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PROJECT REPORT

On

THE TRADING METHODS AND

RULES IN INDIAN CAPITAL

MARKET

SUBMITTED BY:

RUPINDER KUMARROLL NO. 0061401703

BBA, VISEMESTERIP UNIVERSITY

SUBMITTED TO

JAGAN INSTITUTE OF MANAGEMENT STUDIES

ROHINI


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CONTENT

Project Objective

Project hypothesis

Scope of project

Limitation

Methodology

Introduction

Depository system and regulatory framework

Screeples trading in capital market

Derivatives: Future and option trading

Indabulls Financial Services Ltd.

Depository services delivery by different DPs

Competitive price list of DPS

Data Analysis

Findings

Conclusion

Annexure

Abbreviations


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Bibliography

Project Objectives

To know the reasons for introduction of Scripless Trading in India and its scope

To know the trading methods and rules in Indian capital market

To know the price structure and services offered by the players in the same

industry

To analyze the workings in dematerialization era

To know the compliances of depository participant with their regulators

To know the Pros and Cons of dematerialized mode of trading from different

aspects


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Project Hypothesis

There is cutthroat competition in the securities market for providing better

services to the customers; providing Depository Services is one of part of it.

So, each and every competitor is trying to lead in it.

I have assumed that Depository services provided by Indiabulls Securities Ltd.

are very good and attractive.

Scope of Project

Firstly, this project covers the Scripless trading in India capital market,

specially trading in cash and derivatives.

And secondly it covers the area of different Depository services provided by

different Depositories.


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Limitations of Project

Less Responses

Time consuming

Biased Responses

Respondents may not have enough time for response

Benefit of Project for Company

The project will help the company to know the market trends and the

services provided by other company. It will show their place in the market

and help them to formulate the strategies against their competitors by

offering better services.


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Project Methodology

In my project the sample size for the research is 17. In which 8 are the Bank

DPs, which do not provide the facilities of securities transaction and 9 are

securities transaction companies (including those banks which provide the

facilities of securities transaction).

The sources of data collection are books, magazines and various

websites.


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RESEARCH DESIGN

The research design of my project is a mix of exploratory and descriptive study

type:

studies are also termed as formulative research

studies. The major emphasis in such studies is the discovery of ideas and

insights. The main objective of exploratory research is to fine-tune the

broad problem (here, depository services) into specific statement (here,

depository services provide by Indiabulls and other market players).

studies are those studies, which are concerned with

describing the characteristics of a particular individual, or a group or a

trend. A sample was taken and statements about the population on the

basis of the samples were made. Descriptive research aims at drawing

inferences and making predictions (here, knowing the trends of scripless

trading in capital market with help of their terminologies).


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Scripless Trading

The decades of 1999-2000 have seen a phenomenal growth in Indian

Capital Market. India has the largest number of Listed Companies in the world

today that has result a large amount of shareholders also. Hence system of

settlement based on physical delivery of paper certificate causes big problems to

large amount of investors. The need for a new system was felt and Government

of India promulgated the Depositories Ordinance in September 1995 thus the

paving the way for Depository System in India and ushering in an era of

paperless settlement of securities.

A depository, an outcome of rapid development in Technology is an

important agency playing a very important role in stock markets around the

world. A Depository is an organization concerned holding and handling of

securities on behalf of investors, both large and small. The advanced trading

mechanism is designed not only to provide transparency and control to the

regulators but also to provide ease of operation alleviate hardships currently

experienced by Investors.

Indeed it is hard to believe that depository system which was introduced

just four years back is playing now key role in stock market of the country and it

has provide greater efficiency and transparency in the capital market, certainly,

future belongs to Depository System.


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India has the largest number of listed companies, investor population and

substantial volume of trade in the world today. As a result of this investors have

to face a lot of problems relating to:

Bad delivery.

Delay in transfer of shares.

Duplicate / Fake / Forged certificates.

Loss in transit / Theft / Mutilation.

Large paperwork.

Disputes on corporate actions.

Longer settlement cycles.

Heavy stamp duties on transfer.

To obviate these problems the Depositories Act 1996 was enacted to provide for

the establishment of depositories with the objective of ensuring free

transferability of securities with speed, accuracy and safety by making: -

a) Securities of public limited companies freely transferable subject to certain

exceptions.

b) Dematerializing the securities in the depository mode.

c) Provision for maintenance of ownership records in an e-book entry form.


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Reduction of risk associated with physical scrips.

No stamp duty on transfer.

No bad delivery.

No loss due to theft / forgery / fake certificates.

Reduces transaction costs.

Quick settlement cycle.

Improved liquidity of stocks.

Electronic credit in the case of initial public offer (IPOs), right or bonus

issues.

Reduction in rate of interest on loans granted against pledging of shares.

Enhanced liquidity, safety and huge turnover in stock markets.

Opportunity for the development of retail brokerage business.

Improved protection of shareholders rights resulting from more timely

communication from the issuer.

Reduced transaction costs through efficiency.

Elimination of forgery and counterfeit with attendant reduction in

settlement risk from bad deliveries.

Provide automation to post trade processing.

Bringing greater efficiency and transference to the market place.

Improved cash in flows.

NSDL has started SPEED facility, which enables the clearing members to

view the stock positions for Pay in and Pay out to the stock exchange.


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Improved efficiency of Registrar and Transfer agents.

Efficient communication with investors.

Updated list of shareholders on weekly basis.

Better image with global and foreign investors.

Updated information of investors name and address.

Corporate image and awareness among general public.


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Strict guidelines by SEBI have placed many checks for

account opening, which causes a lot of problems to the investors. For

example different Demat Accounts will have to be opened according to

the shareholding pattern in the share certificates; it causes extra cost in

term of monetary expense and time.

It is other major problem, which is faced by

most of investors these days. There are various companies, which are not

processing the dematerialization process within the statutory period of 15

days as prescribed by SEBI.

Inventors can lose their securities due to the frauds

or mistakes done either by employee, officer of the depository participant

or other intermediaries in the depository system.

It is an additional cost to small investors, which deters

them to adopt depository mode.

As per SEBI directives, tax on capital gains shall be

levied on the FIFO Basis by which investors have lost opportunity of tax

planning.


