsche Borse, calculates the index. It lists 50 Prime Standard shares from different sectors that are found immediately after the companies listed in the DAX index.

SDAX - This is a selection index for fifty of the smaller German companies, also known as small caps. These companies are listed below the MDAX index and Xetra generates its prices. The companies are ranked according to their market capitalization and order book volume.

TecDAX - This stock index tracks thirty of the largest German companies from the technology sector that rank below the companies listed in the DAX index.

VDAX - This index depicts the variation margin of the DAX anticipated. Euro Stoxx 50 - Another important stock index of the Frankfurt Stock Exchange, this is designed by Stoxx Ltd for the purpose of blue-chip representation of Supersector leaders.

Exchange History The exchange history of the Frankfurt stock exchange is one of the oldest in the world. It dates back to the year 1585 when a bourse was created for the purpose of trading. Hence the FSE was founded in 1585. In the year 1874, the location of this stock exchange was shifted to a new building at Borsenplatz. After the Second World War, in the year 1949, it was finally successful in establishing itself as one of Germany's leading stock exchange. In the 1990s period, the Frankfurt stock exchange also functioned as a bourse for the Neuer Market. In 1993 it became Deutsche Borse AG. In the year 2002 and 2004 there were advanced negotiations for taking over the London Stock Exchange, which was the fourth largest stock exchange in the world, but the discussions broke down in the year 2005 and no attempts have been made in this direction ever since.

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Chapter-5 Rules and regulation in Indian capital market

Overview In keeping with the broad thrust of the ongoing programs of economic reform, the mechanism of administrative controls over capital issues has been dismantled and pricing of capital issues is now essentially market determined. Regulation of the capital markets and protection of investor's interest is now primarily the responsibility of the Securities and Exchange Board of India (SEBI), which is located in Bombay. Accordingly, SEBI's functions include:

Regulating the business in stock exchanges and any other securities markets Registering and regulating the working of collective investment schemes, including mutual funds.

Prohibiting fraudulent and unfair trade practices relating to securities markets. Promoting investor's education and training of intermediaries of securities markets.

Prohibiting insider trading in securities, with the imposition of monetary penalties, on erring market intermediaries.

Regulating substantial acquisition of shares and takeover of companies. Calling for information from, carrying out inspection, conducting inquiries and audits of the stock exchanges and intermediaries and self regulatory organizations in the securities market.

Keeping this in view, SEBI has issued a new set of comprehensive guidelines governing issue of shares and other financial instruments, and has laid down detailed norms for stock-brokers and sub-brokers, merchant bankers, portfolio managers and mutual funds.

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On the recommendations of the Patel Committee report, SEBI on 27 July 1995, permitted carry forward deals. Some of the major features of the revised carry-forward transactions as directed by SEBI are:

Carry forward deals permitted only on stock exchanges which have screen based trading system.

Transactions carried forward cannot exceed 25% of a broker's total transactions on any one day.

90-day limit for carry forward and squaring off allowed only till the 75th day (or the end of the fifth settlement).

Daily margins to rise progressively from 20% in the first settlement to 50% in the fifth.

On 26 January1995, the government promulgated an ordinance amending the SEBI Act, 1992, and the Securities Contracts (Regulation) Act, 1956. In accordance with the amendment adjudicating mechanism will be created within SEBI and any appeal against this adjudicating authority will have to be made to the Securities Appellate Tribunal, which is to be separately constituted. These appeals will be heard only at the High Courts. The main features of the amendment to the Securities Contract (Regulation) Act, 1956, are:

The ban on the system of options in trading has been* lifted. The time limit of six months, by which stock exchanges could amend their byelaws, has been reduced to two months.

Additional trading floors on the stock exchanges can be established only with prior permission from SEBI.

Any company seeking listing on stock exchanges would have to comply with the listing agreements of stock exchanges, and the failure to comply with these, or their violation, is punishable.

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Fraudulent and Unfair Trade Practices SEBI is vested with powers to take action against these practices relating to securities market manipulation and misleading statements to induce sale/purchase of securities. Inspection and Enforcement SEBI has the powers of a civil court in respect of discovery and production of books, documents, records, accounts, summoning and enforcing attendance of company/person and examining them under oath. SEBI can levy fines for violations related to failure to submit information to SEBI / to enter into agreements with clients / to redress investor grievances, violations by mutual funds/stock brokers and violations related to insider trading, takeovers etc. SEBI In India's Capital Market SEBI from time to time have adopted many rules and regulations for enhancing the Indian capital market. The recent initiatives undertaken are as follows:

Sole Control on Brokers: Under this rule every brokers and sub brokers have to get registration with SEBI and any stock exchange in India.

For Underwriters: For working as an underwriter an asset limit of 20 lakhs has been fixed.

For Share Prices: According to this law all Indian companies are free to determine their respective share prices and premiums on the share prices.

For Mutual Funds: SEBI's introduction of SEBI (Mutual Funds) Regulation in 1993 is to have direct control on all mutual funds of both public and private sector.

Capital Issue Guidelines Following the abolition of the office of Controller of Capital Issues and the consequent removal of administrative control over the pricing of new issues, the capital markets now enjoy a considerable degree of freedom. New companies, being set up by existing
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companies; with a five year track record of profitability, are free to price issues, provided the participation of the promoters is not less than 25% of the equity of the new company and the pricing is made applicable to all new investors symmetrically. Where a new company is set up by existing private sector companies along with a state level agency, or a government company, or a foreign collaborator, it will be sufficient if the private sector companies alone satisfy the requirements of five year track record of profitability. Existing profitable companies issuing capital for augmenting their own capital base are free to price their issue. At the same time, the practice of making preferential allotment of shares, unrelated to the prevailing market prices was stopped by SEBI. In any capital issue to the public, there is a specified minimum capital contribution to be made by the promoters. To reduce the cost of the issue, underwriting by issues has been made optional, subject to the condition that if an issue is not underwritten, and is not able to collect 90% of the amount offered to the public, the entire amount collected would be refunded to the investors. Where fully convertible debentures (FCDs) are to be issued, the interest rate can be freely determined by the issuer. Companies are required to create a Debenture Redemption Reserve (DRR) equivalent to 50% of the amount of debenture issue before debenture redemption commences. The cost of issuing capital, as of December 1992, was estimated at approximately 9-19% of the issue. This included fees for issue management, underwriting fees, stationary costs, advertisement and publicity costs, mailing costs, brokerage, etc. Companies have a variety of options which entail lower issue costs, such as GDR issues, private placement, and bought-out deals.

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SEBI's intention of passing on some part of its responsibility to the lead managers is reflected in the new guidelines announced in May 1995. The major decisions were:

SEBI has decided to stop vetting of rights issues all together. The onus of this responsibility will now rest with the lead managers. The procedure for clearance would be that the merchant banker would have to file the offer document with SEBI six weeks prior to the proposed date of offer of rights issue. If SEBI does not ask for clarifications within 21 days from the date of filing, the company and the lead manager can proceed with the issue.

SEBI revised the guidelines for reservation in public issues. As per the new guidelines which will take effect from 1 June 1995, half of the net public offer should be reserved for small applicants, i.e. those applying for less than 1,000 shares/securities. The other half would be reserved for the corporate applicants.

A committee comprising chiefs of senior executive directors of the five divisions of SEBI has been formed which will clear all public issues which are more than Rs. 100 crore. Formerly, all the issues were cleared by the primary markets division. Issues less than Rs. 20 crore would be cleared by the division chiefs, those between Rs. 20 crore and Rs. 50 crore by the executive directors and those between Rs. 50 crore and Rs. 100 crore by the the senior executive director.

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Rules and regulation in global capital market

Market Supervision
The Market Supervision Division is responsible for monitoring the trade and primarily deals in securities, while also monitoring the electronic channels and websites to ensure that there are no unlawful acts or practices against Capital Market Law and its implementing regulations. The Division also responsible to ensure that Listed Companies, Board of Directors, Senior Executives and Substantial Shareholders comply with the continuous disclosure requirements and any instructions or directives issued by CMA. In addition to this, it also ensures the Listed Companies compliance with requirements of the Corporate Governance Regulations. The Division's roles and responsibilities are as follows: 1. Monitoring of trading transactions and conducting preliminary reviews to ensure a full compliance of the participants under the Capital Market Law and its Implementing Regulations. This is mainly to protect Investors and traders against any unfair or deceptive acts or practices through advanced surveillance systems and tools. 2. Monitoring of electronic channels for any acts or practices against Capital Market Law and its implementing regulations. 3. Monitoring compliance of listed companies compliance with the continuous discloser requirements. This includes listed companies annual, quarterly and noncurrent continuous obligations and review of financial reports to ensure the disclosers adequacy and fairness. 4. Ensure that Board of Directors, Senior Executives and Substantial shareholders comply with discloser requirements stated in CMAs regulations. 5. Ensuring that the compliance of listed companies is in line with the requirements of the Corporate Governance Regulations. 6. Establishing the culture of corporate governance by enhancing awareness of best practices.

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The Market Supervision Division consists of three departments as follows: The Continuous Disclosure Department: The Continuous Disclosure Department is responsible for following up and supervising listed companies in order to ensure the best practices of disclosure and transparency in the capital market. The Department undertakes the promoting of disclosure and transparency of listed companies and investors. The department has contributed in many developments with regard to regulations and procedures for disclosure of listed companies and is still working to promote and improve their procedures and regulations. The main functions of the Department include:

Monitoring of announcements developed by listed companies on the website of The Saudi Stock Exchange (Tadawul).

Monitoring of disclosure forms. Monitoring ownership activities of Board Members, Senior Executives and major Shareholders of listed companies.

Monitoring investment activities of listed companies in the capital market. Reviewing the annual and interim financial statements of listed companies.

Surveillance Department: The Surveillance Department is responsible for monitoring trade operations by using daily analysis for the market trades, writing periodic reports, and using the latest surveillance systems in the global market. The goal is to ensure compliance of the capital market participants to CMA rules and regulations , in order to regulate the market and provide the necessary protection to investors.

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The processes of market surveillance are as follows:

Analyzing market trades on a daily basis and writing reports of all unusual behavior that occurred to it.

Extensive research is conducted on all transactions through the analysis of market data and executed orders.

The monitoring system (SMART) issues alerts about any practices or transactions may be suspected of being in violation of the capital market law and its regulations.

After analyzing the alerts, a report of any suspected violation of the Capital Market Law and its Implementing Regulations must be prepared, and forwarded to the concerned department in Capital Market Authority to investigate the issue and take necessary decisions on it.

A surveillance inquiry (soft enforcement) will take place for any conduct or practice suspected of violating the Capital Market Law and its regulations.

Screening electronic media channels to ensure that there is no practices or acts that violate the Capital Market Law and its Implementing Regulations.

Corporate Governance Department: The Corporate Governance Department is responsible for mentoring listed companies with corporate governance regulations in order to ensure strict adherence to best corporate governance practices that protect the rights of shareholders and the rights of stakeholders. The Department has developed many goals that will help to gain access to implementing the best corporate governance practices of listed companies, such as:

Increase the awareness of listed companies with the corporate governance regulations and good governance practices, while promoting a culture of good governance with listed companies in the Capital Market.

Promote the concepts of transparency, responsibility, and fairness in addition to raising the awareness of investors regarding good governance.

Enhance communication with professional international and local organizations

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related to corporate governance as well as institutional investors in order to introduce and develop corporate governance practices in the Kingdom.

Develop clear and effective procedures to the department to oversee the governance practices of listed companies in the capital market, which ensures the protection of investors in the capital market.

Encourage self-enforcement of good practices of corporate governance and promote a culture of governance in listed companies through the continuous communication.

Develop and use appropriate tools to ensure the effective application of the statutory requirements for corporate governance.

The Market Supervision Division has posted on the CMA website all disclosure templates, forms and special guidance manuals to help participants to comply with CMA requirements.

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Chapter -6
1.Global Stock Market Indices
Dow Jones Industrial Average Index (DJIA:DJI) 12,582.77 +168.43 +1.36% 1. Dow jones stock exchange NYSE Composite Index (NYSEI:NYA.X) 8,423.57 +104.86 +1.26%

2. NYSE Composite Index

NASDAQ Composite Index (NASDAQI:COMPX) 3. NASDAQ --composite index

NASDAQ 100 Index (NASDAQI:NDX.X) 2,361.33 +36.45 +1.57%

4. NASDAQ 100 Index

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FTSE 100 Index (FTSE:UKX) 5,989.76 +44.05 +0.74%

5. FTSE 100 Index

FTSE 250 Index (FTSE:MCX) 12,040.28 +106.24 +0.89%

6. FTSE 250 Index

FTSE 350 Index (FTSE:NMX) 7. FTSE 350 Index 3,187.62 +24.08 +0.76%

FTSE Techmark 100 (FTSE:T1X) 2,218.71 +16.85 +0.77%

8. FTSE Techmark 100

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FTSE AIM All Share Index (FTSE:AXX) 864.23 +6.27 +0.73% 9. FTSE AIM All Share Index

S&P/TSX Composite Index (TSX:OSPTX) 13,300.87 +111.93 +0.85%

10. S&P/TSX Composite Index

Bovespa Index (BOV:IBOV) 63,394.35 +990.71 +1.59% 11. Bovespa Index

DAX Index (DBI:DAX) 7,419.44 +43.20 +0.59%

12. DAX Index

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MDAX Index (DBI:MDAX) 10,991.29 +58.96 +0.54%

13. MDAX Index

Hang Seng Index (HKEX:HSI.X) 22,397.25 0.00 0.00%

14. Hnag Seng Index

Bse Sensex (BSE:SENSEX) 18,753.32 -58.73 -0.31% 15.BSE Sensex

S&P/ASX 200 Index (ASX:XJO) 4,588.30 -16.50 -0.36%

16.S&P/ASX 200 INDEX

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17. Nikkei 225 Index Nikkei 225 Index (NIKKEI:NI225) 9,868.07 +51.98 +0.53%

2. World leading stocks

1.Leading stock exchanges by value of trades in 2008: (trillion dollars) 1. Nasdaq Stock Market 2. NYSE Group 3. London Stock Exchange 4. Tokyo Stock Exchange 5. Euronext 6. Deutsche Boerse 7. Shanghai Stock Exchange 8. BME Spanish Exchanges 9. TSX (Toronto) 10. Hong Kong Stock Exchange 11. Borsa Italiana 12. Swiss Exchange 13. Korea Stock Exchange 14. OMX (Nordic & Baltic exchanges) 15. Australian Stock Exchange
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36.45 33.64 6.47 5.59 4.45 3.88 2.59 2.44 1.74 1.63 1.53 1.51 1.46 1.34 1.26

Source: World Federation of Exchanges

2. Leading derivatives exchanges by contract volume: (Jan-June 2008, million contracts)

1. CME Group 2. Korea Exchange 2. Eurex (Deutsche Boerse) 4. Liffe (NYSE Euronext) 5. Chicago Board Options Exchange 6. ISE (Deutsche Boerse) 7. Philadelphia Stock Exchange 8. National Stock Exchange of India 9. New York Mercantile Exchange 10. JSE (South Africa) 11. NYSE Arca Options 11. Bolsas de Mercadorias & Futuros 12. Bolsa de Valores de Sao Paulo 14. Dalian Commodity Exchange 15. RTS (Russia)

1,551.4 1,172.7 1,146.1 565.8 557.8 505.3 261.1 234.3 217.7 216.2 215.7 214.8 153.1 136.7 123.7

Source: Futures Industry Association

3. Leading exchange groups by market capitalisation: (billion dollars) 1. CME Group (CME.O) 2. Deutsche Boerse (DB1Gn.DE) 3. Hong Kong Exchanges and Clearing (0388.HK) 4. NYSE Euronext (NYX.N) 5. Bovespa (Brazil) (BVMF3.SA) 6. Nasdaq OMX Group (NDAQ.O)
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11.30 10.47 8.83 5.52 5.47 4.40

7. Intercontinental Exchange (ICE.N 8. Singapore Exchange (SGXL.SI) 9. ASX (Australia) (ASX.AX) 10. Bolsas y Mercados Espanoles (BME) (BME.MC) 11. London Stock Exchange (LSE.L) 12. TSX Group (Toronto) (X.TO)

4.09 3.52 2.96 2.01 1.82 1.82

Source: Reuters data (Reporting by Peter Starck, editing by Dan Lalor)

Operating system in different stock market 1)Operating system in US market

a) Operating system in Dow Jones stock exchange Participants in the stock market range from small individual stock investors to large hedge fund traders, who can be based anywhere. Their orders usually end up with a professional at a stock exchange, who executes the order. Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry. This type of auction is used in stock exchanges and commodity exchanges where traders may enter "verbal" bids and offers simultaneously. The other type of stock exchange is a virtual kind, composed of a network of computers where trades are made electronically via traders. Actual trades are based on an auction market model where a potential buyer bids a specific price for a stock and a potential seller asks a specific price for the stock. (Buying or selling at market means you will accept any ask price or bid price for the stock, respectively.) When the bid and ask prices match, a sale takes place, on a first-come-firstserved basis if there are multiple bidders or askers at a given price.

