secondary market

Secondary Market In India- Its Control and Management by SEBI

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Secondary Market basically means a market where securities are traded after them being exchanged through the primary market. It is called a market where second-hand securities are sold. It includes both equity and debt market.

Securities and Exchange Board of India as a regulatory authority was established under section 3 of SEBI Act 1992 in order to protect interests of investors in securities and to promote the development of securities market. Also, it was established to regulate the securities market.

Like the primary market, Securities and Exchange Board of India also plays an important role in regulating the secondary market.

secondary market

ROLE OF DEPARTMENTS OF SEBI

There are various departments established under SEBI which are specifically for the management of secondary market. They are:

(a) Market Intermediaries Registration and Supervision Department (MIRSD): It manages registration, supervision, compliance, monitoring and inspection of all market intermediaries of all market segments which are equity, equity derivatives, debt and debt related derivatives.

(b) Market Regulation Department (MRD): It is responsible for formulating new policies and supervising the functioning and operations of security exchanges, their subsidiaries and market institutions such as clearing and settlement organisations and depositories.

(c) Derivatives and New Products Departments (DNPD): It is responsible for supervising trading at derivatives segments of stock exchanges, introducing new products to be traded, and consequent policy changes.

SEBI AND STOCK EXCHANGES

The securities in the secondary market are daily traded on stock exchanges so SEBI had made various provisions for proper management and functioning of the security exchanges.

(a) Board of directors of the stock exchanges will also include non-members, public representatives and representatives from government to the extent of the 50% of total number of members.

(b) All of the recognised stock exchanges must report about their transactions in their organization within 24 hours.

(c) There must be sufficient infrastructure in stock exchange to facilitate trade and SEBI will only grant recognition to those new stock exchanges which have online screen-based trading facility.

(d) SEBI has also instructed stock exchanges to set up clearing houses, clearing corporations or a settlement guarantee fund in order to ensure prompt settlement of transactions.

(e) Various stock exchanges will have to complete their settlement within 7 days and to conduct auction immediately after the completion of relevant trading period, in those cases where members have failed to give delivery, as on date, the exchanges have weekly settlement cycle.

secondary market

SEBI AND DEMATERIALISATION

(a) SEBI had issued directives to those which are companies included in the list of securities for dematerialisation. The directive has been given in order to effect compulsory dematerialised trading for all investors.

Also, it has been done to sign agreements and complete all the formalities with both depositories and establish connectivity on time. This is done so that dematerialisation process could be completed as per schedule.

(b) SEBI (Depositories and Participants) Regulation, 1996 was also amended in order to include registrars to an issue or share transfer agents ineligible category to become depository participant.

SEBI AND SECURITY LENDING SCHEME, 1997

This scheme was introduced by the SEBI in the year 1997. This scheme provides for lending of securities through an approved intermediary to a borrower under an agreement for a specific period. The scheme will help in the timely delivery of securities which will improve the efficiency of settlement system and will correct the temporary imbalances between demand and supply.

This scheme also provides for mobilization of idle stocks in the hands of foreign investors, mutual funds and other large investors. SEBI has also given approval to various intermediaries to act as stock lenders.

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