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Depository system and Regulatory Framework

Depositories Act, 1996

SEBI Act, 1992 SEBI (D&P) Regulations, 1996

Depository

Business Rules Bye Laws Agreements Application of the

other

SEBI


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The Depositories Act, 1996 provide a legal framework for establishment of

depositories to record ownership details in book entry form. The regulation of

depositories in India is regulated with the following framework:

The Depositories Act, 1996

SEBI (Depositories & Participant) Regulation, 1996

Companies Act, 1956

SEBI Act, 1992

Along with the above-mentioned Acts, following govern the business and

operations of the depositories: Bye Laws of Depository

Business rules of depository

Apart from above, depositories also require the compliance of certain provisions

of other act such as:

Indian Stamp Act, 1989

Income Tax Act

Securities Contract (Regulation) Act, 1956

SEBI (custodian of securities) regulations, 1956


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NATIONAL SECURITIES DEPOSITORY LIMITED (NSDL) is the first depository

to be set up in India. It was incorporated on December 12, 1996. The IDBI,

UTI & NSE, sponsored the setting up of NSDL and subscribed to the initial

capital NSDL commenced operations on November 8,1996.

NSDL is a public limited company incorporated under the Companies Act,

1956. NSDL has a paid up equity capital of Rs. 80 crores and net worth of

more than Rs. 100 crores. NSDL carries out its functions through its business

partners who include DPs, issuers/registrars, clearing corporation/houses etc.

It is electronically linked to each of these business partners via satellite links.

The entire integrated system of the NSDL has been named as the NEST

(National Settlement & Transfer) system.

The legislative framework governing the operations of NSDL essentially

comprises a three-tier structure:

enacted in Aug96, provides the broad framework

for the setting up and working of depositories in India.

under

the Depositories Act 96 provide the regulatory framework for the

depositories.


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govern the functioning and

operational procedures of NSDL and its business partners.

Following services are provided by NSDL:

Maintenance of electronic records of beneficiary ownership of

securities.

Transfer of beneficial ownership of securities.

Dematerialization and rematerilization of securities.

Allotment in the electronic mode in case of initial public offerings

Distribution of securities to allottees in case of public issues.

Distribution of non-cash corporate actions e.g. right/bonus issuses.

Pledge and Hypothecation of securities.

Automatic landing and borrowing mechanism (ALBM)

As already stated, NSDL was promoted by IDBI, UTI and NSE. Only a company

registered under the Companies Act 56 and sponsored by the specified

categories of institutions can set up a depository in India. Presently, thefollowing organizations are shareholders of NSDL.

1. IDBI

2. UTI

3. NSE

4. SBI

5. Global Trust Bank Limited

6. CITI BANK7. STANCHART GRINDLAYS

8. HDFC BANK

9. HSBC

10.DEUTSCHE BANK


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11.DENA BANK

12.CANARA BANK

On February 26, 2002, NSDL, had announced a revision in its fee structure to the

Depository Participants (DPs). The new fee structure was to be made effective

from April 1, 2002. However, SEBI advised NSDL that the charges be further

reviewed by NSDL and may not be made applicable from April 1, 2002. In view

of this, the Board of Directors of NSDL reconsidered the matter and decided to

reduce the settlement fee from Rs.15 per debit instruction to Rs.10 per debit

instruction. There will be no settlement fee for credit instruction, as at present.

There is no change in the fee structure in respect of other transactions and these

are given below:

Pledge Creation Rs.25 per instruction

Pledge Closure Nil

Pledge Invocation Nil

Securities Borrowing Rs.25 per instruction

Custody Fee Rs.9 per ISIN* p.a.

Rematerialisation Rs.10 per certificate

*ISIN (International Securities Identification Number) is a unique identification

number for a security.


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Investor Accounts 65,76,020

Accounts having Debt instruments 1,21,273

Companies Joined 5,669

Demat Custody Quantity (million securities) 138,143

Depository ParticipantsDPs 218

DP Service Centres 2,855

Demat Custody Instruments Value

(in Rs. Million)

Shares 5,362 12,036,800Debt/Bonds 6,973 2,937,656

CP 472 218,418

Settlement (20/06/2005 - 24/06/2005)Equity Shares Qty

(in Million)

Value

(in Rs. Million)

NSE 424 78,485

BSE 522 53,538

Total 955 132,153

Debt/Bonds Settlement 32,510


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A Depository facilitates holding of securities in the electronic form and enables

securities transactions to be processed by book entry by a Depository Participant

(DP), who as an agent of the depository, offers depository services to investors.

According to SEBI guidelines, financial institutions, banks, custodians,

stockbrokers, etc. are eligible to act as DPs. The investor who is known asbeneficial owner (BO) has to open a demat account through any DP for

dematerialisation of his holdings and transferring securities.

The balances in the investors account recorded and maintained with CDSL can

be obtained through the DP. The DP is required to provide the investor, at

regular intervals, a statement of account which gives the details of the securities

holdings and transactions. The depository system has effectively eliminated

paper-based certificates which were prone to be fake, forged, counterfeit

resulting in bad deliveries. CDSL offers an efficient and instantaneous transfer of

securities.

The Stock Exchange, Mumbai (BSE) jointly with leading banks such as State

Bank of India, Bank of India, Bank of Baroda, HDFC Bank, Standard Chartered

Bank, Union Bank of India and Centurion Bank, promoted CDSL.

CDSL was set up with the objective of providing convenient, dependable and

secure depository services at affordable cost to all market participants. CDSL

received the certificate of commencement of business from SEBI in February,

1999. All leading stock exchanges like the National Stock Exchange, Calcutta

Stock Exchange, Delhi Stock Exchange, The Stock Exchange, Ahmedabad, etc


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have established connectivity with CDSL. As on 06TH June, 2005 workings at

CDSL is as follows:-

Equity 4706

Debt instruments including debentures, bonds, Government securities,

certificates of deposits, commercial paper & pass through certificates

5165

Mutual fund units 8

Number of Depository Participants 274

Number of branches with LIVE Connectivity 487

Number of cities/ towns with LIVE connectivity 124

Number of locations with LIVE connectivity 248

Number of securities in million 19610

Value (Rs. in million) 1231060

Number of securities in million 881

Value (Rs. in million) 65192

Investor accounts 1067808


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CDSL fees structure to its depository participants is as follows:

Nil

Nil

: Credit Nil

: Debit 0.01% of the transaction value subject to min. of

Rs.5/- & max. of Rs.12/- per transaction

Individual/NRIs/HUFs/Trusts

Nil

Corporate /Others

Rs.500/- p.a.

: Set up Rs.12/- to pledgor.

: Removal Rs.12/- to pledgor.

: Invocation Nil

Rs.10/- per certificate

Fees payable by DPs or their branches having connectivity with CDSL

(a) Established connectivity before 01-04-2003: Rs.500/- or the amount of


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the bill for a given month whichever is higher. (b) Established connectivity

on / after 01-04-2003: Rs.1000/- or the amount of the bill for a given

month whichever is higher.