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The purpose of a stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a marketplace (virtual or real). The exchanges provide realtime trading information on the listed securities, facilitating price discovery. Market participants A few decades ago, worldwide, buyers and sellers were individual investors, such as wealthy businessmen, usually with long family histories to particular corporations. Over time, markets have become more "institutionalized"; buyers and sellers are largely institutions (e.g., pension funds, insurance companies, mutual funds, index funds, exchange-traded funds, hedge funds, investor groups, banks and various other financial institutions). The rise of the institutional investor has brought with it some improvements in market operations. Thus, the government was responsible for "fixed" (and exorbitant) fees being markedly reduced for the 'small' investor, but only after the large institutions had managed to break the brokers' solid front on fees. (They then went to 'negotiated' fees, but only for large institutions. However, corporate governance (at least in the West) has been very much adversely affected by the rise of (largely 'absentee') institutional 'owners'

b)Operating system in New York Stock Exchange

The New York Stock Exchange The New York Stock Exchange is a physical exchange, also referred to as a listed exchange only stocks listed with the exchange may be traded. Orders enter by way of exchange members and flow down to a floor broker, who goes to the floor trading post
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specialist for that stock to trade the order. The specialist's job is to match buy and sell orders using open outcry. If a spread exists, no trade immediately takes placein this case the specialist should use his/her own resources (money or stock) to close the difference after his/her judged time. Once a trade has been made the details are reported on the "tape" and sent back to the brokerage firm, which then notifies the investor who placed the order. Although there is a significant amount of human contact in this process, computers play an important role, especially for so-called "program trading".

c)Operating system in NASDAQ The NASDAQ is a virtual listed exchange, where all of the trading is done over a computer network. The process is similar to the New York Stock Exchange. However, buyers and sellers are electronically matched. One or more NASDAQ market makers will always provide a bid and ask price at which they will always purchase or sell 'their' stock.[4] The Paris Bourse, now part of Euronext, is an order-driven, electronic stock exchange. It was automated in the late 1980s. Prior to the 1980s, it consisted of an open outcry exchange. Stockbrokers met on the trading floor or the Palais Brongniart. In 1986, the CATS trading system was introduced, and the order matching process was fully automated. From time to time, active trading (especially in large blocks of securities) have moved away from the 'active' exchanges. Securities firms, led by UBS AG, Goldman Sachs Group Inc. and Credit Suisse Group, already steer 12 percent of U.S. security trades away from the exchanges to their internal systems. That share probably will increase to 18percent by 2010 as more investment banks bypass the NYSE and NASDAQ and pair buyers and sellers of securities themselves, according to data compiled by Boston-based Aite Group LLC, a brokerage-industry consultant.[5] Now that computers have eliminated the need for trading floors like the Big Board's, the balance of power in equity markets is shifting. By bringing more orders in-house, where

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clients can move big blocks of stock anonymously, brokers pay the exchanges less in fees and capture a bigger share of the $11 billion a year that institutional investors pay in trading commissions as well as the surplus of the century had taken place. Market participants A few decades ago, worldwide, buyers and sellers were individual investors, such as wealthy businessmen, usually with long family histories to particular corporations. Over time, markets have become more "institutionalized"; buyers and sellers are largely institutions (e.g., pension funds, insurance companies, mutual funds, index funds, exchange-traded funds, hedge funds, investor groups, banks and various other financial institutions). The rise of the institutional investor has brought with it some improvements in market operations. Thus, the government was responsible for "fixed" (and exorbitant) fees being markedly reduced for the 'small' investor, but only after the large institutions had managed to break the brokers' solid front on fees. (They then went to 'negotiated' fees, but only for large institutions. However, corporate governance has been very much adversely affected by the rise of (largely 'absentee') institutional 'owners'.

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Operating system in Asia Market

Operating system in Nikkei 225
The Nikkei Stock Average is the average price of 225 stocks traded on the first section of the Tokyo Stock Exchange, but it is different from a simple average in that the divisor is adjusted to maintain continuity and reduce the effect of external factors not directly related to the market. Equation Sum of stock prices of 225 constitutents Nikkei Average = Divisor

a) Stocks that do not have a par value of 50 yen are converted to 50 yen par value. b) Numbers are rounded to two digits after the decimal point, or hundredths, to calculate the average. c) Priority in the usage of prices are: 1. Current special quotation (closing special quotation). 2. Current price (closing price). 3. Standard price, which is defined as follows: The theoretical price of ex-rights, a special quotation from the previous day or the closing price from the previous day, in this order of priority. Adjustment of divisors When components change or when they are affected by changes outside of the market, the divisor is adjusted to keep the index level consistent.

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1) In the case of ex-rights Old Divisor X(sum of stock prices cum rights - sum of rights prices) New Divisor = sum of stock prices cum rights Rights prices = last cum stock price - theoretical value of ex-rights

Theoretical value of = ex-rights

last cum stock price+paid-in amount X paid-in allotment ratio paid-in allotment ratio + split allotment ratio

When there is no split or a reverse split, the split-allotment ratio shall be one. 2) In case of capital decrease last cum stock price Theoretical value of ex-rights = 1-ratio of capital decrease 3) In the case of replacement of components in the average Rights price = price of replaced components - price of added components 4) In the case of stock buyback by issuer Divisor not adjusted Magnifications 225 Adjusted magnification= divisor sum of stock / prices

Adjusted magnification

= Adjusted average =

sum of stock prices

= 225

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mathematical average

divisor

225

divisor

The concepts of "Periodic Review" and "Extraordinary Review" were redefined, and timing for the reviews was changed. The primary purpose of the Periodic Review is to annually reconsider component issues from the standpoint of changes in the industrial and market structures. The Extraordinary Review is for deleting and adding components in response to extraordinary developments, such as bankruptcies or mergers. Periodic Review Standards In principle, the Periodic Review shall be conducted annually in October in line with the rules in place. The Periodic Review may, however, be carried out more than once a year if necessary. Active Approach To Deletions/Additions The most important changes is that the Periodic Review process is carried out in a far more comprehensive and dynamic manner. The rules previously required replacement of an issue if liquidity had declined significantly, or if a company was delisted. The revised rules call for a more active approach to deletions and additions by requiring consideration of changes in the industrial structure and market environment, in addition to liquidity. In view of the desire for a more dynamic review process, no limit is placed on the number of issues that can be replaced. Assessing Liquidity While the principle of favoring highly liquid stocks was maintained, the yardstick for assessing liquidity was revised. The former measures of "Trading Volume" and "Price Fluctuation to Volume" were replaced by "Trading Value" and "Rate of Price Fluctuation to Volume."

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The new measures are seen as better gauges of liquidity because they combine Trading Value, a standard for measuring turnover, and Rate of Price Fluctuation to Trading Volume, which is important in view of the increase in the number of high-priced issues. Trading Value is calculated by multiplying the average of four prices (open, high, low and close) by number of shares traded. The period over which liquidity is measured was shortened to five years, from 10. The primary reason for this is to track changes in the market as closely as possible while eliminating the impact of factors that temporarily increase liquidity in the market. Selection of Highly Liquid Stocks The practice of assigning highly liquid stocks to the "High-liquidity Group" has not changed. Formerly, all stocks on the first section of the Tokyo Stock Exchange were ranked in order of liquidity and the top 50% were considered high-liquidity issues. This approach has been replaced with one in which the 450 most liquid issues are chosen (a figure double the 225 component stocks of the index). The approach of selecting the top 50% was abandoned because the number of issues listed on the first section of the TSE is growing and there was concern that the method would not result in a list representative of highly liquid issues. A predetermined figure that limits the population to a number double the component count was considered to be more practical and reasonable. Mandatory Deletion/Addition The rule mandating deletion of issues that fall outside the high-liquidity group remains unchanged. Since the high-liquidity group is now limited to 450 stocks, all issues ranked 451 and below are automatically excluded. Another important change involves elimination of the rule stating that only six issues could be removed from the index in a single review period. This was replaced by a rule

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requiring that the 75 most liquid issues (one-third of the component count of the Nikkei average) be included in the index. Deletion/Addition Based on Sector Balance A new concept based on six industrial sectors was adopted with these revisions. This was accomplished by consolidating Nikkei's 36 industrial categories into six: Technology, Financials, Consumer Goods, Materials, Capital Goods/Others, and

Transportation/Utilities. Component stocks of the Nikkei average are balanced among these six sectors. Choice of the sector approach reflects a belief that actively rebalancing component stocks from a broader perspective is required to accurately represent dynamic changes in the industrial structure. Procedures for inter-sector rebalancing are as follows. (a) The 450 high-liquidity issues are classified into the six sector categories. Half of the number of issues in each sector will be considered the "Appropriate Number of Issues" for that sector to be included in the index. This percentage reflects the fact that the number 450 is double the number of Nikkei average components. (b) The Mandatory Deletion / Addition rule is applied to the Appropriate Number of Issues to show if too many or too few have been chosen. For example, if the number of issues appropriate for a sector is 30 and the actual number of issues obtained after applying the rule is only 28, then two issues will be added to bring the sector's count to 30. Adjustments will be made for excesses or shortages in each sector as follows. If the number of companies for a specific sector in the top 75 most liquid issues that will be automatically included in the 225 components excesses in the Appropriate number of Issues for a sector, the excess is ignored and all issues are initially included.

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(c) The excess in a sector resulting from automatic inclusion as described above is adjusted by removing an equivalent number of issues from the sector, starting with the issue exhibiting the lowest level of liquidity. (d) Shortage will be filled up by adding an equivalent number of issues from among companies currently excluded, starting with the issue exhibiting the highest level of liquidity. This sector-based breakdown and the underlying industry classifications may be modified to reflect changes in the industrial structure. The 36 Nikkei industrial classifications included in the six sector categories are as follows: Technology -- Pharmaceuticals, Electrical Machinery, Automobiles, Precision Machinery, Telecommunications Financials -- Banks, Miscellaneous Finance, Securities, Insurance Consumer Goods -- Marine products, Food, Retail, Services Materials -- Mining, Textiles, Paper & Pulp, Chemicals, Oil, Rubber, Ceramics, Steel, Nonferrous metals, Trading House Capital Goods/Others -- Construction, Machinery, Shipbuilding, Transportation Equipment, Miscellaneous Manufacturing, Real estate Transportation and Utilities -- Railroads & Buses, Trucking, Shipping, Airlines, Warehousing, Electric Power, Gas. Extraordinary Deletion Basically, the rule requiring that a component stock be deleted when it is removed from the first section of the TSE (that is moved to the Liquidation post known as "Seiri Post"), delisted due to a merger or insolvency (insolvency is assumed when a company files for

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protection from creditors) or singled out for some other extraordinary reason has not been changed. A component stock moved to "Kanri Post" (Post for stocks under supervision) is in principle a candidate for deletion. Stocks are moved to Kanri Post for a variety of reasons, including likely delisting or during a temporary period of investigation and monitoring. In such cases, the decision to delete a stock from the average will depend on circumstances particular to the issue in question. If one or more component stocks is deleted from the average, the schedule for filling the resulting opening is as follows: (1) The "Shortage Ratio" was used previously for choosing the issue to replace a deleted component, with priority given to the most underrepresented industrial classifications. The new Periodic Review system focuses on the sector with the vacancy and requires selection of the stock with the highest liquidity among sector issues that have not been included in the average in the past. Given one deletion in financials, a newly-selected issue will come from financials. (2) As a rule, replacement will be effective on the day an opening emerges. If a component is moved to Seiri Post, the change goes into effect on the day the issue is moved. If a vacancy develops suddenly on a day the market is closed, a certain interim period may be allowed before the opening is filled, to announce the date and details of replacement ahead of time. This rule is used in cases where a company files for protection under the Corporate Reorganization Law at night or on a public holiday. Other Revisions The rules under "Exceptions to Addition Policy" and "Special Additions" have been abolished. Exceptions to Addition Policy rules stated that companies qualifying for an

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exceptional addition had to be listed on the first section of the TSE for more than 3 years and have a float exceeding 6 million shares. Special Additions rule stated that a firm considered representative of its industry by TSE would be included. Some companies may be delisted as they move forward with restructuring or diversification programs. In such cases, component issues will be replaced in accordance with the following procedures, depending upon the nature of the reorganization. Replacement procedures will not be implemented immediately but held pending until the next Periodic Review so that liquidity can be monitored around the time of the reorganization and the new entity's status measured in terms of its being representative of its industry. This means that the delisting process will be handled as before. It should also be noted that in the following cases, the issue may not necessarily be included at the next Periodic Review. (1) If a non-component issue becomes the surviving entity in a merger between TSE first section companies, and the current component issue is the company absorbed by the surviving entity, the surviving non-component issue may be included in the index. (2) When a component issue is delisted following the formation of a holding company (including formation of a holding company by several listed firms), the newly established "Holding Company" may be included as an index component. Revisions to the Nikkei Indices Selection Rules 2002 Nikkei Inc. revised the component selection rules for the Nikkei Stock Average (Nikkei Average or Nikkei 225), Nikkei Stock Index 300 and Nikkei 500 Stock Average from February 1, 2002. The previous rule stipulated that the constituents were to be removed and added immediately after corporate failure events. When constituents filed for bankruptcy or were moved to Seiri-Post by the Tokyo Stock Exchange, changes to the indices were made after the close of the same day.
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However, in the face of recent economic conditions, to enable the users respond to the changes smoothly and to make the changes better known to the public, new constituents are added after an interval under the revised rules. The interval is approximately two days and the exact number of days will be announced at each event. Constituents which are moved to Seiri-Post continue to be removed on the day of the event. The Nikkei Average will be calculated with fewer than 225 constituents before the addition of new components.

Operating System in Taiwan Index

Listing of Securities

A public company applying for listing has to meet certain financial and operational criteria. After close examination by TWSEs listing functions, the application is submitted to the Securities Listing Review Committee for consideration. Thereafter, the application needs to be confirmed by a resolution from the Board of Directors for endorsement, before being submitted to the Securities and Futures Bureau (SFB) for final approval. After the listing application has been approved by the SFB, the public company pays listing fees, and submits its quarterly certified financial reports to TWSE for examination. TWSE actively promotes corporate governance of listed companies, supervises and regulates listed companies financial and operational status on a routine basis, and carries out investigations into unusual circumstances, and verifies material information disclosed by listed companies. In addition, in order to enhance the quality of information disclosure in the securities market, TWSE works with GreTai Securities Market to manage a Market Observation Post System, and an Information Disclosure Evaluation System. TWSE has focused on developing new products to enhance diversification of securities and provide investors with hedging tools. TWSE began to accept listing applications of put warrants in January 2003, launched the first Exchange Traded Fund (ETF) on June 30, 2003, and launched ETF warrants in July 2004. Listed securities on TWSE currently

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include stocks, entitlement certificates of convertible bonds, convertible bonds, government bonds, beneficiary certificates, call warrants, put warrants, ETFs and Taiwan Depository Receipts (TDRs). Trading of Securities When TWSE was established, trading in the centralized market place was carried out on an open trading floor. However, to meet the changing needs of the market environment, the trading system has progressed through several phases. In August 1985, the open trading floor was gradually replaced by a computer-aided trading system (CATS), which was eventually upgraded to a fully automated securities trading (FAST) system in 1993. The fully computerized trading system has helped boost the trading capacity and efficiency of the stock market. The trading hours of the centralized market trading session are as follows: Trading Days Monday Friday Monday Friday Monday Friday

Trading Sessions

Trading Hours

Regular Trading

09:00 ~ 13:30

Off-hour Trading

14:00 ~ 14:30

Odd-lot Trading

13:40 ~ 14:30

Non-paired Monday Trade Block Trading Paired Trade Monday Friday Friday

09:00 ~ 17:00 08:00 ~ 08:30 Pre-opening trading hours 09:00 ~ 17:00 In case of settlement on T Day, the quote shall be completed by 13:50.

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Investors may place an order in person, by phone, fax or Internet. Orders are entered via terminals on securities firms premises into TWSEs main computer, and are processed and executed by the trading system on a price-and-time-priority principle. In special cases, listed stocks may be traded through negotiation, auction, tender or other means. Trading prices are decided by call auction. TWSE conducts intra-day volatility interruptions to prevent over-volatility of stock prices, and also discloses prices and volumes of unexecuted orders at the 5 best bids/asks. At the end of the trading session, the trading system accumulates orders for 5 minutes (from 1:25 p.m. to 1:30 p.m.) before the closing call auction in order to form fair closing prices. Computer and Information Safety

The computerized trading, settlement, and information transmission of TWSE is highly efficient. For the purpose of maintaining market integrity and safeguarding investor rights, TWSE pays close attention to information and communication safety mechanisms. TWSE has a full capacity back-up computer system to guard against any possible system failure. TWSE has been awarded an ISO9001 quality system certificate for its computer system, and received ISO27001 authentication for its IT Security Management System.

Market Surveillance A healthy and orderly market should be able to protect investors rights and privileges, and suppress manipulation and insider trading. In accordance with the Market Surveillance Regulations, TWSE daily discloses information about abnormal securities trading to alert investors, thereby protecting investors rights. TWSE may take disciplinary measures, as defined in the Regulations, to constrain abnormal market behavior, and prevent damage to the market. Clearing and Settlement According to the Securities and Exchange Act and TWSEs own operational rules, TWSE acts as clearinghouse for all trades executed in the market. All securities firms have to
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fulfill settlement obligations to TWSE, which takes on the final responsibility for ensuring the completion of the settlement process in the market. TWSE employs a multilateral net settlement to calculate the net amounts of securities and funds receivables and payables between securities firms and TWSE. The settlement of shares and payments between securities firms and TWSE is processed on T+2. In cases of block trades, investors can choose the settlement day to be either T+2 or T. The securities broker and dealer is responsible to TWSE for completing all the obligations of clearing and settlement and other related responsibilities arising from trading on TWSE. If the securities firm can not fulfill securities settlement obligations because of a defaulting client, erroneous trade, or other reasons, it may apply to TWSE to borrow securities to complete the settlement through the securities borrowing system. When the securities firm applies to borrow securities, it deposits collateral with TWSE. When the securities firm cannot borrow a sufficient amount of securities through the securities borrowing system, TWSE issues a due bill to cover the gap. The securities firm has to provide collateral as well. If any securities firm fails to fulfill its settlement obligations, TWSE designates other securities brokers or dealers to complete its settlement. The resultant price differences and the expenses incurred are first covered by the Joint Settlement and Clearing Fund (JSCF) contributed by the defaulting securities firm, and then the Special Clearing Fund maintained by TWSE, followed by the left portion of JSCF contributed by other securities firms. TWSE Securities Borrowing and Lending System

TWSE established a Securities Borrowing and Lending System (SBL) on June 30, 2003. Participants include institutional investors such as securities firms, banks, insurance companies and foreign institutional investors, while TWSE serves as an intermediary. The system provides three kinds of transactions: fixed-rate transactions, competitive auction transactions and negotiated transactions. Upon collecting borrowers collateral in fixed-rate and competitive auction transactions, TWSE assumes the role and risks of a guarantor. The

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introduction of SBL mechanism in Taiwan not only increases the liquidity of the Taiwan securities market, but also attracts foreign investors to our market and makes our market more competitive. Internationalization of Securities Market In order to enhance international information-exchange and cooperation, TWSE has entered into Memoranda of Cooperation with more than 20 foreign stock exchanges, and actively participated in international securities meetings and organizations, such as WFE, EAOSEF, ANNA and IOSCO. To speed up the liberalization and internationalization of the Taiwan securities market, TWSE has actively reached out to the world in recent years. We have held promotional tours to the major financial centers in the world and other promising areas such as the Middle East. We wish to connect the entrepreneurial spirit of Taiwan with foreign investors funds, and in turn enhance the market depth of the stock market. In addition, TWSE has held conferences or meetings, at which famous foreign scholars or experts are invited to talk to the local market about current market trends and at the same time, inform foreign investors of the continuing liberalization of our stock market. In order to keep up with the international trend of developing index-related products, TWSE, in association with FTSE, has launched a series of tradable indices in Taiwan: the TWSE Taiwan 50 Index on October 29, 2002, TWSE Taiwan Mid-cap 100 Index and TWSE Taiwan Technology Index on November 29, 2004, TWSE Taiwan eight industries Index and TWSE Taiwan dividend+ Index on January 15, 2007. TWSE will continue to cooperate with FTSE, in accordance with international standards, to compile more indices to be used as underlying indices of new financial products. Monitoring of Securities Firms

According to the Securities and Exchange Law, the establishment of a securities firm and its branch has to be approved and licensed in advance by the relevant authority. Prior to participating in the market, a securities firm must sign a contract with TWSE and deposit a settlement and clearing fund with TWSE, who then set up a fund management committee to

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manage this fund. The securities firm is responsible for its employees in both sales representation and ethical behavior when conducting centralized market business. To enhance the financial structure and risk management, all securities firms must meet the regulatory capital adequacy ratio to maintain regular business. All securities dealers are required to set aside a monthly trading-loss reserve, and securities brokers are required to set aside a defaulting-loss reserve. All reserves are accumulated up to a specified amount. To maintain an orderly and safe market, TWSE regularly sends inspectors to check the securities brokers and dealers on-site to see whether their business operations and financial status meet all these requirements. In addition, TWSE maintains a warning system for scrutinizing the operational risk of securities firms, and also sets up a risk control database for margin trading to strengthen the risk management of securities firms. For the purpose of simplifying and reducing paperwork of trading participants, TWSE established a unified reporting system in 1999 for securities brokers to file all TWSErequired reports through a single electronic user interface. TWSE also provides securities brokers with e-mail trading and direct market access (DMA) to make full use of the most advanced technology. Furthermore, TWSE has relaxed securities firms sites and facilities requirements and encouraged their automation effort so as to reduce operation cost. Investors Service

An investor wishing to conduct securities transactions first opens an account with a securities brokerage firm, and signs a Trustee Agreement to grant the broker permission to act as his/her agent. Following the Executive Yuans revision of the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals and the abolition of the QFII system, TWSE has simplified the process of admitting foreign investment into the Taiwan stock market. The review process for foreign investment has changed from a permission to a registration system. As a result, foreign investors can now qualify for domestic investment after completing registration at TWSE. TWSE employs television, newspapers, magazines, posters and other media for

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promotional purposes, and holds various promotional activities such as workshops and seminars to inform and educate investors as regards investment and finance. Investors are welcome to ask questions concerning securities investments by calling the Investor Service Center (886-2) 8101-3101 or 8101-3873. To enhance and protect investors rights and interests, TWSE and other securities-related institutions jointly established the Securities Investors Protection Fund. Following the promulgation of the Securities Investors and Futures Traders Protection Act, which became effective on January 1, 2003, the Securities and Futures Investors Protection Center was established. The Center manages the protection fund to compensate investors should securities or futures companies be unable to do so due to financial difficulties. According to Article 18 of the Act, TWSE and other securities-related institutions are required to contribute funds to the Center. TWSE has implemented a investor personal data inquiry system. This system helps to reduce the manual handling of personal data processing. It also provides speedy and convenient responses to personal information inquiries, thus helping to lower the possibility of fraud or forgery. Securities Information

To enhance the fairness and efficiency of securities trading, as well as providing a computer system for stock trading and matching, TWSE uses various channels such as a website and publications to give investors easy access to securities information. TWSEs website ( http://www.twse.com.tw/ ) carries official announcements concerning securities listing and trading, as well as other securities information for investors consultation. In addition, the following 3 websites established by TWSE can be accessed from TWSEs home page.

1. Market Information System ( http://mis.twse.com.tw/ ): This website provides real-time trading information about the market and individual stocks, including Market Summary, Sector Group Quotes, Five Best Bids and Asks, ETF Quotes, Stock Borrowing

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Quotes

and

Market

Announcements,

etc.

2. Market Observation Post System ( http://emops.twse.com.tw/emops_all.htm ): This website provides financial and operational information about listed companies, including company profiles, financial statements, operational summaries and material information. 3. Data e Shop ( http://dataeshop.twse.com.tw/ ): This website provides data vendors and investors with on-line subscriptions to data services, including end-of-day market data, index constituents data and historical trading data. To provide investors with versatile reference data, TWSE publishes a Stock Chart of Taiwan Stock Exchange Capitalization Weighted Stock Index and Trading Volume & Value at the beginning of each year, showing market trends since 1977 (in Chinese only). In addition, TWSE also puts out the following periodicals, which are also available on TWSEs website: 1. Taiwan Stock Exchange Review Monthly (monthly) 2. Taiwan Stock Exchange Statistical Data (annual) 3. Highlights of TWSE Listed Securities (annual) 4. Status of Securities Listed on Taiwan Stock Exchange (monthly) 5. Taiwan Stock Exchange Annual Report (annual) 6. Fact Book (annual) To inform and educate investors, TWSE has compiled a series of booklets. Investors can either access the booklets on TWSEs website ( http://www.twse.com.tw/ ), or obtain hard copies at securities firms premises. TWSE has established an Investors Reading Room (3F, No. 7, Sec. 5, Xinyi Rd., Taipei) to display prospectuses and quarterly financial reports of all listed companies, as well as monthly and semiannual financial reports of all securities brokers and dealers. To bring the public closer to the stock market, TWSE set up an Information Center in mid2008. The Center provides the following information: market data displays such as trading graphs, international stock market data, foreign exchange rates, trade data displays etc.

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 current trends in TWSE trading simulation systems and educational network servic s interactive inquiries and display systems live broadcasts of ceremonies and speeches

Operating system in Shanghai Comp.

Trading business falls into two categories depending on whether it is provided through the trading system, namely, trading system-based business and non-trading system-based business. Trading system-based business can be further grouped into two types: centralized trading business and trading-related services. Non-trading system-based business includes negotiated transfer, warrant creation and cancellation, etc.

Centralized trading refers to the change of securities ownership affected through price inquiry, quotation and auction via the trading system of the stock exchange. Tradingrelated services refer to the services provided by the stock exchange through the trading system that relate to offering, entitlement or trading relationship that is closely associated with the centralized trading of securities. Compared with similar services offered through over-the-counter market, centralized trading has the following main differences: (1) services are provided through the trading system; (2) specific securities codes are assigned; and (3) trading is conducted through a broker.

SSE is open for trading from Monday to Friday. In the morning session, the market opens with a call auction between 9:15 am and 9:25 am, which is followed by a continuous auction between 9:30 am and 11:30 am. The afternoon session begins with a continuous auction between 13:00 pm to 15:00 pm and then block trading takes place between 15:00 am -15:30 am. The market is closed on the weekends and other public holidays as announced by SSE.

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Securities are traded on SSE on a market-driven and free auction basis. Limit orders and market orders are accepted in line with market conditions. At present, trading in A Shares, B Shares and securities investment funds is subject to a 10% daily price up and down limit, except for the first trading day. Special treatment shares, or ST shares, are subject to a 5% daily price up and down limit. The price limits on warrants are based on that of their corresponding underlying securities and are determined by multiplying the conversion ratio by a certain coefficient. The price of a block trade of securities with a price limit is determined by the buyer and seller within the price limit applicable to such securities on the day of trading. The price of a block trade of securities without any price limit is negotiated by the buyer and seller within 30% of the previous closing price or between the highest and lowest traded prices on the day of trading. In the absence of any transaction for a particular stock, the closing price of the previous trading day will be the execution price.

Securities trading on SSE are conducted on an agency basis. All the investors that trade securities on SSE must first appoint a member of SSE as an agent and sign an agreement with the agent for trading and clearing securities on their behalf. No trading is allowed before the investor's trading account is registered with the member's trading seat.

SSE has adopted a primary dealer system in warrant trading. Primary dealers are the securities firms that are designated by SSE for providing bilateral quotations for warrant trading. In addition, institutional market participants recognized by SSE may provide daily bilateral quotations for bonds traded on SSE's block trading system, with the specific bonds and the spreads to be determined at their discretion to the extent permitted by SSE rules.

SSE makes timely releases of trading data and information to members and investors. Daily real-time market quotations, stock indices, clearing data, market reports and daily transaction data are transmitted to member's counter terminals via satellite communications system or optical fiber communications system. The transaction data is instantaneously transmitted to each member via a two-way satellite system and optical
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fiber communications system. Since September 22, 2003, SSE has started disclosing five best quotations. Block trade data is published in SSE-designated media and released simultaneously on SSE's website (www.sse.com.cn). Apart from that, SSE also discloses more detailed information about the daily top gainers and losers on the securities market in line with the trading rules.

Operating system in Europe market

Operating system in London Stock Exchange

Participants in the stock market range from small individual stock investors to large hedge fund traders, who can be based anywhere. Their orders usually end up with a professional at a stock exchange, who executes the order. Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry. This type of auction is used in stock exchanges and commodity exchanges where traders may enter "verbal" bids and offers simultaneously. The other type of stock exchange is a virtual kind, composed of a network of computers where trades are made electronically via traders. Actual trades are based on an auction market model where a potential buyer bids a specific price for a stock and a potential seller asks a specific price for the stock. (Buying or selling at market means you will accept any ask price or bid price for the stock, respectively.) When the bid and ask prices match, a sale takes place, on a first-come-firstserved basis if there are multiple bidders or askers at a given price. The purpose of a stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a marketplace (virtual or real). The exchanges provide realtime trading information on the listed securities, facilitating price discovery.

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 Operating system in FTSE

The FTSE 100 consists of the largest 100 UK companies, by full market value, which are eligible for inclusion in the index. To qualify, companies must have a premium listing on the London Stock Exchange with a Sterling denominated price on SETS, subject to eligibility screens. The FTSE Europe/Middle East/Africa Regional Committee will meet quarterly to review the constituents of the FTSE 100. The meetings to review the constituents will be held on the Wednesday after the first Friday in March, June, September and December. Any constituent changes will be implemented on the next trading day following the expiry of the LIFFE futures and options contracts, which normally takes place on the third Friday of the same month. Market capitalization rankings are calculated using data as at the close of business on the day before the review. Companies must have a minimum trading record of 20 days at the review. A security will be inserted at the periodic review if it rises above the position stated below when the eligible securities for each FTSE Index are ranked by market value: Risen to 90th or above

A security will be deleted at the periodic review if it falls below the position stated below when the eligible securities for each FTSE Index are ranked by market value:

- Fallen to 111th or below

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Changes made to the FTSE 100 at the periodic review will be made automatically to the FTSE 350 and FTSE 350 Yield Indices. Where a greater number of companies qualify to be inserted in an index than those qualifying to be deleted, the lowest ranking constituents presently included in the index will be deleted to ensure that an equal number of companies are inserted and deleted at the periodic review. Likewise, where a greater number of companies qualify to be deleted than those qualifying to be inserted the securities of the highest ranking companies which are presently not included in the index will be inserted to match the number of companies being deleted at the periodic review. Companies that are large enough to be constituents of the FTSE 100 but do not pass the liquidity test shall not be included. At the next annual review they will be re-tested against all eligibility screens. A constant number of constituents will be maintained for the FTSE 100. The Secretary to the FTSE Europe/Middle East/Africa Regional Committee will be responsible for publishing the six highest ranking non-constituents of the FTSE 100 Index at the time of the periodic review. The appropriate Reserve List will be used in the event that one or more constituents are deleted from the FTSE 100 during the period up to the next quarterly review. If a new issue is larger than 1% of the full market capitalization of FTSE All-Share it will normally be included in the FTSE 100 after close on the first day of official trading. The lowest ranking constituent will be removed.

Operating system in DAX

The DOW Jones Average is made up of 30 companies on the New York Stock exchange. As of January of 2009 there were 3,615 companies listed. In March of 2006 the NYSE had a market capitalization valued at $43.6 trillion dollars. Market Capitalization equals the stock price multiplied by the number of outstanding shares. Outstanding shares refer
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only to the public side of the company and therefore only measured public failure or success not what may be held privately in the same company.

In March of 2008 the New York Stock Exchange market capitalization was valued at $27.3 trillion dollars. Today the estimated value is $15 trillion dollars. Since some say there is only $7 trillion dollars of money in the United Statesone might wonder where did the other vast sums come from or go to for that matter? Of course that money is just on paper and one can see how easy it is to evaporate and re-materialize wealth almost whimsically.

As mentioned the DOW Jones is made up of 30 companies out of 3,615 on the NYSE. Not to mention the other 7,000 technology-Nasdaq, transportation and utility companies in the United States that are not represented. This means that the concept governing this index is not one of diversification even though the Dow is made up of stocks from companies most widely held in the country.

All 30 of these companies with the exception of Intel and Microsoft, (They are a part of the Nasdaq.) are members of the New York Stock Exchange. In fact only due to a recent change in the rules, which precluded non NYSE members, allowed their inclusion. The fact these companies are some of the most widely held stocks are one of the few pros that seem to stand-up to why they could possibly be used as a true indicator. Yet there are many more reasons why they fail to give us a true picture what the real market is doing. Here are some of the many cons.

First, the DOW Jones Index is a price weighted average. This means that the higher value stocks are given more weight than the lower priced stocks. Or put another way smaller companies on the DOW can have and often times do have a bigger impact on the index than larger companies. Thus the weighted average has nothing to do with the companies overall size. That means if the more expensive stocks are doing well than the index is doing well and visa versa.

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The Dow works by establishing a divisor based on the weighted average. Once the divisor has been calculated the percent change is muted. So a $1 decrease in value of a stock worth $10 per share or $1 decrease in value of a stock worth $100 per share is indexed the same. So the average is not one where you can add up the price of 30 stocks and then divide by 30.