CDSL collects only Rs. 500/ - per month

from its DPs for a CM except for CM Investors securities Account. Further,

a fee of 0.01% on the transaction value subject to a minimum of Rs.5/-

and maximum of Rs.12/- will be payable - (a)For credit of securities in

pay-out declared by an exchange into a CM a/c meant for other exchange,

(b)For transfer from a CM a/c to any CM a/c.

Companies 5159

Depository Participants 274

Debt Instruments 5269

Demat Quantity (in million) 20250

Demat Value (in million) 1287370

Settlement Quantity (in million) 309

Settlement Value (in million) 21203


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India is in the midst of an era of liberalization, deregulation and globalization

of economy and financial markets. With the objective of improving market

efficiency, enhancing transparency, checking unfair trade practices and bringing

the Indian market up to the international standards, a package of reforms

consisting measures to liberalize, regulate and develop the securities market was

introduced during the 1990s. This has changed corporate securities market

beyond recognition in that decade. The secondary market overcame the

geographical barriers by moving to screen based trading. The passing of the

Depository Act 1996 is another milestone in the securities market reform process

within the country.

The Indian Capital Market has seen unprecedented boom in its activity in

the last decade. We can now boast of a very large investor population and

substantial volumes of trade. However, this surge in activity has brought with it

numerous problems that threatened the very survival of the Capital Market in the

long run. A closer inspection of the problems would reveal that most of them

arose due to the intrinsic nature of paper based trading and settlement.

The century old system of trading and settlement requiring handling of

huge volumes of paper leading to increased costs and inefficiencies.

Simultaneously, they exposed the investors to greater risks like delays in

transfers, forgery, thefts of certificates etc.

This has made the investors, both retail and institutional, wary of entering

the Indian Capital Market. In this scenario, it was felt that the setting up of a

depository and the introduction of and is

imperative for the efficient functioning of the market.


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Dematerialisation (Demat in short form) signifies conversion of a share

certificate from its physical form to electronic form for the same number of

holding which is credited to clients demat account which they open with a

Depository Participant (DP).

Dematerialisation is a process by which the Company takes the physical share

certificates of an investor back and an equivalent number of securities are

credited in electronic form at the request of the investor. An investor will have to

first open an account with a Depository Participant and then request for the

dematerialisation of his share certificates through the Depository Participant so

that the dematerialised holdings can be credited into that account. This is very

similar to opening a Bank Account.

Dematerialisation of shares is optional and an investor can still hold shares in

physical form. However, he / she has to demat the shares if he / she wishes to

sell the same through the Stock Exchanges. Similarly, if an investor purchases

shares, he / she will get delivery of the shares in demat form.

:

Depositories are an important intermediary in the securities market that is

scripless or moving towards such a state. The Depository Act has been enacted

with a particular aim to strengthen the move towards professionalisation of the

securities market and provision for a national securities transfer system.

The Depositories Act 96 defines a depository to mean

A Company formed and registered under the Companies Act 56 and which has

been granted a certificate of registration under sub section (IA) of section 12 of

the SEBI Act 92.


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The above definition doesnt however explain the meaning of a depository

completely. It can be explained as

A Depository is an institution which maintains the custody and transfer of

securities in the electronic form, on behalf of its participants.

Thus, the principal function of a depository is to dematerialized securities and

enables their transactions in book entry form. Dematerialization of securities

occurs when securities issued in the physical form is destroyed and an equivalent

number of securities are credited into the beneficiary owners account. In a

depository system, the investors stand to gain by way of lower costs and lower

risks of theft or forgery etc. They also benefit in terms of efficiency of the

process.

A depository established under the Depository Act 96 could provide any

service connected with recording of allotment of securities or transfers of

ownership of securities in the record of a depository. A depository cannot directly

open the accounts and provide services to clients. Any person willing to avail of

the services of the depository can do so by entering into an agreement with a

depository through any of its depository participant.

:

It can be compared with a bank, which holds the funds for depositors. A Bank

Depository Analogy is given in the following table:

Holds funds in an account Hold securities in an account

Transfers funds betweenaccounts on theinstruction of the accountholder

Transfers securities betweenaccounts on the instruction ofthe account holder


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Facilitates transfer withouthaving to handle money

Facilitates transfer of ownership without having tohandle securities

Facilitates safekeeping ofmoney

Facilitates safekeeping ofsecurities

Similar to the brokers who trade on clients behalf in and outside the Stock

Exchange; a Depository Participant (DP) is clients representative (agent) in the

depository system providing the link between the Company and his client

through the Depository. Clients Depository Participant will maintain clients

securities account balances and intimate to him the status of their holding from

time to time. According to SEBI guidelines, Financial Institutions like banks,

custodians, stockbrokers etc. can become participants in the depository. A DP is

one with whom a beneficiary needs to open an account to deal in electronic

form. While the Depository can be compared to a Bank, DP is like a branch of

his/her bank with whom he/she can have an account. The minimum net worth

stipulated by SEBI for a depository is Rs. 100 crore. As on 31/03/2005, total of

DPs are registered with SEBI.

The Depository System functions very much like the banking system. A bank

holds funds in accounts whereas a Depository holds securities in accounts for its

clients. A Bank transfers funds between accounts whereas a Depository transfers

securities between accounts. In both systems, the transfer of funds or securities

happens without the actual handling of funds or securities. Both the Banks and

the Depository are accountable for the safe keeping of funds and securities

respectively.


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As per the available statistics at BSE and NSE, 99.9% settlement takes place in

demat mode only. Therefore, in view of the convenience in settlement through

demat mode, it is advisable to have a beneficiary owner (BO) account to trade at

the exchanges.

To avail the services of a depository an investor is required to open an account

with a depository participant of any depository.

Firstly an investor has to approach a DP and fill up an account opening form. The

account opening form must be supported by copies of any one of the approved

documents to serve as proof of identity (PoI) and proof of address (PoA) as

specified by SEBI.

All applicants should carry original documents for verification by an authorized

official of the depository participant, under his signature.

Further, the investor has to sign an agreement with DP in a depository

prescribed standard format, which details rights and duties of investor and DP.

DP should provide the investor with a copy of the agreement and schedule of

charges for their future reference. The DP will open the account in the system

and give an account number, which is also called BO ID (Beneficiary Owner

Identification number).

The DP may revise the charges by giving 30 days notice in advance. SEBI has

rationalised the cost structure for dematerialisation by removing account opening

charges, transaction charges for credit of securities, and custody charges vide

circular dated January 28, 2005.


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It is for the protection of investors interest. The bank account number will be

mentioned on the interest or dividend warrant, so that such warrant cannot be

encashed by any one else. Further, cash corporate benefits such as dividend,

interest will be credited to the investors account directly through the

facility, wherever available, by the company.

An investor can open more than one account in the same name with the same

DP and also with different DPs. The investor has not to keep any minimum

balance of securities in his/her accounts. It is not necessary to have account with

the same DP as broker has. Depository / DP can be chosen by investor as per

convenience irrespective of the DP of the broker. The demat account must be

opened in the same ownership pattern in which the securities are held in thephysical form. e. g. if one share certificate is in the individual name and another

certificate is jointly with somebody, two different accounts would have to be

opened.

In this case the investor may open only one account with A & B as the account

holders and lodge the security certificates with different order of names for

dematerialisation in the same account. An additional form called "Transposition

cum Demat" form will have to be filled in. This would help a client to effect

change in the order of names as well as dematerialise the securities. The demat

account cannot be operated on "either or survivor" basis like the bank account.

a. Trading in the shares of the Company is now under the compulsory

demat segment. With SEBI making demat mandatory on most of

the traded scrips, electronic transaction will be the only way

everyone will trade.

b. No stamp duty for transfer of securities in the electronic form. In

case of transfer of physical shares, stamp duty of 0.5 percent is


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payable on the market value of shares being transferred.

c. All risks associated with physical certificates such as delays, loss, in

transit, theft, mutilation, bad deliveries, etc. eliminated.

Beneficiarys shares can be kept in the Frozen Mode by his/her

Depository Participant under his/her specific instructions.

d. The concept of an odd lot in respect of dematerialized shares

stands abolished, i.e. in the demat mode, market lot becomes one

share.

e. Dematerialised securities are most preferred by banks and other

financiers for providing credit facility against securities. Generally,

demat securities attract lower margin and lower rates of interest

compared to physical securities.

f. Even in the electronic mode of trading, the payment mechanism

(usually through a broker) between the buyer and seller continues

to be as before. Also the usual brokerage charges would have to be

incurred. However, after the settlement, pay in and pay out are on

the same day for scripless trading which means he/she can get

his/her securities as well as cash immediately.

g. Shares bought or sold are transferred in his/her name on the very

next day of pay out. In case of physical shares, transfer of

ownership takes 30 days or sometimes even more.

h. No courier / postal charges for sending share certificates / transfer

deeds.


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i. Facility for freezing / locking of investor accounts, which enables

him/her to make his/her account non-operational, for instance if

he/she is abroad.

j. Facility to pledge and hypothecate his/her securities available.

k. As the Depository System becomes popular, brokers will be

increasingly reluctant to deal with physical shares.

l. Investors prefer to buy shares which are already in dematerialised

form.

In order to dematerialise physical securities one has to fill in a DRF (Demat

Request Form), which is available with the DP, and submit the same along with

physical certificates one wishes to dematerialise. Separate DRF has to be filled

for each ISIN Number. The complete process of dematerialisation is outlined

below:

Surrender certificates for dematerialisation to investors depository

participant.

Depository participant intimates Depository of the request through the

system.

Depository participant submits the certificates to the registrar of the

Issuer Company.


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Registrar confirms the dematerialisation request from depository.

After dematerialising the certificates, Registrar updates accounts

and informs depository of the completion of dematerialisation.

Depository updates its accounts and informs the depository

participant.

Depository participant updates the demat account of the investor.

When electronic holdings be converted back into Physical certificates, the

process is called . If one wishes to get back his securities in

the physical form one has to fill in the RRF (Remat Request Form) and request

his DP for rematerialisation of the balances in his securities account. The process

of rematerialisation is outlined below:

One makes a request for rematerialisation.

Depository participant intimates depository of the request through the system.

Depository confirms rematerialisation request to the registrar.

Registrar updates accounts and prints certificates.

Depository updates accounts and downloads details to depository participant.

Registrar dispatches certificates to investor.

The procedure for buying and selling dematerialised securities is similar to the

procedure for buying and selling physical securities. The difference lies in the

process of delivery (in case of sale) and receipt (in case of purchase) of

securities.


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In case of purchase: -

The broker will receive the securities in his account on the payout day

The broker will give instruction to its DP to debit his account and creditinvestor's account

Investor will give Receipt Instruction to DP for receiving credit by filling

appropriate form. However one can give standing instruction for credit in

to ones account that will obviate the need of giving Receipt Instruction

every time.

In case of sale: -

The investor will give delivery instruction to DP to debit his account and credit

the brokers account. Such instruction should reach the DPs office at least 24

hours before the pay-in as other wise DP will accept the instruction only at the

investors risk.

In a bank account, credit to the account is given only when a 'pay in' slip is

submitted together with cash/cheque. Similarly, in a depository account 'Receipt

in' form has to be submitted to receive securities in the account. However, for

the convenience of investors, facility of 'standing instruction' is given. If client

says 'Yes' for standing instruction, he/she need not submit 'Receipt in' slip every-

time he/she buy securities. If investor is particular that securities can be credited

to his/her account only with his/her consent, then do not say 'yes' [or tick ] to

standing instruction in the application form.

To give the delivery one has to fill a form called Delivery Instruction Slip (DIS).

DIS may be compared to cheque book of a bank account. The following

precautions are to be taken in respect of DIS:-


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Ensure and insist with DP to issue DIS book.

Ensure that DIS numbers are pre-printed and DP takes acknowledgment

for the DIS booklet issued to investor.

Ensure that investor account number [client id] is pre-stamped.

If the account is a joint account, all the joint holders have to sign the

instruction slips. Instruction cannot be executed if all joint holders have

not signed.

Avoid using loose slips

Do not leave signed blank DIS with anyone viz., broker/sub-broker.

Keep the DIS book under lock and key when not in use.

If only one entry is made in the DIS book, strike out remaining space to

prevent misuse by any one.

Investor should personally fill in target account -id and all details in the

DIS.

Pledging dematerialised securities is easier and more advantageous as compared

to pledging physical securities. The procedure to pledge electronic securities is as

follows:

Both investor (pledgor) as well as the lender (pledgee) must have

depository accounts with the ;

Investor has to initiate the pledge by submitting to DP the details of the

securities to be pledged in a standard format ;

The pledgee has to confirm the request through his/her DP;

Once this is done, securities are pledged.

All financial transactions between the pledgor and the pledgee are

handled as per usual practice outside the depository system.


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The DP gives a Transaction Statement periodically, which will detail current

balances and various transactions made through the depository account. If so

desired, DP may provide the Transaction Statement at intervals shorter than the

stipulated ones, probably at a cost.