There is also another calculated caveat. If any one of the stocks splits the average will remain the same. The index does not change instead the price and divisor, are adjusted. Thus price of a stock goes down as a result of the spilt but the indicator stays the same. These are a few mathematical manipulations of the index. Yet there is a bigger question and it has little to do with the math.

Based on the quality and strategy of the 30 stocks picked, the question, is the DOW Jones Average a good representation of how the market is actually doing? Or stated another way, how can a market such as the New York Exchange and the broader markets in general justify such psychological wealth being evaporated based on the volatility of 30 companies? It starts with this sticking point. The divisor is adjusted only when there is a recalculation of the price weighted average. This is done when stocks are rotated in and off the roles of the DOW. Heres how it is works. The method of selection for these 30 companies is conducted through an annual review process done by Dow Jones & Company perhaps in conjunction with the Wall Street Journal. They use seven criteria to decide what companies should stay and which ones should go. Essentially a public relations strategy, the index is designed to put the best face on Wall Street. The process is about establishing what is called The Dow Jones Sustainability Index and it is design to make sure only those corporations that represent the top 10% of the leading sustainable companies in a given industrial sector are represented.

The first criteria, is classified as Sector Sustainability. The companies are reviewed with respect to their primary revenue source. In the case of Bank of America, Citigroup, GM
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and JP Morgan Chase & Co their main source of income is now the tax payer! These sources of income and sectors are judged on their ability to sustain a certain level of performance.

The second criteria, is Corporate Sustainability. Each company is required to be evaluated. The results are tallied and a score assigned. Here the focus is on shareholder value, company management, economic goals and the companys relationship with the community. For example, has the company always paid a dividend and how much. It is essentially a risk assessment. The survey of the company is as much subjective as objective.

Third the company is given a ranking within the Sector. This is based on the Corporate Sustainability score.

Fourth is the Eligible Industrial Groups. This primarily is an evaluation of the sectors in conjunction with the corporation. Only those companies that rank a high percentage of the maximum score in a given sustainable sectors can earn further consideration.

Fifth is Eligible Companies. Those sectors and corporations qualifying under the forth criteria, companies that are in the top 50% percentile of a sector are eligible for further consideration.

Sixth is the Component Selection. Overall the top 10% companies are selected. Then from each sector based on the corporate sustainability score the top 7% of the companies per sector are selected. If the required number is not reached by then the top 10% in a sector are selected. If still the required number is not reached then the standards are lowered until the desired amount has been reached.

Seven is the Market Capitalization Coverage. The DJSI establishes a free floating target market capitalization for each subsector. This floating capitalization number is based on a percentage of the market capitalization of a larger super sector. If companies exceed this
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market capitalization then they are selected. If the required number is not met after this iteration then the floating target market capitalization number is adjusted down.

This process is of course very detailed and much more technical than the length of this article permits. None the less the review takes place annually and sometimes quarterly as needed. The point is Dow Jones & Company go through this elaborate process to put the best face possible on the market. Since the Dow Jones Industrial Average is the most recognizable index in the world. The controversy about whether it adequately represents the real market is the point and it is a hotly debatable.

In March of 2008 the Dow Jones market capitalization was less than 10% of the New York Stock Exchange. Under some circumstances 10% might work as a good indicator. But keep in mind the NYSE does not include The Nasdaq, Transportation, Utilities, Preferred Stock, or privately held companies. Then there are the dubious companies, a part of the DJIA like Citigroup and General Motors. Is it a wonder people are beginning to ignore the Dow Jones all together and the world is looking for a suitable replacement based on a combination of US, Euro and Asian copulations.

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Chapter 7 Stock market in developed countries

Developed International Markets Understanding developed international markets is key to learning how to invest in them. Developed markets are much like the US, in that they are strong opportunities that offer good return on investments. Emerging markets are those just fresh on the books. Remember, though, that the age of the country and the overall impression you have of that country may not define the investment opportunities there. The US market was considered emerging less than 100 years ago, after all. Developed international markets are those similar to the United States. According to the 2008 Emerging Economy Report, emerging economies and markets are "regions of the world that are experiencing rapid informationalization under conditions of limited or partial industrialization. On the other hand, developed international markets are countries well developed and pose less of a risk. Which countries are considered to be developed international markets? According to Morgan Stanley Capital International, here is a list of the current developed countries:

Australia Austria Belgium Canada Denmark Finland France Germany Greece Hong Kong

Japan Netherlands New Zealand Norway Portugal Singapore

Spain Sweden Switzerland

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Ireland Italy

United Kingdom United States

Those who are interested in understanding developed international markets will want to take a good look at how the United States' markets work, as these are some of the most commonly used trading locations. What does trading in the United States mean in general? To most individuals, trading in developed markets means stability. While there is a large amount of movement in most stock markets, especially the US markets, there is much less risk of losing it all. The country is developed enough to the point of being able to give people the information they need to make key decisions on whether they should or should not invest there. Another benefit to investing in developed international markets is the range of opportunities available. There are thousands of companies that you could invest in, here. Many of them are from various sectors, giving you plenty of room to expand your portfolio to include various assets. As one type of asset falls in value on those markets, there are other assets likely doing well. Therefore, developed markets do offer some benefits especially to those who want a steadier return on investment. On the other hand, there are some benefits to investing in emerging markets as well. Emerging markets are those that are more risky, which may mean that you have to put a lot of faith in what you are investing in. Unfortunately, some information may be more difficult to obtain from these markets. So, why do so many people see emerging markets as an ideal investment arena? The answer to this may lie in the profit they offer. Since these countries are growing at a rapid pace, and there are more opportunities for ground floor businesses to do well, there is a potential for a higher return on investment.

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Understanding international developed markets is likely to take a great deal of study and research, but for many, these markets are an opportunity for lower, but less risky investments.

Oslo Stock Exchange (Norway Stock Exchange)

Oslo Stock Exchange Oslo Brs

Type Location

Stock Exchange Oslo, Norway 595431.31N

Coordinates

104452.06E59.9086972N 10.7477944E

Founded

1819

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Owner

Oslo Brs ASA Bente A. Landsnes (CEO) Leiv Askvig (Chairman) 219 US$ 346,2 billion (2010) NOK 2,585 billion (2010) OBX, OSEAX http://oslobors.no

Key people

No. of listings MarketCap Volume Indexes Website

Oslo Brsen Building 2011 The Oslo Stock Exchange (Norwegian: Oslo Brs) (OSE: OSLO) serves as the main market for trading in the shares of Norwegian companies. It opens at 9:00am and closes 5:30pm local time (CET). In additional to a wide range of domestic companies, the OSE attracts a lot of international companies within petroleum, shipping and other related areas. The exchange has pre-market sessions from 08:15am to 09:00am, normal trading sessions from 09:00am to 05:20pm and post-market sessions from 05:20pm to 05:30pm on all days of the week except Saturdays, Sundays and holidays declared by the Exchange in advance.

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The Oslo Stock Exchange started life as Christiania Brs in 1819. In the beginning, there was no organized listing or stock exchange; the Brs served as a meeting place for investors auctioning ships, shares in ships, commodities, and foreign currencies. Stocks and bonds only started trading on the exchange in 1881. In 1988, the exchange introduced an electronic trading support system, and replaced the old auction model with continuous trading of listed shares throughout the day. Trading became fully electronic in 1999 and the trading floor was discontinued. OBX Index The OBX Index is a list of the 25 most liquid companies on the Oslo Stock Exchange main index. The companies have their own index common OBX index. All stocks on the OBX list can be traded with options and futures which are listed on the SOLA derivative platform. The companies on the OBX list are rotated twice a year, on the third Friday of June and December. Ownership The Oslo Stock Exchange remained a self-owning institution until 2001 when it converted into a joint stock company and offered shares to the public in an IPO. DnB NOR now owns 18% of the company, with the rest of the shares held mostly by many foreign and domestic investors. On October 6, 2006, the larger market and panScandinavian stock exchange group OMX acquired a 10% strategic stake

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Irish Stock Exchange, Anglesea Street History The Irish Stock Exchange (ISE) (Irish: Stocmhalartn na hireann) is Ireland's only stock exchange and has been in existence since 1793. It is an Irish private company limited by guarantee. It was first recognised by legislation in 1799 when the Irish Parliament passed the Stock Exchange (Dublin) Act. At different periods in its history, the ISE included a number of regional exchanges, including the Cork and Dublin exchanges. In 1973, the Irish exchange merged with the other British and Irish stock exchanges becoming part of the International Stock Exchange of Great Britain and Ireland (now called the London Stock Exchange).Between 1973 and 1986 there were no new company listings.[1] In 1995, it became independent again and since then has expanded internationally and established itself as a global listing centre for international fund and debt securities. Markets The Irish Stock Exchange operates three markets: The Main Securities Market (MSM), the principal market for Irish and overseas companies, which admits a wide range of security types such as shares, bonds and funds to listing and trading. The Main Securities Market is a regulated market as defined by
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Markets in Financial Instruments Directive (MiFID). It is the principal market of the ISE for larger, more established companies - Irish and international - from a broad range of industry sectors including financial services, building, oil and gas, utilities and food. The Enterprise Securities Market (ESM), an equity market designed for growth companies. The ESM is an exchange regulated market and multi-lateral trading facility (MTF) as defined by MiFID. It is the ISE market for smaller, growth companies and has been specifically designed to meet the funding needs of companies at earlier stages in their development. The Global Exchange Market (GEM), a specialist debt market for professional investors. GEM is an Exchange regulated market and MTF as defined by MiFID. Current Operations The exchange is owned by Irish Stockbrokers and the country currently has two large, and half a dozen medium-sized, brokerages but most observers believe this cannot continue indefinitely, as sales from trading commissions and fees from corporate deals tumble because of the recession.[2] On 6 June 2000, the ISE closed its trading floor in Anglesea Street ( a listed building)[3], Dublin 2, and switched to an electronic trading platform called ISE Xetra which has enabled it to expand its membership base to include international banks and)used by the Deutsche Brse Group. Trading on the ISE is settled via the CREST settlement system which is operated by Euroclear (UK and Ireland) and cleared by Eurex Clearing AG. It operates three markets the Main Securities Market, the principal market for Irish and overseas companies; the Enterprise Securities Market (ESM), an equity market designed for growth companies; and the Global Exchange Market (GEM), a specialist debt market for professional investors. The published index of shares is known as the Irish Stock Exchange Quotient or ISEQ Overall Index. Other indexes of the exchange include the ISEQ ESM Index, the ISEQ 20, the ISEQ General, ISEQ SmallCap, and ISEQ Financial. The ISE also has two other
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ISEQ 20 based indices, the ISEQ 20 Capped Index and the ISEQ 20 Leveraged Strategy Index. The exchange is regulated by the Central Bank of Ireland under the Markets in Financial Instruments Regulations (MiFID) and is a member of the World Federation of Exchanges and the Federation of European Stock Exchanges. Criticism Two reports of an investigation into the "wholly inappropriate sale of perpetual bonds" by Davy Stockbrokers to credit unions failed to involve any of the credit unions affected, leaving them "in the dark and powerless to add any value to the findings of this investigation. The ISE, who have Davy as one of its largest shareholders, then declined to give them access to the reports. The Chairman of one the Credit Union's who suffered large losses told his members The failure to publish the reports is to place the complaints process in a shroud of secrecy. Such a failure of openness, transparency and fairness can only serve to undermine confidence in the complaints process, forcing those with grievances into the courts. Such a course of action is not in the interest of any of the stakeholders.[4] The number of equity companies quoted is dwindling as companies go broke, de-list or move overseas but their lucrative fund and debt securities listings could prove attractive to other exchanges, although a parliamentary committee in December 2009 was told that they do not intend to merge with a larger rival.[5] In April 2010, the chief executive of Financial Regulation at the Central Bank of Ireland told the same committee that "senior management of the exchange should step up to the plate" after failing to help charities, credit unions and rich individuals who received letters informing them that many investments made by stockbrokers over the past decade are now worthless.[6][7] It employs 92 people who are paid an average of 98,000 when pensions and employer contributions are taken into account
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Our Business The Irish Stock Exchange provides access to capital markets for investors, financial institutions and companies. As an independent exchange in existence for over 200 years, the ISE:

Has a choice of markets to meet issuer and investor needs, Is a leading listing centre for international fund and debt securities, Acts as a centre for Irish companies to raise funds for growth and as a focal point of liquidity for trading in Irish equities and the trade reporting of Irish Government bonds,

Provides best in class trading, clearing and settlement infrastructure, through our partnership arrangements with international providers,

Provides information services to the wider financial community through the dissemination of quality real-time and historical information supporting market integrity and transparency, and

Offers a competitive pricing structure to its clients

Our Organisation ISE Corporate Structure The Irish Stock Exchange Limited (the Company) is an Irish private company limited by guarantee. This legal structure was adopted in 1995 by the then founding member firms of the ISE who formed the guarantors of the Company. Board Members The Company has a Board of thirteen directors (twelve non-executive directors and one executive director). Seven of the non-executive directors are elected directors, being partners or directors in stockbroker member firms. In addition, there are five other nonexecutive directors who represent wider market interests and are not employees or persons associated with member firms of the ISE. The Chief Executive of the ISE also sits on the main Board. The appointment of all directors is subject to prior approval of the Financial Regulator, Board Committees The Board Committees which are concerned with the governance of the Company are:
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the Audit Committee, the Senior Appointments and Remuneration Committee, and the Investment Committee.

Markets and Securities The ISE operates a choice of three markets:

The Main Securities Market (MSM), the principal market for Irish and overseas companies, which admits a wide range of security types such as shares, bonds and funds to listing and trading. The Main Securities Market is a regulated market as defined by Markets in Financial Instruments Directive (MiFID);

the Enterprise Securities Market (ESM), an equity market designed for growth companies. The ESM is an exchange regulated market and multi-lateral trading facility (MTF) as defined by MiFID; and

the Global Exchange Market (GEM), a specialist debt market for professional investors. GEM is an Exchange regulated market and MTF as defined by MiFID.

For more information on securities listing and trading on the ISE please use the following links:

Equities and other corporate securities Irish Government bonds Exchange Traded Funds (ETFs) Investment Funds Debt Securities

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 Stock market in developing countries

1. Egyptian Exchange Egypt's Stock Exchange, now renamed Egyptian Exchange (EGX) and formerly known as the Cairo and Alexandria Stock Exchange (CASE), comprises two exchanges, Cairo and Alexandria, both of which are governed by the same board of directors and share the same trading, clearing and settlement systems. In March 2009, the CASE 30 Index (made up of the 30 largest companies being traded) changed its name to the EGX 30 Index. The Alexandria Stock Exchange was officially established in 1883, with Cairo following in 1903. Both exchanges were very active in the 1940s, and the combined Egyptian Stock Exchange ranked fifth in the world. The central planning and socialist policies adopted in the mid-1950s led to the exchange becoming dormant between 1961 and 1992. In the 1990s, the Egyptian government's restructuring and economic reform programme resulted in the revival of the Egyptian stock market, and a major change in the organisation of the Cairo and Alexandria stock exchanges took place in January 1997 with the election of a new board of directors and the establishment of a number of board committees. Under the then chairman, Sherif Raafat, the board of directors determined to modernise the exchange. Steps taken since then have included:

Creating a coherent organisation structure with a clear division of authority and responsibilities;

Deciding to install a new state-of-the-art trading, clearing and settling system conforming to international standards (in May 1998 a contract was signed with EFA Software Ltd., a Canadian company, to this end);

Developing new membership and trading rules, as well as arbitration and dispute resolution procedures;

Planning the improvement of the clearing, settlement and payment systems.

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By the end of November 1998, these efforts had started to bear fruit and there were 833 listed companies on the Egyptian Stock Exchange with a market capitalisation of approximately L.E. 71.3 billion (up from 627 companies listed in 1991 with a market capitalisation of L.E. 8.8 billion). Hours The exchange has normal trading sessions from 8.30am to 2.30pm, local time, on all weekdays, except Fridays, Saturdays and holidays declared by the exchange in advance.[1] 2011 events The Egyptian stock exchange plummeted 6.25% following the beginning of the Revolution of 2011 on 25 January. The Egyptian Stock Exchange closed at the end of trading on the 27th January after the benchmark EGX 30 Index (EGX30) plunged 16 percent that week amid the uprising. The exchange reopened on Wednesday 23rd March after being closed for almost 8 weeks. The market fell by a further 8.9% on reopening The trading system at EGX has perceived gradual development from an outcry system (prior to 1992) to an automated order-driven system. As a result of the growth in business, the Exchange got hold of a proven and scalable system conforming to international standards and up to date technology. In May 1998, EGX contracted with "efa", a Canadian software company (which was first bought by the Australian Computershare company and was recently acquired by the leading international technology provider "OMX"), to provide a new trading, clearing and settlement system. The trading component of this system started operations in May 2001, after applying a locally developed automated trading system for almost 9 years. In its endeavor to keep abreast with the latest technological advancements, based on its vision to become the financial hub and investment gateway in the Middle East and North
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African (MENA) Region that best serves its stakeholders, EGX has upgraded its trading platform to OMX high performance "X-Stream" solution, and launched it on 27 November 2008, replacing the old trading system "EFA Horizon". X-stream is designed to support the increasing volume of trading on EGX as well as the simultaneous trading multiple product classes including equities, debt, commodities, ETFs, futures and options in both an exchange traded and cash/OTC/derivatives environment. X-stream has the capacity to meet the future needs of EGX. Moreover, EGX offers an in-house developed OPR program that deals with the IPO's and private placements before execution in the market. This program facilitates orders' registrations and cancellations, assures accurate calculations of the allocation percentages and enables the market to absorb efficiently the surge in the amount of placements. Trading Procedures at EGX How transactions or trades are carried out on EGX?

Before investors can trade listed or un-listed securities on the Egyptian Exchange (EGX), investors must open a trading account with one of the licensed members or brokerage firms by the Capital Market Authority. Investors can only buy or sell shares through licensed member firms. All investors must open accounts with custodians, which are mainly banks and few member firms, in order that EGX can check on line their outstanding balances prior to any sale transactions.

All members trading in listed or unlisted securities (stocks, bonds, close-ended mutual funds) on EGX must trade via EGX Trading System (CTS). Members must record their customers orders immediately after receiving them. Recording includes the details of the order: order number, security name, client account number, quantity and exact time that the order was received etc.

Members must ensure that the securities being sold are available before execution of the orders and if members are buying securities, they must ensure that the necessary funds are available before the execution of the trade.

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Trading starts with an order given by a client or customer to the member firm to buy (or sell) a specified number of shares of a given company at a specified price.

This order will be queued into EGX electronic trading system terminal either at EGX trading floor or the members premises. The order is then sent through the trading system to EGX central computers. An order confirmation is immediately routed back to the member firm.

2. Indonesia Stock Exchange Type Founded Headquarters Key people Website Stock exchange 1912 Jakarta, Indonesia Ito Warsito, CEO www.idx.co.id

Indonesia Stock Exchange (IDX) or in Indonesian Bursa Efek Indonesia (BEI) is a stock exchange based in Jakarta, Indonesia. It was previously known as Jakarta Stock Exchange (JSX) before its name changed in 2007 after merging with Surabaya Stock Exchange (SSX). As of 28 June 2010, the Indonesia Stock Exchange had 341 listed companies with a combined market capitalization of $269.9 billion.[1] On May 23, 2011 the Indonesia Stock Exchange increasing the number of issuers at the exchange to 425.[2] On April 20, 2011 the Jakarta Composite Index hits new record and closed at 3,794.76. Trading volume was about Rp.5.9 trillion ($0.68 billion) and the overall market capitalization up to Rp.3,384 trillion ($389 billion).[3] In July 8, 2011 IDX Composite Index broke the psychological barrier of 4,000 and closed at the record of 4,003.69.[4]

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Currently opens from 9:30 a.m. to 4:00 p.m. local time, but since March 2011 has made rehearsal opens since 9:00 a.m. at the weekends when the bourse closed and will be fully implemented in the second half of 2011. The plan to open trading at either 9 a.m. or 8:30 a.m. with closing time will remain unchanged is to accommodate trading hours which fund managers setting strategies based on Singapore and Hong Kong stock exchange. History Originally opened in 1912 under the Dutch colonial government, it was re-opened in 1977 after several closures during World War I and World War II. After being reopened in 1977, the exchange was under the management of the newly created Capital Market Supervisory Agency (Badan Pengawas Pasar Modal, or Bapepam), which answered to the Ministry of Finance. Trading activity and market capitalization grew alongside the development of Indonesia's financial markets and private sector - highlighted by a major bull run in 1990. On July 13, 1992, the exchange was privatized under the ownership of Jakarta Exchange Inc. As a result, the functions of Bapepam changed to become the Capital Market Supervisory Agency. On March 22, 1995 JSX launched the Jakarta Automated Trading System (JATS). In September 2007, Jakarta Stock Exchange and Surabaya Stock Exchange merged and named Indonesian Stock Exchange by Indonesian Minister of Finance. The current location of the Indonesian Stock Exchange is located in the IDX building in the Sudirman Central Business District, South Jakarta, near the current site of the Pacific Place Jakarta. Stock Indices Two of the primary stock market indices used to measure and report value changes in representative stock groupings are the Jakarta Composite Index and the Jakarta Islamic Index (JII). The JII was established in 2002 to act as a benchmark in measuring market activities based on Sharia (Islamic law). Currently, there are approximately 30 corporate stocks listed on the JII.[7] The FTSE/ASEAN Indices were launched by the five ASEAN exchanges (Singapore Exchange, Bursa Malaysia, The Stock Exchange of Thailand, Jakarta Stock Exchange, and The Philippine Stock Exchange) and global index provider

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FTSE on September 21, 2005. The indices, covering the five ASEAN markets, are designed using international standards, free float adjusted, and based on the Industry Classification Benchmark (ICB). The indices comprise FTSE/ASEAN Benchmark Index and FTSE/ASEAN 40 tradable index. The FTSE/ASEAN 40 index is calculated on a real-time basis from 9:00 a.m. and the closing index is calculated at 6:00 p.m. (Singapore time). The FTSE/ASEAN benchmark index is calculated on end-of-day basis. Besides Jakarta Composite Index and JII, IDX also has 4 more types of index, namely Individual Index, Sector Stock Price Index, LQ 45 Index, Main Board and Development Board Indices.[8] At May 12, 2011 Indonesia Stock Exchnage officially launched a new Indonesia Sharia Stock Index (ISSI), which comprises 214 Indonesian stocks which have been screened by the Majelis Ulama Indonesia (Indonesia Ulema Council).[9] Fatwa Number 80 from Indonesia Ulema Council is expected to make public no longer have any doubt to make sharia investment in the capital market to eventually increase the number of the domestic investors in the Indonesia Stock Exchange

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 Stock market in under developed countries

1. Stock market in Afghanistan
Afghanistan Financial Services has automated the primary and secondary market for capital notes by creating a secure online trading system for DAB, the Central Bank of Afghanistan. This is part of the bigger Afghanistan Stock Exchange concept for the future of Afghanistan. Afghanistan has emerged from over 20 years of conflict and is rapidly growing at nearly double digit real GDP growth annually. Access to capital is citied as fourth highest constraint to private businesses after electricity, access to land and corruption. Although a growing number of microfinance companies, banks, and public institutions provide financing solutions for businesses, the need for capital remains vast. The government continues to pass favorable laws to setup a legal framework that attracts foreign investment and regulates business. By steadily developing a culture of using public capital markets as well as financial and business transparency, the Afghanistan Stock Exchange envisions growing to be the preferred source of capital for business and as well as target for wealth investment. Job creation in the sectors of financial auditing, market research, credit checks, etc is expected to take place, in addition to direct foreign investment in Afghan companies. AFX will drive the growth of agricultural sector of the country. By expanding the economy, the countrys GDP is expected to be significantly positively impacted. AFX assists in meeting three main objectives, as outlined in the ANDS:

Facilitate private sector companies to raise capital for new businesses and to expand existing firms.

Facilitate the privatization of public sector owned companies. Enable local investors to participate in the growth of the Afghan economy.

What are the major benefits to SMEs provided by AFX?

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Access to capital: Gaining access to capital is a struggle for SMEs in developing economies for three reasons. Firstly, most financial institutions are risk-averse and perceive lending to the SME sector to be inordinately risky. Secondly, interest rates are often punitive on debt finance in the emerging markets. And thirdly, SMEs frequently lack both the collateral and appropriately prepared financial accounts to meet banks lending requirements. In contrast, public equity can redress this gap by considering a broader range of criteriamost importantly quality of management and growth prospects when evaluating SME financing. It can also mitigate risk by actively participating in investee companies through board representation. Sectoral development: The organic expansion of SMEs through injections of risk capital, combined with their exposure to more sophisticated managerial and financial practices, technology and know-how helps to foster indigenous sectoral development. In successful investments, the close relationship between investor and investee promotes productivity, competitiveness, innovation and entrepreneurship in the latter. In response, other SMEs in the sector often strive to emulate and supersede these advances in order to safeguard market share and/or remain competitive. In consequence, the sector as a whole deepens and progresses. Economic linkages: SMEs that expand generate vital linkages which cross-cut economic and social boundaries. They connect formal markets with informal markets and smallscale producers with large-scale producers. They also draw the poor further into the cash economy and provide low-income workers with more opportunities to increase their incomes and accumulate wealth. A corollary of this process is the graduation of firms from micro-enterprises to small businesses, from small to medium-sized businesses and, eventually, from medium-sized to large businesses. Market integration: As SMEs grow and their participation in the supply and demand chains of large enterprises increases, market integration occurs. This helps to erode imbalances of economic power and resources between large companies and smaller players. In many emerging markets, these imbalances thwart steadier economic growth and present significant barriers to entry.

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Export and investment development: Lack of resources, information and economies of scale often prevents SMEs from developing export markets. International public equity helps to educate SMEs about export opportunities and to incorporate export development into wider growth strategies. Not only does this mitigate the risk that SMEs face in the form of sudden changes in domestic market conditions, but also, it provides vital access to foreign currency. Sustainability: AFX could become a fully self-sustainable company within five years. As with most other stock exchanges, fees can be increased as the stock exchange becomes more liquid. While the majority of revenue is expected from transaction charges per trade, there are a number of other sources as well, such as: annual company listing fees, individual trader account fees, brokerage connection account fees, interest accrued on account balances, IPO fees, audit fees, and so on. There is little question that a country cannot become really independent and have a reasonable business environment without a stock exchange to offer its firms an opportunity to grow, expand and create jobs. The Dari and Pashtu term for businessman is tujar- which literally means trader. AFX provides a twenty first century platform for a spirit of trading in Afghanistan is as old as the silk route

Afghanistan Financial Services has automated the primary and secondary market for capital notes by creating a secure online trading system for DAB, the Central Bank of Afghanistan. This is part of the bigger Afghanistan Stock Exchange concept for the future of Afghanistan. Afghanistan has emerged from over 20 years of conflict and is rapidly growing at nearly double digit real GDP growth annually. Access to capital is citied as fourth highest constraint to private businesses after electricity, access to land and corruption. Although a growing number of microfinance companies, banks, and public institutions provide financing solutions for businesses, the need for capital remains vast. The government continues to pass favorable laws to setup a legal framework that attracts foreign investment and regulates business. By steadily developing a culture of using public
180

capital markets as well as financial and business transparency, the Afghanistan Stock Exchange envisions growing to be the preferred source of capital for business and as well as target for wealth investment. Job creation in the sectors of financial auditing, market research, credit checks, etc is expected to take place, in addition to direct foreign investment in Afghan companies. AFX will drive the growth of agricultural sector of the country. By expanding the economy, the countrys GDP is expected to be significantly positively impacted. AFX assists in meeting three main objectives, as outlined in the ANDS:

Facilitate private sector companies to raise capital for new businesses and to expand existing firms.

Facilitate the privatization of public sector owned companies. Enable local investors to participate in the growth of the Afghan economy.

What are the major benefits to SMEs provided by AFX? Access to capital: Gaining access to capital is a struggle for SMEs in developing economies for three reasons. Firstly, most financial institutions are risk-averse and perceive lending to the SME sector to be inordinately risky. Secondly, interest rates are often punitive on debt finance in the emerging markets. And thirdly, SMEs frequently lack both the collateral and appropriately prepared financial accounts to meet banks lending requirements. In contrast, public equity can redress this gap by considering a broader range of criteriamost importantly quality of management and growth prospects when evaluating SME financing. It can also mitigate risk by actively participating in investee companies through board representation. Sectoral development: The organic expansion of SMEs through injections of risk capital, combined with their exposure to more sophisticated managerial and financial practices, technology and know-how helps to foster indigenous sectoral development. In successful investments, the close relationship between investor and investee promotes productivity, competitiveness, innovation and entrepreneurship in the latter. In response, other SMEs in the sector often

181

strive to emulate and supersede these advances in order to safeguard market share and/or remain competitive. In consequence, the sector as a whole deepens and progresses. Economic linkages: SMEs that expand generate vital linkages which cross-cut economic and social boundaries. They connect formal markets with informal markets and smallscale producers with large-scale producers. They also draw the poor further into the cash economy and provide low-income workers with more opportunities to increase their incomes and accumulate wealth. A corollary of this process is the graduation of firms from micro-enterprises to small businesses, from small to medium-sized businesses and, eventually, from medium-sized to large businesses. Market integration: As SMEs grow and their participation in the supply and demand chains of large enterprises increases, market integration occurs. This helps to erode imbalances of economic power and resources between large companies and smaller players. In many emerging markets, these imbalances thwart steadier economic growth and present significant barriers to entry. Export and investment development: Lack of resources, information and economies of scale often prevents SMEs from developing export markets. International public equity helps to educate SMEs about export opportunities and to incorporate export development into wider growth strategies. Not only does this mitigate the risk that SMEs face in the form of sudden changes in domestic market conditions, but also, it provides vital access to foreign currency. Sustainability: AFX could become a fully self-sustainable company within five years. As with most other stock exchanges, fees can be increased as the stock exchange becomes more liquid. While the majority of revenue is expected from transaction charges per trade, there are a number of other sources as well, such as: annual company listing fees, individual trader account fees, brokerage connection account fees, interest accrued on account balances, IPO fees, audit fees, and so on. There is little question that a country cannot become really independent and have a reasonable business environment without a stock exchange to offer its firms an
182

opportunity to grow, expand and create jobs. The Dari and Pashtu term for businessman is tujar- which literally means trader. AFX provides a twenty first century platform for a spirit of trading in Afghanistan is as old as the silk route

2. Nepal Stock Exchange

Nepal Stock Exchange, in short NEPSE, is established under the company act, operating under Securities Exchange Act, 1983.

The basic objective of NEPSE is to impart free marketability and liquidity to the government and corporate securities by facilitating transactions in its trading floor through member, market intermediaries, such as broker, market makers etc. NEPSE opened its trading floor on 13th January 1994.

Government of Nepal, Nepal Rastra Bank, Nepal Industrial Development corporation and members are the shareholders of NEPSE.

History The history of securities market began with the floatation of shares by Biratnagar Jute Mills Ltd. and Nepal Bank Ltd. in 1937. Introduction of the Company Act in 1964, the first issuance of Government Bond in 1964 and the establishment of Securities Exchange Center Ltd. in 1976 were other significant development relating to capital markets.

Securities Exchange Center was established with an objective of facilitating and promoting the growth of capital markets. Before conversion into stock exchange it was the only capital markets institution undertaking the job of brokering, underwriting, managing public issue, market making for government bonds and other financial services. Nepal Government, under a program initiated to reform capital markets
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converted Securities Exchange Center into Nepal Stock Exchange in 1993.

Members Members of NEPSE are permitted to act as intermediaries in buying and selling of government bonds and listed corporate securities. At present, there are 23 member brokers and 2 market makers, who operate on the trading floor as per the Securities Exchange Act, 1983, rules and bye-laws.

Besides this, NEPSE has also granted membership to issue and sales manager securities trader (Dealer). Issue and sales manager works as manager to the issue and underwriter for public issue of securities whereas securities trader (Dealer) works as individual portfolio manager.

At present there are 11 sales and issue manager and 2 dealers (Secondary market). Click here to get information of NEPSE members.

The tenure of the membership is one year. The license should be renewed within 3 months after the closure of the fiscal year. If not, it can be done within another three months by paying 25% penalty. Trading NEPSE the only Stock Exchange in Nepal introduced fully automated screen based trading since 24th August, 2007. The NEPSE trading system is called NEPSE Automated Trading System (NATS) is a fully automated screen based trading system, which adopts the principle of an order driven market. Market Timings Trading on equities takes place on all days of week (except Saturdays and holidays declared by exchange in advance). On Friday only odd lot trading is done.
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The market timings of the equities are:Market Open: - 12:00 Hours Market Close: - 15:00 Hours Odd Lot Trading is done on Fridays. For Odd Lot Trading Market Timings are Market Open: - 12:00 Hours Market Close: - 13:00 Hours Note:- The exchange may however close the market on days other than schedule holidays or may open the market on days originally declared as holidays. The exchange may also extend, advance or reduce trading hours when it deems fit necessary. Securities Available for Trading NEPSE facilitates trading in the following instruments A. Shares Equity Shares Preference Shares B. Debentures C. Government Bonds D. Mutual Funds Circuit Breakers NEPSE has implemented index-based circuit breakers with effect from 2064/6/4 (21 September 2007). In addition to the circuit breakers, price range is also applicable on individual securities. Index-based Circuit Breakers

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The index-based circuit breaker system applies at 3 stages of the NEPSE index movement of 3%, 4% and 5%, . These circuit breakers when triggered bring about a trading halt in all equity. In case of 3% movement either way, there would be a market halt for 15 minutes if the movement takes place during first hour of trading i.e. 13:00 hours. In case this movement takes after 13:00 hours there will be no trading halt at this level and market shall continue trading. In case of 4% movement either way, there would be a market halt for half an hour if the movement takes place before 14:00 hours. In case this movement takes after 14:00 hours there will be no trading halt at this level and market shall continue trading. In case of 5% movement in either way, trading shall be halted for the remainder of the day. Price Range Price Range is applicable on individual securities. The trading of the individual securities are not halted but allowed to trade within the price range. The price band is 10% of previous close on either way. * * During the ATO session the range is 5% on either way of Previous Close Price. After the band is 2% on either way of the Last traded price till it reaches to 10% of the previous close. Trading Location The trading can be done either from NEPSEs trading floor or from the brokers office. NEPSE uses sophisticated technology through brokers can trade remotely from their office located inside the Kathmandu valley. This remote trading facility was started from 1 November 2007.