If any person required to deliver a security in the market does not readily have

that security, he can borrow the same from another person who is willing to lend

as per the Securities Lending and Borrowing Scheme.

Lending and borrowing has to be done through an 'Approved Intermediary'

registered with SEBI. The approved intermediary would borrow the securities for

further lending to borrowers. Lenders of the securities and borrowers of the

securities enter into separate agreements with the approved intermediary for

lending and borrowing the securities. Lending and borrowing is effected through

the depository system.

Only individuals holding beneficiary accounts either singly or jointly can makenomination. Non-individuals including society, trust, body corporate, karta of

Hindu Undivided Family, holder of power of attorney cannot nominate.

Transmission is the process by which securities of a deceased account holder are

transferred to the account of his legal heirs / nominee. Process of transmission in

case of dematerialised holdings is more convenient as the transmission

formalities for all securities held in a demat account can be completed by

submitting documents to the DP, whereas in case of physical securities the legal

heirs/nominee/surviving joint holder has to independently correspond with each

company in which securities are held.


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SCRIPLESS TRADING IN CAPITAL

MARKET

As mentioned above, in a traders have the option to hold and

trade in the shares of the Company in electronic form. So that the problems like

bad delivery, delay in transfer of shares, duplicate / fake / forged certificates,

loss in transit / theft / mutilation, large paperwork, disputes on corporate

actions, longer settlement cycles, etc. can be removed.

There are two ways for trading in securities market. First is cash market and

second is derivative market. NSE provides the facility of both the trading in cash

as well as in derivatives market but BSE provides only the facility of trading in

cash market. In the cash market we easily sell or purchase the securities in a

simple manner. But in a derivative market we have to know deeply the

terminologies used in capital market for trading in derivatives.

But before discussing on the derivatives market, its terminologies and what are

the sources of getting securities in individuals account; I want to describe few

things about the BSE & NSE. Although there are many exchanges in India but

these two are most popular in the India and having highest number of trading

volumes, listed companies and market capitalizations. Few more facts about

these two are as follows:


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The National Stock Exchange of India Limited has genesis in the report of the

High Powered Study Group on Establishment of New Stock Exchanges, which

recommended promotion of a National Stock Exchange by financial institutions

(FIs) to provide access to investors from all across the country on an equal

footing. Based on the recommendations, NSE was promoted by leading Financial

Institutions at the behest of the Government of India and was incorporated in

November 1992 as a tax-paying company unlike other stock exchanges in the

country.

On its recognition as a stock exchange under the Securities Contracts

(Regulation) Act, 1956 in April 1993, NSE commenced operations in the

Wholesale Debt Market (WDM) segment in June 1994. The Capital Market

(Equities) segment commenced operations in November 1994 and operations in

Derivatives segment commenced in June 2000.


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No of companies listed 987 977

No. of companies permitted 1 1

No. of companies available for trading 854 842

No. of trading days 23 22

No. of companies traded 861 875

No. of trades (lakh) 477 412

Traded Quantity (lakh) 70,485 56,516

Turnover (Rs.cr) 111,397 86,802

Average Daily Turnover (Rs.cr) 4,843 3,946

Average Trade Size 23,374 21,020

Demat Securities Traded (lakh) 70,485 56,516

Demat Turnover 111,397 86,802

Market Capitalisation (Rs.cr) 1,727,5021,654,995
http://www.nse-india.com/content/equities/eq_turnjun2005.htmhttp://www.nse-india.com/content/equities/eq_turnmay2005.htm


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The Stock Exchange, Mumbai, popularly known as was established in

1875 as It is the oldest

one in Asia, even older than the Tokyo Stock Exchange, which was established in

1878. It is a voluntary non-profit making Association of Persons (AOP) and is

currently engaged in the process of converting itself into demutualised and

corporate entity. It has evolved over the years into its present status as the

premier Stock Exchange in the country. It is the first Stock Exchange in the

Country to have obtained permanent recognition in 1956 from the Govt. of India

under the Securities Contracts (Regulation) Act, 1956.

The Exchange, while providing an efficient and transparent market for trading in

securities, debt and derivatives upholds the interests of the investors and

ensures redressal of their grievances whether against the companies or its own

member-brokers. It also strives to educate and enlighten the investors by

conducting investor education programmes and making available to them

necessary informative inputs.

A Governing Board having 20 directors is the apex body, which decides the

policies and regulates the affairs of the Exchange. The Governing Board consists

of 9 elected directors, who are from the broking community (one third of them

retire ever year by rotation), three SEBI nominees, six public representatives and


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an Executive Director & Chief Executive Officer and a Chief Operating Officer.

The Executive Director as the Chief Executive Officer is responsible for the day-

to-day administration of the Exchange and he is assisted by the Chief Operating

Officer and other Heads of Departments.

The Exchange has inserted new Rule No.126 A in its Rules, Bye-laws &

Regulations pertaining to constitution of the Executive Committee of the

Exchange. Accordingly, an Executive Committee, consisting of three elected

directors, three SEBI nominees or public representatives, Executive Director &

CEO and Chief Operating Officer has been constituted. The Committee considers

judicial & quasi matters in which the Governing Board has powers as an

Appellate Authority, matters regarding annulment of transactions, admission,

continuance and suspension of member-brokers, declaration of a member-broker

as defaulter, norms, procedures and other matters relating to arbitration, fees,

deposits, margins and other monies payable by the member-brokers to the

Exchange, etc.


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The average daily turnover of the Exchange during the financial year

2000-2001 (April-March), was Rs.3984.19 crores and the average numberof daily trades was 5.69 lakhs.

The average daily turnover of the Exchange in the subsequent two

financial years, i.e., 2001-02 & 2002-03, has declined considerably to Rs.

1248.15 crores and Rs. 1251.29 crores respectively.

The average number of daily trades recorded during 2001-02 and 2002-03

numbered 5.17 lakhs and 5.63 lakhs respectively.

The average daily turnover and average number of daily trades during the

quarter April-June 2003 were Rs. 1101.05 crores and 5.70 lakhs respectively.

The ban on all deferral products like Borrowing & Lending of Securities Scheme

(BLESS) and Automated Lending & Borrowing Mechanism (ALBM) in the Indian

capital markets by SEBI w.e.f. July 2, 2001, abolition of account period

settlements, introduction of Compulsory Rolling Settlements in all scrips traded

on the Exchanges w.e.f. December 31, 2001, etc. have adversely impacted the

liquidity in the market and consequently there is a considerable decline in the

average daily turnover at the Exchange as reflected in above statistics.