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Trading System NEPSE operates on the NEPSE Automated Trading System (NATS), a fully screen based automated trading system, which adopts the principle of an order driven market. Order Matching Rules The system adopts principle of order driven market. The best buy order is matched with the best sell order. An order may match partially with another order producing multiple trades. For order matching the best buy order is the one with the highest price and the best sell order is the one with the lowest price. This is because the system views all buy orders available from the point of view of the sellers and all sell orders from the point of view of the buyers in the market. So, of all buy orders available in the market at any point of time, a seller would obviously like to sell at the highest possible buy price that is offered. Hence, the best buy order is the order with the highest price and the best sell order is the order with the lowest price. Settlement NEPSE has adopted a T+3 settlement system. Settlement will be carried out on the basis of paper verses payment. The trading is done at "T" and at T+1; the buying brokers have to submit bank vouchers for settlement with covering letter. At T+2, the selling brokers must submit share certificate with covering letter. At T+3, NEPSE prepares billing for payment and this will be forwarded to the bank.

Once the settlement is done the buying brokers with the consultation of the clients must decide and present the purchased shares if they want to record it as blank transfer. This must be completed within T+5. Blank Transfer Under this mechanism an opportunities to derive the market benefit is provided. But presently, the buying brokers must complete the BT process within T+5. The transactions

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that are executed can be recorded in different way and NEPSE has considered all possible retention. The followings are the major key points to be considered. 1. This is related only with buy of the securities. 2. The buyer may decide to have market benefit either to have capital gains or to minimize the loss. 3. In order to do this s/he may partly send for name transfer or may register it in blank transfer. 4. If s/he register total purchase in blank transfer and can put for sale and if only the part of the shares are subscribed then s/he can handover the part and the part can be forwarded for name transfer to the concerned company. In order to do this s/he has to cancel the blank transfer for that portion.

3. Zimbabwe Stock Exchange

Zimbabwe Stock Exchange

Industry

Finance

Founded

1993

Headquarters

Harare

Key people

Mukadira T Compliance Madziva F Trading

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Mashava RK Listings Munyukwi EH CEO

Products

Stock trading services

Website

http://www.zse.co.zw/

The Zimbabwe Stock Exchange, or ZSE, is the official stock exchange of Zimbabwe. It has been open to foreign investment since 1993. The exchange has about a dozen members and over 65 listed securities. There are two indices, the Zimbabwe Industrial Index and the Zimbabwe Mining Index. History The first stock exchange in Zimbabwe opened its doors shortly after the arrival of the Pioneer Column in Bulawayo in 1896. However, it only operated for about six years. Other stock exchanges were established in Gwelo (Gweru) and Umtali (Mutare). The Mutare Exchange, also opened in 1896, thrived on the success of local mining, but with the realisation that deposits in the area were not extensive, activity declined and it closed in 1924. After World War II a new exchange was founded in Bulawayo by Alfred Mulock Bentley and dealing started in January 1946. A second floor was opened in Salisbury (Harare) in December 1951 and trading between the two centres took place by telephone. Traders continued working by telephone until it was decided that legislation should be enacted to govern the rights and obligations of the members of the exchange and the general investing public. The Rhodesia Stock Exchange Act reached the statute book in January 1974. The members of the exchange continued to trade as before and for legal reasons it became necessary to create a new exchange coincidental with the passing of the legislation. The exchange dates from the passing of the act in 1974, and is operated and regulated in

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accordance with the act and its amendments, including 1996's Zimbabwe Stock Exchange Act: Chapter 24:18. On achieving independence from Britain in 1980, the exchange changed its name from the Rhodesia to the Zimbabwe Stock Exchange. With the decline of the Zimbabwean economy, hyperinflation rendered the Zimbabwean dollar useless and the US-Dollar was adopted as the legal tender for trading on the exchange in February 2009. As of March 2009, trade has been very thin, with very few foreign investors willing to risk trading on the market. Most stocks trade in the US-cent range, with at least 26 different stocks not trading at all

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CHAPTER-8 Comparative study between Indian capital market and Global Capital market

Comparative Analysis
This is the main part of the study wherein the various stock exchanges of the sample have been compared on certain parameters, both qualitatively and quantitatively.

Qualitative Analysis
In this section the various the following parameters; 1. Market Capitalization 2. Number of listed securities 3. Listing agreements 4. Circuit filters 5. Settlement These parameters are used to look at selected important aspects of any stock exchange, viz., the market capitalization gives an idea about the size of the respective exchanges; whereas the number of listed securities acts as an indicator for the volume and liquidity of any exchange. The listing agreements take care o f the governance issue, while circuit filters give an insight into the risk management framework of the said exchange. Finally, the efficiency of a stock exchange has been measured in terms of its settlement process. stock exchanges have been compared on

Market Capitalization
Market capitalization is the measure of corporate size of a country. It shows the current stock price multiplied by the number of outstanding shares. It is
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commonly r e f e r r e d to as Market cap. It is calculated by multiplying the number of common shares with the current price of those shares. This term is often confused with capitalization, which is the total amount of funds used to finance a firm's balance sheet and is calculated as market

capitalization plus debt (book or market value) plus preferred stock. While there are n o strong definitions for market cap categorizations, a few terms are frequently used to group companies based on its capitalization. The table below shows the market capitalization of various stock markets in the world.

Based on the above study, it can be observed that India is 15th in the world ranking of Market capitalization. This is in spite of having the third largest investor base, after Japan and USA, and having the largest number
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of

companies listed. United States leads the list of countries with the highest market capitalization. It is interesting to note that the total market capitalization of all the companies listed on the New York Stock Exchange is greater than the amount of money in the United States. As mentioned earlier, the above data pertain to the year 2005. The individual and global economy has grown since then. As on March 2006, the global market capitalization for all stock markets was $43600 billion.

Listed Securities Listing in a stock exchange refers to the admission of the securities of the company for trade dealings in a recognized stock exchange. The securities may be of any public limited company, quasi-governmental and other financial Central or State Government,

institutions/corporations,

municipalities, etc. Securities of any company are listed in a stock exchange to provide liquidity to the securities, to mobilize savings and to protect the interests of the investors. India has the highest number of companies listed in the stock market. Out of this, about 75% of the companies are listed with the Bombay Stock Exchange. After India, United States has the highest number of companies listed.

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194

Indices

Listing Agreements

Bombay Stock Exchange Eligibility Criteria for IPOs/FPOs: Companies have been classified as large cap companies and small cap companies. Company with a minimum issue size of Rs. 10 crores and market capitalization small cap company is a company

other than a large cap company.

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National Stock Exchange

Eligibility Criteria for New companies (IPOs) Paid Up capital: Not less than 10 Crores

Market Capitalization: Not less than 25 Crores At least three years track record: The company has not been referred to the Board for Industrial

and Financial Reconstruction (BIFR). The net worth of the company has not been wiped out by the

accumulated losses resulting in a negative networth. The company has not received any winding up petition accepted by a court. Promoters mean one or more persons with a minimum 3 years

experience of each of them in the same line of business and shall be holding at least 20% of the post issue equity share capital individually or severally No disciplinary action by other stock exchanges and regulatory authorities in past three years. Existing Companies listed on other stock exchanges Paid up Capital: Not less than 10 Crores Market Capitalization: Not less than 25 Crores.

Minimum

Listing

Requirements

for companies

listed

on other

stock

exchanges. The company should have minimum issued and paid up equity capital of Rs. 3crores. The Company should have profit making track record for last three years. Minimum net worth of Rs. 20 Crores Minimum market capitalization of the listed capital should be at least two times of the paid up capital
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New York Stock Exchange

Domestic listing on NYSE requires minimum certain minimum standards to be met. Distribution and size criteria Distribution of shares c a n be attained through U.S. acquisitions made i n the U.S., or by other similar means. Public o ff e r i n gs ,

Financial Criteria

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(A) The number of beneficial holders of stock held in "street name" will be considered in addition to the holders of record. The Exchange will make any necessary check of such holdings that are in the name of Exchange member organizations. (B) In connection with initial public offerings, spin-offs and carve-outs, the NYSE will accept an undertaking from the company's underwriter to ensure that the offering will meet or exceed the NYSE's standards. (C) If a company either has a significant concentration of stock or changing market forces have adversely impacted the public market value of a company that otherwise would qualify for an Exchange listing, such that its public market value is no more than 10 percent below the minimum, the

Exchange will consider stockholders' equity of $60 million or $100 million, as applicable, as an alternate measure of size. (D) Pre-tax income is adjusted for various items as defined in Section 102.01C of the NYSE Listed Company Manual. (E) Represents net cash provided by operating activities excluding the

changes in working capital or in operating assets and liabilities, as adjusted for various items as defined in Section 102.01C of the NYSE Listed Company Manual. Average global market capitalization for already existing public companies is represented by the most recent six months of trading history. For IPOs, spin-offs and carve-outs, it is represented by the valuation of the company as represented by, in

the case of a spin-off, the distribution ratio as priced, or, in the case of an IPO/carve-out, the as-priced offering in relation to the total company's capitalization.

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Tokyo Stock Exchange

Criteria for Listing The number of shareholders: In case where the number of shares to be listed is less than 10 thousand units; 800 persons. In case where the number of shares t o be listed is 10 thousand units or more but less than 20 thousand units; 1,000 persons, In case w h e r e the number o f shares t o be listed is 20 thousand units or more; 1,200 persons. Number of years since incorporation: 3 years o r more have elapsed by the last day of a business year immediately prior to the day of listing application

Amount of profit: The amount of profit for the first year of the latest 2 years was 100 million yen or more; And 400 million yen or more for the latest year, or The amount of profit for the first year of the latest 3 years was 100 million yen or more; 400 million yen or more for the latest one year of the latest 3 years; and the aggregate amount of profits for all of the latest 3 years was 600 million yen or more.

Hong Kong Stock Exchange Basic Listing Requirements for Equities Profit attributable to shareholders: At least HK$50 million in the last three financial years Market Capitalization: At least HK$200 million at the time of listing Revenue: At least HK$500 million for the most recent audited financial year Cash flow: Positive cash flow from o p e r a t i n g activities of at least

HK$100 million i n aggregate for the three preceding financial years Spread of Shareholders:
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100 shareholders for issuers with 24 months of active business pursuits. 300 shareholders for issuers with 12 months of active

business pursuits. Public float: At least 25% of the issuer's total issued share capital must at all times be held by the public.

Korea Stock Exchange

Quantitative Requirement No of Shares: At least 1million shares as of application date. Net Worth: At least KRW 10 billion as of application date. Sales Amount: At least KRW 30 billion for the latest fiscal year and the average for the latest three fiscal years should be at least KRW 20 billion.

Financial Requirement Profit: Must show operating profits, ordinary profits and net profits. Profits for the latest fiscal year should be at least KRW 2.5 billion and the sum for the latest three fiscal years should be KRW 5 billion. Reserve Ratio: At least 50% (25% for large corporations) according to the balance sheet of the latest fiscal year. Reserve ratio = [(Net worth - Paid-in Capital) / Paid-in Capital] * 100 No of years since establishment: Have been operating without

interruption for at least 3 years since establishment.

Circuit filters Stock Markets have the dubious reputation of crashing without a warning t a k i n g with the savings of numerous investors. A stock market crash is a sudden dramatic decline of stock prices across a significant cross-section of a market. Crashes are driven by panic as much as by underlying economic factors. They often follow speculative stock market bubbles such as the dot-com
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bubble.

The study is restricted to the performance of the Indian Stock market, Japan, Hong Kong, Korean, Russian and the New York Stock exchanges. Hence we will be concentrating on the Asian Financial Crisis, Dot-Com Bubble, and the Russian Financial Crisis etc. As a counter measure to the instability of the stock market, various measures were introduced by to avoid huge losses. One such solution is circuit breakers. Circuit Breakers are a point at which a stock market will stop trading for a period of time in response to substantial drops in value.(11) They are also referred to as trading curb is certain stock markets like DJIA and NYSE. This was first introduced after Black Monday. Black Monday is the name given to Monday, October 19, 1987, when the Dow Jones Industrial Average (DJIA) fell 22.6%.(12). This was done with an aim to avert panic in the market and to avoid panic selling. The Filters operate according to the rules Market in question. and Circuit

requirements of the stock

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NATIONAL STOCK EXCHANGE

Index-based Circuit Breakers The index-based market-wide circuit breaker system applies at three stages of the index movement, either way viz. at 10%, 15% and 20%. These circuit breakers, when triggered, bring about a coordinated trading halt in all equity and equity derivative markets nationwide. The market-wide circuit breakers are t r i g ge r e d by movement of either the BSE Sensex or the NSE S&P CNX Nifty, whichever is breached earlier. In case of a 10% movement of either of these indices, there would be a onehour market halt if the movement takes place before 1:00 p.m. In case the movement takes place at or after 1:00 p.m. but before 2:30 p.m., there would be trading halt for hour. In case movement takes place at or after 2:30 p.m., there will be no trading halt at the 10% level and market shall continue trading. In case of a 15% movement of either index, there shall be a two-hour halt if the movement takes place before 1 p.m. If the 15% trigger is reached on or after 1:00 p.m. but before 2:00 p.m., there shall be a one hour halt. If the 15% trigger is reached on or after 2:00 p.m., the trading shall halt for the remainder of the day. In case of a 20% movement of the index, trading shall be halted for the remainder of the day. Market-wide

These percentages are translated into absolute points of index variations on a quarterly basis. At the end of each quarter, these absolute points of index variations are revised for the applicability for the next quarter. The absolute points are calculated based on closing level of index on the last day of the trading in a quarter and rounded off to the nearest 10 points in Case of S&P CNX Nifty.

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In addition to this, there are also price bands for individual securities. Daily price bands are applicable on securities as below: Daily price bands of 2% (either way) on specified securities. Daily price bands of 5% (either way) on specified securities. Daily price bands of 10% (either way) on specified securities. No price bands are applicable on scrips on which derivative products are available or scrips included in indices on which derivative products are available. Price bands of 20% (either way) on all remaining scrips debentures, warrants, preference shares (including

etc). The price bands for

the securities in the Limited Physical Market are the same as those applicable for the securities in the Normal Market. For Auction

market the price bands of 20% are applicable. In order to prevent members from entering orders at non-genuine prices in such securities, the Exchange has fixed operating range of

20% for such securities.

BOMBAY STOCK EXCHANGE

Scrip wise Price Bands 1. For scrips (53 scrips) on which derivative products are available and scrips which are included in indices on which derivative products are

available, there is no circuit filter. However, the Exchange has imposed dummy circuit fitters on these scrips to avoid punching error, if any. 2. Other Scrips which are not included in above-mentioned category have a circuit filter limit of 20%.

Market Wide Circuit Breakers In addition to the above-stated price bands on individual scrips, SEBI

has decided to implement index based market wide circuit breakers system
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with effect from July 02, 2001.The circuit breakers are applicable at three stages of the index movement either way at 10%, 15% and 20%. These circuit breakers will bring Derivative market. The market wide circuit breakers can be triggered by movement of either BSE SENSEX or the NSE NIFTY, whichever is breached earlier. The percentage movements are quarter. These calculated on the closing index value of the translated into absolute points of index about a coordinated trading halt in both Equity and

percentages are

variation (rounded off to the nearest 25 points in case of SENSEX). At the end of each quarter, these absolute points of index variations are revised and made applicable for the next quarter. The absolute points of SENSEX

variation triggering market wide circuit breaker for a specified time period for any day of the quarter is informed by the Exchange through Press Release from time to time.

Tokyo Stock Exchange

There are two circuit breakers which last for only 15 minutes after the price limit is hit. The first circuit breaker takes effect when the price is 5% above or below the previous trading days settlement price. Another 5%

change in the same direction, or a total of 10%, will trigger the second circuit breaker. Limits do not apply to the last 30 minutes of the trading day, unless the 15-minute cooling period spills into that time frame. There are no limits for the last day of trading for the contract nearest to expiry.

NYSE
Trading halts are applied by the New York Stock Exchange (NYSE) under conditions of extreme market points are Jones volatility. The circuit breaker trigger

set at three levels representing 10%, 20% and 30% of the Dow are calculated by the NYSE at the

Industrial Average. The levels

beginning of each calendar quarter, using the average closing value of the DJIA for the preceding month and each trigger is rounded to the nearest
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50 points. For the third quarter 2006, the following triggers are in place. Level 1 circuit breaker triggered if losses are 10% or 1,050 points. (a) Before 2:00 p.m. halted one hour; (b) At 2:00 p.m. or later but before 2:30 p.m. halted 30 minutes; (c) At 2:30 p.m. or later - trading shall continue, unless there is a Level 2 or 3 halt. Level 2 circuit breaker triggered if losses are 20% or 2,100 points (a) Before 1:00 p.m. halted two hours; (b) At 1:00 p.m. or later but before 2:00 p.m. halted one hour; (c) At 2:00 p.m. or later - trading shall halt and not resume for the remainder of the day. Level 3 circuit breaker triggered if losses are 30% or 3,150 points (a) At any time - trading shall halt and not resume for the remainder of the day.

Korean Stock Exchange

Daily price change limit To avoid abnormal price fluctuations caused by imbalance in supply and demand, the KRX- Stock Market places 15% of limit that the prices on

individual stocks can change during a day, thus preventing fall or rise of the price of individual stock more than 15 percent of the previous days closing price.

Circuit Breakers The KSE introduced the Circuit Breakers in December 1998. In order to pacify the over- reaction of investors, when the stock price drops suddenly below certain level (more than 10% of the closing price of the previous day and such situation continues for longer than one minute), the circuit breakers system was introduced on December 7, 1998. The trading, which resumes by periodic call auction where the orders submitted during the first 10 minutes after the trading halt ended, are matched at a single price.
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Regulation on program trading As a measure used to minimize possible impacts of futures market on cash market, thus maintaining the stability of the cash market, when

the price of the most active futures contract continues to change 5 % or more than the base price for one minute, execution of all program trading orders in the cash market is delayed for 5 minutes.

Trading Halt In order to protect investors, when, due to rumors or reports on the matters (e.g., bank defaults, bankruptcy, corporate restructure, etc.) that have major implication on corporate management, change sudden and drastic

of trading value and volume is anticipated, the trading of such

issues may be halted. In such a case, the concerned corporation is asked to make an inquiry into such rumors or reports and disclose findings.

Hong Kong Stock Exchange Though a circuit-breaker has not been adopted yet, a two-tier circuitbreaker is being considered, under which trading would stop for half an hour in the event of a 15% fluctuation over the previous days close, and for one hour in the event of a 25% fluctuation. Another option being considered is an individual circuit-breaker per stock, which would cause a ten- minute open-outcry auction to be initiated every time a stock price varied more than 10% over last days close.

Trading and Settlement Cycle This segment takes care of the efficiency issue of the said stock exchange. It basically looks into the speed at which any of the numerous transactions affected in the market gets settled. This is especially crucial given the

volume. We see that Indian exchanges are at par with the best in the world when it comes to efficient settlement. It can even go one up if the proposed T+1system is put in place.
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Below are the various settlement cycles for the stock exchanges.

Quantitative Analysis. The hypothesis that the exchanges impact each other has been tested through various statistical methods with data on price, returns collected from the exchanges. Mainly the correlation analysis, exponential trend

analysis and the risk-return analysis has been used to validate the hypothesis.

Price Relationship Correlation is a numerical summary measure that indicates the strength of relationships between the pairs of variables. A correlation is very useful but it has its limitations. That is, it can only measure the strength of a linear relationship. The numerator of the above formula is also a measure of

association between two variables X and Y which is called the covariance between X and Y. Similar to correlation, a covariance is a single number that measures the strength of the linear relationship between the two

variables. It is by looking at the sign of the correlation or the covariance, i.e. positive or negative, that we can tell whether the two variables are positively or negatively related. Therefore the correlation is better because, unlike the covariance, the correlations are not affected by the units in which the variables are

measured. All the correlations are between +1 and -1, inclusive. The sign
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determines whether the relationship is positive or negative. The strength of the relationship is measured by the absolute value or the magnitude of the correlation. The closer it is to +1 the stronger the relationship is and the closer to zero indicates that there is practically no linear

relationship. At the extreme a correlation equal to1 -1 or +1 occurs only when the linear relationship is perfect. In this part the price data of the various exchanges are collected and subjected to a correlation test in order to find out the influence that they have on each other. In other words, an effort has been made to gain insight into how far the price movements of the exchanges are related with one another.

NSE vs. Russian Stock Exchange

In the above figure, during period 1, the two stock exchanges have moved in a very narrow range. The volatility is much higher in the NSE than in the Russian stock exchange. There seemed to be low connectivity between the two exchanges. In period 2, The Russian stock exchange had seen a peak and also a very heavy drop. But at the same time, NSE did not show so much
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variation

as

shown

by

Russian

stock

exchange.

The

Russian

stock

exchange was awarded as the best performing stock exchange in the year 1997. But the very next year it crashed. The event started with collapse of one of the largest bank in Russia and, for the first time ever, a country defaulted on its government securities. Then the political environment

became volatile, which led to the ouster of Boris Yeltsin and then Putin came to power. NSE again moved in a range but showed much higher volatility than the previous period. The Russian market showed the characteristics of a grave yard market wherein there is so much wealth loss due to decline of the indices that those who are in the market cannot sell off and come out as no one is willing to buy and get into the market at that current scenario. Period 3 saw reversal of roles of earlier period. NSE went up and reached a peak and then came down whereas the Russian stock exchange remained stagnant. NSE rose because of tech boom till mid of 2000. Subsequently it collapsed and went back to its level of 1998 in the year 2001. Till 2003, NSE remained at the level that it attained in the year 1998. But volatility was much higher in this period. Russian stock suffered from the period of stagnation in this period. The stock exchange did not respond at all to the tech boom. After the bubble collapse this exchange started to move up slowly. NSE moved up very sharply responding to the favorable interest rate regimes and other macroeconomic factors. Growth was very sharp in this period for NSE. Russian stock exchange also rose but

marginally. But the volatility is higher which shows that the trading activity has started to pick up. During period 4, both the exchanges rose sharply and moved in an almost identical fashion. Correlation is also very high during this period. This shows a lot more integration of two markets with each other.

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NSE vs. Hang Seng

period

1 shows that there is almost no correlation between these two because of the East Asian story, remained almost

exchanges. Hang Seng was rising very sharply miracle. Whereas

India, not part of this success

untouched by this boom. NSE is almost constant during this period. During period 2, Hang Seng crashed 50 percent and then rose back 100 percent. Thus, it showed very high volatility during this period. NSE also rose during this period because of pervasive tech boom but the rise was not as spectacular as Hang Seng. Hang Seng might also have risen sharply because of its previous low levels. Period 3, Hang Seng was falling steadily; showing a downward trend. This might be due to the fear of global recession. But the NSE was not much affected. During Period 4, NSE was rising in almost identical manner with the Hang Seng. This shows the larger integration of the Indian economy in the foreign market. This might also be due to the fact that this boom was led by FII and other foreign investors. Hence, NSE is showing higher correlation during this period.
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NSE vs. NYSE

Here, NYSE was a success story in this period. Led by the tech companies, the US economy was at its pink which is reflected in the NYSE. But the NSE did not appreciate much. In the NYSE the tech boom was saturating. The NYSE did not appreciate much in the initial period. But in the year 1999 and mid of 2000, NSE was rising with the NYSE because India had benefited much from the tech boom in this period along with the NYSE. The high

dependence of India on the US in trade was reflected by the two stock exchanges. During this period, both the stock exchanges has risen sharply. Although the percentage change in the NSE was much larger, but the manner in which they were moving was highly correlated.

NSE vs. Korean stock exchange

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The above diagram shows that, during 1995, both the stock exchanges were at the same level. But due to East Asian crisis, Korean stock exchange was much more affected because its economy was more integrated with those East Asian economies. During period 2, both the stock exchanges moved in almost identical manner. The returns were almost nearly equal during this period, since both the stock exchanges rose very sharply. But, the rise in the NSE

was much sharper. Still, we can say that the two exchanges were moving more or less in same fashion. We have tried to take a look at the impact of various stock exchanges on each other in this section. Therefore, we have divided our time period from 1995-2006 June into sub-sets depending on

the happening of certain changes caused by events or policy decisions. This has the purpose of finding out the extent of impact that the markets have on each other.

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Stock Price Correlation among Stock Exchanges Year/variabl Korea Russia Hong 1995-1997 es n n Kong Korean Russian Hong Kong New York NSE 1998-2000 -0.277 Korean Russian Hong Kong New York NSE 2001-2003 0.628 Korean 0.548 0.810 0.631 0.603 0.282 0.657 1.000 1.000 0.367 0.629 1.000 1.000 1.000 -0.878 0.386 0.421 0.355 1.000 -0.868 0.873 0.933 1.000 -0.663 0.837 1.000 1.000 1.000 New York NSE

0.826 The period Russian 1995-97, characterized by the South East Asian currency crisis and Hong economic events, did not have integration of different other Kong markets at high levels. This is especially true in case of India. Our country was New in its inception stage as a 1.000 globalized economy and hence distinctly protected 1.000 from foreignYork exposure. The capital market was slowly evolving at that NSE 0.586 point of time, putting systems in place. That is to say, India had only limited 2004-2006 0.171 1.000 foreign exposure which somewhat insulated the countrys economy from 0.171 foreign economic upheavals. This is clearly reflected in the following table of 1.000 1.000 Korean -0.296 0.566 213 Russian -0.031 Hong Kong 0.395 0.427 0.789 0.467

correlations which clearly shows that, in that period, very little correlation was existent among the exchanges. This signifies that the impact of other

exchanges was negligible on the Indian capital markets. The almost nonexistent effect of the South Asian Currency on the Indian market validates crisis, which affected Korea,

our observation. The correlation shows

negative for Korean exchange. During the period 1998-2000, Indian economy faced a recession as well as a period of heightened business activity. Mainly, the capital market started to consolidate across the globe. This is

reflected by increasing impact of various exchanges on the NSE. The point to note is that it is mainly the Asian markets that have started impacting the NSE. The Korean market started to cast its effect along with the Hong Kong market. This maybe because a lot of MNCs made their Asian base in those two countries and they also operated in India, hence the impact. The period 2001-03 faced another major economic dampener in the form

of the 9/11 attacks in USA. This left the world economy in a state of shock. As could be expected, the economies across the globe faced recessionary situation. However, this time also, except for the Hong Kong bourses, none else had any significant impact on the Indian counterpart. 2004-06 is termed as the period when the various world markets started to converge. In the global scenario also, we find that the economies facing downturn were making a comeback Japan and USA. Our expectation to find high level of impact of other markets on Indian market gets validated as shown by the significant correlation figures in the table. However, one thing to notice is the lessened impact of the Hong Kong market on the Indian market which, going by the past trend, comes as a surprise. This may be due to easing of restrictions which previously insulated the economy from foreign exposures. The increased cross phenomenon. border flow of capital also contributed to this

Exponential Trend In contrast to a linear trend, an exponential trend is appropriate when

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the time series changes by a constant percentage (as opposed constant amount) each period. One important

to a

characteristic of

exponential trend is that, if a time series exhibits an exponential trend, a plot of its logarithm should be appropriately linear. This equation can be interpreted that the coefficient b is approximately the percentage change per period. Whenever there is a time series that is increasing at an increasing rate or decreasing at a decreasing rate, an exponential trend model proves apt. In this context, the method has been used to understand the trend

existing in the movement of the exchanges and whether the trends have commonality. In other words, an attempt has been made to find whether two or more exchanges follow the same pattern in their movements of price and, if so, to what extent they are related.

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217

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In the above figures, it can be seen that NSE seemed to follow the exponential trend quite reasonably before the technology boom had hit the Indian stock market in the year 2003. After that NSE has much larger rise which could not be captured in the exponential trend. Russian stock exchange has also been explained by the exponential trend method quite reasonably before year 2003. Exponential trend has been able to capture the trend quite well the changes in NYSE. R-square value is around 0.6135. This shows that the model is able to explain the 60% of the variations of the index. For, both the stock exchanges of Korea and Honk Kong have shown very high volatility over this period trend line and is have not not risen to consistently enough. the price Thus exponential of these

able

explain

behavior

exchanges satisfactorily. The R-square values are very low 0.07 and 0.13 for Korean and Hang Sang respectively.

Risk and Return This section tries to compare the various exchanges on the basis of returns and the corresponding risks associated with it, returns being,

perhaps, the single most important factor affecting the performance of any index. While risk can be termed as the major factor underlying all

activity, it becomes imperative to compare the exchanges based on this parameter. Table 2 exhibits the historical risk-return figures of the

exchanges. From the return perspective, NYSE seems to be most stable among all of these stock exchanges. There are only two years when NYSE has given the negative returns, i.e. in the years 2001 and 2002. Russian stock

exchange is the most volatile of all these and has given returns from 108% to -194%. NSE seems to have followed or moved in tandem with the NYSE more after year 2000. Hang Seng exchange follows long cycles. If returns turn negative, they remain negative for two or three years. Similarly if return turns positive, then they remain so again for two or more years.

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Year / variables

NSE

Hong Kong

New York return 20% 30% -20% -20% 54% -18% -21% -17% 36% 9% 7% 15% Risk 240.4 193 411 328.4 220 218.2 374.9 560 480.3 229.5 230.7 182.2 return 27% 17% 27% 15% 9% 3% -8% -22% 22% 12% 8% 5%

Korean

RSE

risk 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 60.1 100.4 82.4 115.4 184.0 157.2 129.2 67.7 254.2 159.0 263.5 252.3

return -26% -1% 14% -20% 51% -23% -17% 4% 54% 8% 29% 10%

risk 323.5 418.7 905.1 637.9 784.0 521.8 659.8 336.5 654.9 371.2 278.3 335.0

risk 40 71.4 108.3 88.2 156.8 143.8 48.1 80.0 84.2 53.1 136.3 60.3

Return -14% -31% -55% 38% 56% -74% 29% -14% 24% 9% 43% -3%

risk 10.1 47 93.5 114 24.7 24.5 23.9 32.4 81.3 55.6 155.0 128.9

return -19% 83% 62% -194% 108% -22% 69% 29% 45% -14% 62% 31%

Russian stock exchange has shown the least variation and hence appears to be least risky. But actually there is very less trading in the Russian stock market during the period of 1999 to 2003 due to stagnation and political instability and uncertainties about economy.

Risk Return Comparison Korean stock market is also very stable form the standard deviation angle. But this market has also not much appreciated over these years and it remains more or less range- bound. Hang Seng has shown the highest volatility as it is a much traded stock exchange. Also, the events like East Asian crisis have also affected the

volatility of this exchange. But, nevertheless, the volatility has reduced in the recent years than it has in the period 1997-1999. Yet, it is more volatile than the other stock exchanges that we have compared. NYSE is a mature and most stable market of all these. The volatility has remained more or less constant over the years. The volatility of the NSE has risen
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steadily over

these

220

years as the trading and market capitalization of the companies has increased. Now the volatility of NSE is almost at par with the other exchanges.