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Dematerialization is the process by which the physical securities are converted in

electronic balances in the clients account maintained with a depository

participant. The process of demat can be understood with the help of the

following chart:

I) Client submits the DRF & physical certificates to DP. DP checks if the

securities are available for demat. Client defaces the certificate by

stamping Surrendered for Dematerialization . DP punches two holes on

the name of the company and draws two parallel lines across the face of

the certificate.

II) DP enters the demat request in his system to be sent to NSDL. DP

dispatches the physical certificates along with the DRF to the R&T Agent.

III) NSDL records the details of the electronic request in the system forwards

the request to the R&T Agent.

INVESTOR D P

R & T

AGENT

N S D L


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IV) R&T Agent on receiving the physical documents and the electronic request

verifies and checks the same and confirms to NSDL.

V) NSDL credits the demat securities to the beneficiary account of the

investor and intimates the DP electronically. The DP issues a statement of

transaction to the client.

In case of a primary issuse, securities in electronic form can be obtained ab-

initio. The client applies in the application form along with his client ID and DP ID

details and the issuer credits the quantity allotted to him, through depository, in

his account with the DP. The process is as follows:

ISSUER

NSDL

DP

CLIENT


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The secondary market transfers are settled through a clearing corporation. Once

the trade is executed by the broker on the stock exchange, the seller gives a

delivery instruction to his DP to transfer securities to his brokers account.

The broker has to then complete the pay-in before the deadline prescribed by

the stock exchange. The broker moves the securities from his account to CC/CH

of the stock exchange concerned. The CC/CH gives pay-out and the securities

are transferred to the buying brokers account. The broker then gives delivery

instructions to his DP to transfer securities to the buyers account. The

movement of funds takes place outside the NSDL system.

The various steps in the transactions are:

I) Seller gives delivery instructions to his DP, to move securities from his

account to his broker.

II) Securities are transferred from brokers account to CC on the basis of a

delivery out instruction.

III) On pay-out, securities are moved from CC to buying brokers account.

Buying broker gives instructions and securities move to the buyers account .


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Derivatives: Future and Option

Trading

The term " " indicates that it has no independent value, i.e. its

value is entirely "derived" from the value of the underlying asset. The

underlying asset can be securities, commodities, bullion, currency, live

stock or anything else. In other words, Derivative means a forward,

future, option or any other hybrid contract of pre determined fixed

duration, linked for the purpose of contract fulfillment to the value of a

specified real or financial asset or to an index of securities.

With Securities Laws (Second Amendment) Act, 1999, Derivatives has

been included in the definition of Securities. The term Derivative has been

defined in Securities Contracts (Regulations) Act, as:-

A Derivative includes: -

a. a security derived from a debt instrument, share, loan, whether secured

or unsecured, risk instrument or contract for differences or any other form

of security;

b. a contract which derives its value from the prices, or index of prices, of

underlying securities;

In a nutshell, Derivatives is a product whose value is derived from the value of

one or more basic variables, called bases (underlying asset, index, or reference

rate), in a contractual manner. The underlying asset can be equity, forex,

commodity or any other asset.

For example, wheat farmers may wish to sell their harvest at a future date to

eliminate the risk of a change in prices by that date. Such a transaction is an


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example of a derivative. The price of this derivative is driven by the spot price of

wheat which is the underlying.

The most common derivative instruments traded at the stock exchange are: -

1) Futures: A futures contract is an agreement between two parties to buy or sell

an asset at a certain time in the future at a certain price. Futures contracts are

special types of forward contracts in the sense that the former are standardized

exchange-traded contracts.

2) Options: Options are of two types calls and puts. Calls give the buyer the

right but not the obligation to buy a given quantity of the underlying asset, at a

given price on or before a given future date. Puts give the buyer the right, but

not the obligation to sell a given quantity of the underlying asset at a given price

on or before a given date.


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Futures Contract means a legally binding agreement to buy or sell the underlying

security on a future date. Future contracts are the

organized/standardized contracts in terms of quantity, quality (in case of

commodities), delivery time and place for settlement on any date in

future. The contract expires on a pre-specified date which is called the

expiry date of the contract. On expiry, futures can be settled by delivery

of the underlying asset or cash. Cash settlement entails paying/receiving

the difference between the price at which the contract was entered and

the price of the underlying asset at the time of expiry of the contract.

Options Contract is a type of Derivatives Contract which gives the buyer/holder

of the contract the right (but not the obligation) to buy/sell the underlying asset

at a predetermined price within or at end of a specified period. The buyer /

holder of the option purchases the right from the seller/writer for a consideration

which is called the premium. The seller/writer of an option is obligated to settlethe option as per the terms of the contract when the buyer/holder exercises his

right. The underlying asset could include securities, an index of prices of

securities etc. Under Securities Contracts (Regulations) Act, 1956 options on

securities has been defined as "option in securities" means a contract for the

purchase or sale of a right to buy or sell, or a right to buy and sell, securities in

future, and includes a teji, a mandi, a teji mandi, a galli, a put, a call or a put

and call in securities, etc.;

A stock option is a contract, which gives the buyer the right, but not the

obligation, to buy or sell shares of the underlying security or index at a

specific price for a specified time. Stock option contracts generally are for


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100 shares of the underlying stock. There are two types of options, calls and

puts.

A call option gives the buyer the right, but not the obligation, to buy the

underlying security at a specific price for a specified time. The seller of a call

option has the obligation to sell the underlying security should the buyer

exercise his option to buy.

A put option gives the buyer the right, but not the obligation, to sell an

underlying security at a specified time. The seller of a put option has the

obligation to buy the underlying security should the buyer choose to exercise

his option to sell.

The buyer of the option is called Option Holder.

The seller of the option is called Option Writer.


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The premium is the price at which the contract premium trades. The

premium is the price of the option and is paid by the buyer to the writer or

seller, of the option. In return, the writer of the call option is obligated to

deliver the underlying security to an option buyer if the call is exercised or

buy the underlying security if the put is exercised. The writer keeps the

premium whether or not the option exercised.

The strike or exercise price of an option is the specified share price at which

the shares of stock can be bought or sold by the buyer if he exercise the

right to buy (in case of a call) or sell (in case of a put). In a nutshell the

fixed price at which the option holder can buy and/or sell the underlying

asset is called the exercise priceor strike price.

When the price of the underlying security is equal to the strike price, an option is at

the money (ATM). A call option is in the money (ITM) if the strike is less than the

market price is less than market price of the underlying security. A call is out of the

money (OTM) if the strike price is greater than the market price of the underlying

security. A put option is out of the money (OTM) if the strike price is less than the

market price of the underlying security.

At the Money Exercise price=Market Price Exercise price=Market Price

In the Money Exercise priceMarket Price

Out of the

Money

Exercise price>Market Price Exercise price


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Open interest refers to number of outstanding option contracts in the

exchange market or in a particular class or series.

When an investor buys an option he/she have the right to either purchase

or sell stock at a predetermined price (strike price). When and if he/she

choose to purchase or sell Stock at that predetermined price (strike price)

he/she is said to be exercising his/her right. When he/she sell an option

he/she now have the obligation to sell or purchase stock. He/she have or

may not have to fulfill that obligation. He/she is considered to be assigned

if he/she is being required to fulfill that obligation. Typically this occurs when

the option is in the money.

If he/she bought a call or put he/she would lose the Premium he/she paid

for the option plus whatever commissions and fees incurred on that

transaction. If he/she sold a call or a put and his/her option is in the money

he/she will most likely be assigned and he/she will have to sell or buy stock.

An investor can anticipate being assigned any time his/her option becomes

in the money as the buyer of the option may exercise to earn profit.

The last day upto which a buyer of an option can exercise his option. At NSE

option contract expires on last Thursday of the expiry month. At any

moment of time three types of contracts are traded, current month (expiring

on last Thursday of the current month). A new contract starts on next day of

expiry of the current month contract.

If an option that is exercisable on or before the expiry date is called

American optionand one that is exercisable only on expiry date, is called

European option.


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Therefore, in the case of American options the buyer has the right to

exercise the option at anytime on or before the expiry date. This request for

exercise is submitted to the Exchange, which randomly assigns the exercise

request to the sellers of the options, who are obligated to settle the terms of

the contract within a specified time frame.

As in the case of futures contracts, option contracts can be also be settled by

delivery of the underlying asset or cash. However, unlike futures cash

settlement in option contract entails paying/receiving the difference between

the strike price/exercise price and the price of the underlying asset either at

the time of expiry of the contract or at the time of exercise / assignment of

the option contract.

Options traded on an exchange are called exchange-traded options and

options not traded on an exchange are called over-the-counter options.

Futures contract based on an index i.e. the underlying asset is the index, are

known as Index Futures Contracts. For example, futures contract on NIFTY

Index and BSE-30 Index. These contracts derive their value from the value of the

underlying index.

Similarly, the options contracts, which are based on some index, are known as

Index options contract. However, unlike Index Futures, the buyer of IndexOption Contracts has only the right but not the obligation to buy / sell the

underlying index on expiry. Index Option Contracts are generally European Style

options i.e. they can be exercised / assigned only on the expiry date.


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An index, in turn derives its value from the prices of securities that constitute the

index and is created to represent the sentiments of the market as a whole or of a

particular sector of the economy (Sectoral Index).

By its very nature, index cannot be delivered on maturity of the Index futures or

Index option contracts therefore, these contracts are essentially cash settled on

Expiry.

The Standing Committee on Finance, a Parliamentary Committee, at the time of

recommending amendment to Securities Contract (Regulation) Act, 1956had recommended that the minimum contract size of derivative contracts

traded in the Indian Markets should be pegged not below Rs. 2 Lakhs.

Based on this recommendation SEBI has specified that the value of a

derivative contract should not be less than Rs. 2 Lakh at the time of

introducing the contract in the market.

Lot size refers to number of underlying securities in one contract. Additionally,

for stock specific derivative contracts SEBI has specified that the lot size of the

underlying individual security should be in multiples of 100 and fractions, if any,

should be rounded of to the next higher multiple of 100. This requirement of

SEBI coupled with the requirement of minimum contract size forms the basis of

arriving at the lot size of a contract (See Annexure-1).

For example, if shares of XYZ Ltd are quoted at Rs.1000 each and the minimum

contract size is Rs.2 lacs, then the lot size for that particular scrips stands to be

200000/1000 = 200 shares i.e. one contract in XYZ Ltd. covers 200 shares.


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Derivative trading in India takes can place either on a separate and independent

Derivative Exchange or on a separate segment of an existing Stock Exchange.

Derivative Exchange/Segment function as a Self-Regulatory Organization (SRO)

and SEBI acts as the oversight regulator. The clearing & settlement of all trades

on the Derivative Exchange/Segment would have to be through a Clearing

Corporation/House, which is independent in governance and membership from

the Derivative Exchange/Segment.


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Trading Terminal for Future & Option


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In this continuously changing business environment managing risks has become

an inevitable part of any finance related organisation from Banking to Share-broking.

Risk Management has gained a lot of importance in the last half decade. With

risk managers handling risks from Rs. 20 million to Rs. 200 million its absolutely

essential for Indiabulls to understand the role of Risk Management in their

organisation.

Since managing market risks on client positions is critical to their business their

in-house technology team of engineers has designed the Risk ManagementSystem around real time technology requiring minimal human intervention. The

PIB Software has a risk management logic built into it that continuously marks to

market the clients position & doesnt allow the client to take a fresh position

beyond the stipulated limits. This risk management logic takes into account all

the assets of the client (cash & shares), updated real time, lying with us to get

an allowable exposure value. Margin call alerts are automatically generated &

relayed to the client & the administrators from the system.For the other part of the business, the back-office system provides the

centralized controls & risk management team with all information for generating

margin calls & managing risk of the client. CTCL & NEAT softwares have been

installed at branches to manage risk at the time of order entry.


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Indiabulls Financial Services Ltd. acts as a NBFC to all clients of Indiabulls

Securities Ltd. providing funding to all its clients against shares and cash balance

available with them thereby providing them ample opportunity to earn that extra

amount of profit in a positive market environment.

The RMS Dept. of Indiabulls has carefully bifurcated companies listed in the

exchange based on their performance & liquidity in the market into two

categories viz.

1) A Category Scrips where we provide margin funding to the clients.

2) Z Category Scrips where we provide no margin funding to the clients.

The list of scrips provided for funding are subject to changed from time to timebased on the performance & liquidity of the co. in the stock market.

A link to the list of these scrips is available at the website and also at the

PowerIndiabullsAdmin & Client Terminals.

More than 314 scrips in this category In order to make a distinction between a

frequent Investor and an infrequent investor, Indiabulls has provided special

limits to those clients who demand extra exposure and who give a high amount

of turnover in order to encourage them to trade. (see Financial Agreement)The infrequent investor comes under or 3-Times exposure limits which is

calculated as under: - (the limit is for delivery trade)

Where, L1 = Max. Limit Available for Trading in A Category Scrips

L2 = Max. Limit Available for Trading in Z Category Scrips

CB = Cash Balance in the Clients AccountS1 = Total Market Value of A Category Scrips

S2 = Total Market Value of Z Category Scrips

S3 = Market Value of sold A Category Scrips not lying with Indiabulls

S4 = Market Value of sold Z Category Scrips not lying with Indiabulls


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Scrips lying in Demat A/c. of Indiabulls are not given any exposure unless

transferred to Margin A/c.