Conclusions
The study brings forth some distinct conclusions many of which validate popular beliefs. The objective of the whole research was to try and compare the various stock exchanges based on certain parameters in order to

understand the impact of integration of the financial world on the various entities within it especially in the context of globalization and increased interest in the capital markets fuelled by surging growth. The various research papers that have been studied traced the gradual coming of age of the Indian stock market over the past decade without actually arriving at any conclusive evidence on the comparative position of our stock exchange with that of other global ones. The studies mainly looked at various aspects of efficiency in the stock market on a standalone basis and tried to draw conclusion regarding the state of our maturity. However, we have tried to use the comparison method to benchmark the performance of our stock market with that of a selection of global stock exchanges on the basis of their diversity with respect to geo-socio- politico-economy. With regard to the initial hypothesis of this study, it is clearly found that the stock markets do impact each other, more so in the recent times, i.e. post-2000. This has been due to the fact that cross holdings are

increasingly becoming common wherein the geographical barrier is dissolving with respect to investing. In India also, deliberations are on to cross list Indian shares in Asian exchanges to start off. This will increase the degree of integration manifold. Moreover, the automation of the exchanges has played a vital role in making the financial markets integrated. In this ADRs and GDRs, along

context, the pioneer is the Swiss exchange, followed by Brussels as an early adapter. The spate of with the increased trade and the rise

opening up of various economies, increasing foreign

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of the MNCs have contributed immensely to the integration process. It leaves us with the conclusion that the strategy of globally diversifying

investments is slowly losing its profitability. Especially after 2000, the markets are fast converging. It has now become a global market

operating 24 hours,

with opening of markets in different time zones at

various points of time appearing to be seamless. Thus, in hindsight, it would not be an exaggeration to say that the impact of the South East Asian currency crisis, if happened today, would have much more drastic effect on India, as the country is more in sync with the global markets. Actually, it can be said that, in the current scenario, any apprehension about stocks in one country can escalate into a panic selling. However, a caveat needs to be put here with respect of In a way, the attractiveness of the global

diversification strategy.

though the attractiveness of the

strategy is gradually diminishing, it can still be profitably used for investing in countries whose stock exchanges do not yet have high correlation amongst each other. Moreover, although the stocks listed in the stock exchanges of the sample in this study do impact each other and move in tandem, the magnitude of that movement as a result of reacting to global cues varies and, to that limited extent of variation, the global diversification strategy can prove useful. In short, the transaction cost for investment is coming down as is informational cost. Qualitatively, the showed efficient comparison an

that Indian stock exchange has the governance system and mechanism in place to be a world class

institute, specially

the requirements of Clause 49 promulgated by SEBI and the advanced trading and settlement mechanism of NSE, respectively. However,

unfortunately our implementation of the same remains a problem area with almost 15-20% of the listed companies yet to align their

operations as required under the law. Moreover, there are also issues regarding the extent to which the utilized in

sophisticated systems of the stock exchanges (NSE, BSE) are terms of the volume and

frequency of transactions and the range of

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instruments traded. The commodity segment, derivatives and such other segments are yet to see activities like the equity segment of the

market. The reasons that can be attributed to this is the fact that it has been only 5 years (derivatives started in 2000) that the various segments, apart from equity and debt, have started operating and counterparts. hence it is It would,

reasonably nascent compared to its global

therefore, not be unjustified to say that the system is still evolving and it would take some time not only to attain efficiency of operation, but also to generate increased interest and awareness about the various other segments of the market. Then only can we expect the operations to match its global counterparts in terms of volumes, frequency and variety of instruments traded. One more reason that can be attributed for the lag between a global benchmark like NYSE and BSE or NSE can be the fact that, in our country, listing of foreign companies are still not allowed on the lines of ADRs or GDRs. This can be due to lack of depth and breadth of the market. Again, as this study points out, the listing criteria differ in terms of size as well as their disclosure norms. This implies judged by the total capitalization is that the depth of the market less for the Indian markets

compared to its counterparts. Moreover, the disclosure norms affect the governance aspect as also the information availability. Innovative financial instruments like CAT Bonds, or dealing in Junk

Bonds as a cheap source of finance or sophisticated derivative instruments are yet to catch up in our country. This is partly because of the regulations that are gradually being eased out and also due to the risk appetite of the investors in this country. The opening up of the economy and its

subsequent impact on the financial sector has only started barely in the last six years and, hence, the teething problems of initial skepticism, lack of awareness and interest exist, besides cautious approach towards bringing about changes with keenly monitored impact of those changes. If we go to the specifics, then we find that the Clause 49, our counterpart
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of the famed Sarbannes-Oxley Act of USA, has brought us to the global standards. But, because of the early stages (only a year), the implementation is causing a hindrance in attaining the requisite level with regard to governance. Again the risk management system in our country is very elaborate and the mechanism in place is very efficient as also effective. It actually matches the level of a well established benchmark like NYSE.

However, the only difference is in terms of risk appetite of the investors which causes the level and operation of circuit breakers to vary. However, Indian stock market is very much at the same pedestal and, in fact, better than most of its Asian counterparts especially the emerging economies. Indian system enjoys creditability even when compared with a stock exchange like Nikkei (Japan). If we look at the efficiency of trading captured by the trading and

settlement mechanism, then we have found that the Indian mechanism is faster than the NYSE and at par with the best in the world. In fact, it is one of the fastest. One problem area that came out as a possible barrier in the path of Indian stock exchanges attaining global level is the fact that India has a very low rank in terms of market capitalization (ranked 14th). All other stock exchanges that we used in our study rank above Indian stock exchange. This is in spite of the fact that Indian stock exchanges have the highest number of companies listed (around 9000) and BSE accounting for almost 75%.

Therefore, volume-wise, Indian market is still pretty small. One more aspect that we have tried to look at in this study is the extent of influence the various stock markets cast on each other, specifically the impact of other stock exchanges on their Indian counterpart. In order to understand, we divided our study period in parts based on certain events that had economic implications. Here, we found the results validating popular

belief that the markets in general and Indian market in particular became more integrated with other global exchanges from 2002-03. This can very well be seen since the South Asian crisis of the mid-late nineties barely affected
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us, particularly because we were

insulated due

to government policies

and were just making the transition. However, in the later time periods, the influence of other stock markets increased on BSE or NSE but at a very low - almost insignificant - level. At the time of crucial 9/11, NYSE had started to exert its influence on us but at lower levels and, though the economic downturn impacted, it did not last long. The increased trend of Indian companies going for ADR and GDR issues has also contributed as a channel for information transfer between the exchanges where the

particular company

is listed. This has not only facilitated the integration countrys stock

process, but also increased the sensitivity of the home

exchange to the movements of various other exchanges especially where the home company is listed.

To sum up: Finally, we can sum up with the following observations: The m a r k e t s have indeed started to integrate and Indian market is no exception especially after 2002-03. The regulatory authorities must remove any ambiguity that may be existing when compared to the regulations of other exchanges

before they can actually make the grade. Lastly, although it has to be accepted that the market is evolving but the Indian system has already attained the minimum level of

robustness and efficiency to be counted among the best in the world and stand equipped to attain higher sophistication as well as

heightened activities. As for the existence of any signals or patterns among the stock exchanges, it can safely be said that the markets do react to global cues and any happening in the global scenario be it macroeconomic or country specific (foreign trade channel) affect the various markets. In short, the Indian exchanges are ready to make the transition should the
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government decides to further relax

the regulations and

open

up. The

financial sector as a whole, with the stock markets as its indicator, has indeed come a long way and are ready for the next level with regards to efficient trading and variety in the instruments traded. Thus this study validates the popular belief that the markets in general and Indian market in particular is more integrated with other global

exchanges from 2002-03 onwards. This can very well be seen since the South Asian crisis of the mid- late nineties barely affected us particularly because we were insulated due to government policies and was just making the transition. However, in the later time periods, the influence of other stock markets increased on our BSE or NSE, but at a very low almost insignificant level. At the time of 9/11 incident, NYSE had started to exert its influence on us but at lower levels and hence the economic downturn did not impact for long. The increased trend of Indian companies going for ADR and GDR issues has also contributed as a channel for information

transfer between the exchanges where the particular company is listed. This has not only facilitated the integration process but also increased the

sensitivity of the home countrys stock exchange to the movements of various other exchanges especially where the home company is listed. As for the existence of any signals or patterns among the stock exchanges, it can safely be said that the markets do react to global cues and any happening in the global scenario be it macroeconomic or country specific (foreign trade channel) affect the various markets.

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CHAPTER-9
Working process of sharekhan ltd.
Sharekhan Ltd. work in two different departments a. Selling department b. Advisory department 1. Selling department: In the Sharekhan Ltd. Selling department do the work of sell of Demat A/c. The work of sell divided among the different hierarchy. That hierarchy is following. 1) Trainees 2) Super trainees 3) Sales executives/dealer 4) Senior sales executives 5) Assistant sales manager/HNI Sales Asst.Manager/Relationship Manager/Equity advisor. 6) Territory manger 7) Area sales manager 8) regional sales manager(Branch manager)

Working process of sales department: In Sharekhan Ltd., there is a lead management system. Lead management system is a company personal working website where he keep the record of those people who are interested in Demat A/c. then he send those lead to the regional sales manager from where he send these lead send to the different area sales manager according to area. Area sales manager classify these leads and sends to the territory manager, where territory manager classify these leads and sends to Assistant sales manager and senior sales executive.
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Now the trainee, super trainee, and sales executive call to the people and fix the appointment and convert the appointment into the successful closure.

2. Advisory Department: The Advisory department work as advisor for those people who have A/c with the company. These people give the advise to the client and also act on the behalf of the client. There is three kind of advisor in the Sharekhan Ltd. a) Dealer: those clients have investment in the Demat A/c less than Rs.25000. they can avail only the Dealer services. b) Relationship Manager: Those client have a investment more than Rs. 25000 and Less than Rs.100000, they got the relationship manager. c) Equity advisor: those People have investment more than Rs. 100000. They got the Equity advisor. These people are highly Qualified and well trained.

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CHAPTER-10 Nothing is complete in this world. Everything have two phases one is bad and one is
good . so we will discuss some limitation of capital market both in India and Global capital market. And the limitation are following:-

LIMITATIONS:A. The first and big limitation what I find out during the project that there is
no international body to control the international stock market.

B. Almost all the Stock market depend on some big Stock market like- Dow
Jones, NASDAQ, NYSE Hang Seng London stock exchange etc. if they fall other also fall and if they rise other also rise.

C. In the summer training I came to know there is lot of hidden expense

which is not disclosed by the company and also its not seems possible to disclosed all these charges. Like D.P. Charges in delivery market.

D. There is complex structure of global capital market due to the complex

structure investor afraid to invest in the foreign capital market. E. There is lots of paper work when you entered in capital market there are lots terms and condition. This is the probably one of the reason they are afraid to come in the capital market.

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SUGGESTIONS and RECOMMENDATIONS

There are some suggestions for the global capital market as well as Indian capital market. These suggestions are following:I. There should one international authority, who can control the all the countries stock exchanges. II. There should be some assistance for the stock market that they will not face the situation of excessive inflation and deflation. III. In India almost 90% people are not aware about the share market or you can say that they have not proper knowledge about the share market. So there is need to aware about share market. IV. For the client welfare SEBI should issue the guideline to the company to disclose the hidden expanses to the client. V. A knowledge need to be spread concerning the risk and return of the capital market VI. SEBI should conduct seminars regarding the use of capital market to educate investors. VII. It is important for a consultancy to create awareness about its financial service effectively VIII. The customers are expecting frequent and timely correspondence from the consultancy regarding their funds and the monthly market overview. Therefore, the organization needs to give more weight age on this concern

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LEARNINGS AND FINDINGS This summer training vastly useful for me. I learn a lot in these two months , I can say what I learn here in ten months almost equal to I learn in the summer training like stress management, handling the pressure, complete the task before the deadlines etc. And from my learning some of the key points are following:Learning in Sharekhan: Stock broking companies technology in the field of stock broking is immense. The terminal through which the brokers buy and sell run with the help of IT. Shares are software that completely depends on the internet. For Sharekhan, Buying and this terminal has been designed by the software company Spider. Selling through internet is fast. As soon as the prices of the shares goes up or comes down then they can be sold or purchased instantly within seconds. Customer Relationship is very necessary for the company to retain the customers. In Sharekhan, I have learned how to maintain good relations with the customers by giving them the proper service and solving their queries regarding the share, I have learned how to maintain good relation with the employees market and the co- trainees. Learned in Sharekhan Ltd. I have learned a lot relating to the finance. Learned the meaning of the words that are mostly used in the share market. Learned various aspects about various products of the Sharekhan Limited. Learned about various products used in the share regarding Share Market.

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Learned how to use online market especially Demat accounts and Currency Derivative Segment and trading terminal. Learned how to approach the customers how to take appointments. Learned how to interact with people. Learned the various policies of the convince them and guide them in trading Learned the importance of the learned to manage time properly. Got the Excel sheet. I maintained all my daily records in the Excel sheet. Had a practical experience of working in a practical knowledge of the market in a reputed organization named Sharekhan?

Findings of the project

There are many findings of my project, some of the findings are given below:

I find in my project that there is huge scope in stock market for the investor There is scope of organized a international stock exchange and where all the countries stock exchange will do the training.

In my summer training I find out people who did not know about anything about the capital market. And very little knowledge about the stock market.

People have wrong concept about the stock market. During the project report I find out that almost all the countries stock market depend on some ruling stock exchange

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RECOMMENDATION
After the detail analysis of the project I want to recommend some points to the Indian capital market as well as Global capital market. These points are following: There will be international authority to control all the stock exchange of overall world. In India some steps will be taken by the SEBI to educate the people about the stock market. There will be uniform system of trading who will match all the standard criteria of stock exchange. All the stock exchange should concentrate on the user friendly system of stock market. There are lots of hidden charges, and I think stock exchange work on that the customer will know about that charge.

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BIBLIOGRAPHY
http://www.tax4india.com/finance-and-economy-india/capital-market.html 1/07/11 http://www.investopedia.com/articles/financial-theory/10/introduction-to-thedow.asp#ixzz1RUoKsMf3 1/07/2011 http://www.vc-china.com/qita/jinrong_en.htm 1/07/2011
http://en.wikipedia.org/wiki/Tokyo_Stock_Exchange

1/07/2011

http://en.wikipedia.org/wiki/Nikkei_225

2/07/2011

http://en.wikipedia.org/wiki/Straits_Times_Index 2/07/2011 http://www.unitedasia.com/index.php?option=com_content&view=article&id=4:newsflas h-3&catid=1:latest-news 2/07/2011 http://www.higbank.com/index.php?option=com_content&view=article&id=93&Itemid= 89&lang=en 3/07/2011 http://en.wikipedia.org/wiki/London_Stock_Exchange 3/07/2011 http://en.wikipedia.org/wiki/CAC_40 3/07/2011 http://en.wikipedia.org/wiki/DAX 5/07/2011 http://www.nasdaqtrader.com/Trader.aspx?id=Global_market_Data 5/07/2011 http://www.unitedasia.com/index.php?option=com_content&view=article&id=19&Itemi d=27 6/07/2011 http://www.hsi.com.hk/HSI-Net/HSI-Net 8/07/2011 http://www.hsi.com.hk/HSI-Net/HSI-Net 8/07/2011 http://www.pccpv.com.cn/english/index.asp 10/07/2011 http://www.yeahindia.com/c-india1.htm 11/07/2011
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http://bseindia.com/about/tradnset.asp#Timing 12/07/2011 http://www.twse.com.tw/en/about/company/service.php 12/07/2011 http://www.sse.com.cn/sseportal/en/c04/p1101/c1504_p1101.shtml 14/07/2011 http://www.rts.ru/s602 17/07/2011 http://www.stocks-for-beginners.com/frankfurt-stock-exchange.html 15/07/2011 http://library.thinkquest.org/11372/data/c4-sebi.htm 16/07/2011 http://www.indolink.com/consulate/iebo/capmkt12.htm 16/07/2011 http://www.cma.org.sa/En/AboutCMA/CMA_Department/Pages/Market_Supervision.asp x 16/07/2011 http://www.twse.com.tw/en/about/company/service.php 17/07/2011 http://www.sse.com.cn/sseportal/en/c04/p1101/c1504_p1101.shtml 17/07/2011

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ANNEXURE
Press release related to the Sharekhan Limited Diversify fund portfolio, avoid betting on sectors': Sharekhan Madhu T, TNN, Jul 2, 2010, 05.26 AM IST MUMBAI: Defensive sectors like pharma and FMCG are on investors' radar. Many have noticed that these sectors have been topping the return chart in the mutual fund industry for some time. No wonder, they are contemplating investing in these sectoral schemes. However, investment advisors have a word of caution for them: don't start chasing shortterm winners and instead always try to diversify your portfolio so that you would gain from upside in any sector. It is no wonder that investors have started noticing these sectors lately. But the trouble is that winners come into notice only after they have won already, there is no guaranty that these sectors are likely to offer similar returns in the coming months," says Amit Trivedi, a financial trainer. "The problem with investors is that they tend to chase winners in the last six months. Again, they would shift out and invest in another sector which would have started performing well for a few weeks. In this chase, they will lose out on a good opportunity to earn more returns," he adds. Experts say it is almost impossible for anyone to get in and get out of winning sectors all the time. "Investors should remember that different sectors would perform better at different points in time. For example, everyone was talking about gold sometime back. Then small and midcap stocks came and now it is pharma and FMCG. It won't be possible for an average investor to get in and out of sectors as and when they perform," says a mutual fund manager, who doesn't want to be quoted. "Look at the returns offered by either gold or small and midcap funds now. If anyone has gone overboard on these schemes, they would be regretting it now," he adds. Rakesh Goyal, senior vice-president, Bonanza Portfolio, believes that this is not the best to time to be defensive.

Subscribe to Technofab Engg IPO for listing gains: Sharekhan 1 Jul 2010, 0008 hrs IST, AGENCIES MUMBAI: Sharekhan has advised investors with risk appetite to apply for Technofab Engineerings initial public offering for listing gains. The company entered the capital

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market Tuesday with public issue of 29.90 lakh shares in the price band of Rs 230-240 per share. The 100 per cent book building issue will close Friday. Technofab Engineering has been able to increase the average order size over the years. It had reported good financial performance in the past. However, the PBDIT margin has risen very sharply since FY08. In the first half of FY10, PBDIT margin is higher than the industry and so it would be a challenge for the company to sustain these levels. Investors with risk appetite may apply for listing gains, the report said. The company is engaged in the business of providing Engineering Procurement and Construction (EPC) services, executing a wide range of Balance-of-Plant (BoP) and electromechanical projects on a complete turnkey basis. It plans to use the proceeds to meet long-term working capital requirements, finance the procurement of construction equipment, finance setting up of maintenance and storage facility for construction equipment and for setting up of training centre for employees.

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