Incase of derivatives, Indiabulls provides no margin funding instead a limit to the

extent of the amount available for buying Z Category shares is available for

trading.

For example: if a client has purchases a futures contract , Indiabulls provides 0%

limit but instead charges him 100% margin to trade further in A or Z Category

shares. That means if the client has bought futures contract worth Rs. 10,000/-

no amount would be considered as limit for buying any more shares either of A

or Z Category or any F&O contracts and he would have to shell out more funds

to buy any shares or F&O contracts. (i.e. 10,000 / 1)

If one looks at the net exposure report one would realise that total available limit

to trade in A Category shares is 3-times or 4-times that of MARGIN

REQUIREMENT in F&O segment.

As the most popular phrase in the business world goes Time is Money it applies

very aptly to the working of the Stock Market where every minute can translate

into monetary gains or losses. It is in this fast paced & volatile market that

provides ample opportunity for making gains in the short run.

In order to enable their clients to take advantage of these short-term

opportunities and maximize their gains, we have provided limits and exposures

for Intra-settlement and Delivery Trading in their PowerIndiabullsSoftware.

In the PIB terminal or the browser based terminal, at the time of order entry, the

client would have to specify whether the order being placed is for Intra-

settlement trade or Delivery trade.


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is the trade which is done with the intension of holding the scrip

for investment purposes. Normally a client buys a particular scrip on delivery

basis if he expects the price of the share to go up in the near or distant future.

The amount of brokerage generally charged for this kind of transaction is 0.50%

on the total turnover.

The exposure provided for this kind of trade is mentioned in the earlier chapter

of Limit Calculations (for illustration refer to Slide nos. 9 & 10 for 3T Clients and

Slide nos. 14 & 15 for 4T Clients). The client can even short-sell the shares if he

wishes to but he would be charged 150% margin against A Category Shares

and 200% margin incase of Z Category shares.

means that the shares which are bought

or sold with the intension of buying or selling them on the same day. This kind of

trade is done with the intension of speculation. The scrips could be either bought

earlier and sold later or sold earlier and bought later. The amount of brokerage

generally charged for this kind of transaction is 0.10% of the total turnover of

Intraday trade.The exposure provided for this kind of trade is 2 times that of

delivery trade in A Category as well as Z# Category shares.

An intra-settlement trade or delivery trade can be done by choosing theappropriate option from the drop down combo box on the Browser based

Terminal or the PowerIndiabullsAdmin or Client Terminal.

Only selected scrips are traded in intraday in Z Category group.

When an investor feels that due to certain market conditions the price of

particular scrip is going to fall he can short-sell the shares at a high price and

buy them again when the price is much lower than before. This gap between thesale price and the purchase price of the share after deducting brokerage, sales

tax and turnover tax would be the gains which the investor can make. Short-

selling could be done in Intra-settlement as well as Delivery trading.


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In order to Short-sell the user would have to choose a particular scrip by clicking

on it, then he can either right click and choose Sell Now or Press Function key

12 or the minus ( - ) sign from the number pad keys and key in the details of the

quantity, price and Intra-settlement or Delivery Trade. If it is Delivery Trade the

investor would presented with 3 options viz. Shares Not With Indiabulls, Sell

From Margin Only & Sell From Margin & DP

Incase of derivatives segment, the underlying instrument could be either bought

or sold. There is no concept of Short-Selling in Derivatives Segment.

Incase of Futures contracts, if the client is bearish he can sell his contract earlier

during the month and choose to buy it later at a lower price. The difference in

price would be the gain for the client.

Incase of Options contracts, the client has an option of a Call or Put option. He

can either take a call option if he bullish and expects the price to appreciate or

take a put option if he bearish and expects the price to fall.

In today's world of rising inflationary prices & increasing costs a penny saved is

a penny earned". This phrase has not only a lot of relevance to the urban middle

class consumer but it is also important in understand the working of stock

exchange whenever there is a sudden fall or rise in the prices of the scrips

leading to high volatility.

A stop loss order is generally placed in order to minimize the loss against such

abnormal market conditions. When a purchase or sale position is taken in the

market it is always recommended that a trader places orders with a reasonable

margin of stop loss in order to avoid heavy losses in the market 'coz in today's

times a well-educated investor is a smart investor. Screen Shot of a buy order

being placed along with stop loss during mkt hours.


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Incase of Stop-Loss order for buy positions, a client would have to make a

decision whether he expects the price to show some resistance beyond a certain

price level. If yes, he could place a stop-loss order and the trade would be

executed only if the price goes beyond the stop-loss price.

For example:- If Mr. X feels that BIOCON (spot price Rs. 490) is worth buying

only above Rs. 500/- he can place a stop loss of Rs. 495/- and purchase of Rs.

500/-. This means that only if the share price of BIOCON surpasses Rs. 495/- it

would be considered for trade and if it reached Rs. 500/- the shares would be

bought. Screen Shot of a sell order being placed along with stop loss during

market hours.

Incase of Stop-Loss orders for Sell Positions, a client could place a stop-loss

order for his buy position taken and can get his exposure released against earlier

positions taken. For a buy positions taken, if a sell slide market stop loss order is

placed then it is treated as a square off of the position at a price which is 5%

below the specified trigger price.

For example- if 1 share is bought at Rs 100 and a sell stop loss order at market

with trigger price of 95 is placed then only 4* (100-90) =40 rupees are blocked

and 60 are released.

To trade in derivatives segment, the client should first add the particular F&O

scrip by pressing the shift & insert key together. After choosing the required F&O

contract (the contract has to be highlighted) the client can either use plus + key

(for buy) or minus - key (for sell) from the number pad or press Function Key

11 for buy or Function Key 12 for sell.

Incase of Derivatives Segment, the concept of stop-loss is exactly the same as it

is in equity. The only difference is that in equity the field name specified is Stop


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Loss whereas the field name specified in derivatives segment is Trigger Price.

Screen shot of order being placed in F&O segment along with a stop-loss.

Every area of business has certain kinds of limitations or restrictions and

although Indiabulls has provided exposures and limits for their clients it has to

monitor these clients so that they dont exceed the limits and violate SEBI rules

and regulations.

Margin Calls are reminders sent by the Risk Management team to the Client or

the appropriate Client Relationship Managers to reduce their clients position

incase if their clients have taken any margin or loan from Indiabulls to carry

his\her position to the next day. Generally, if a client takes margin from

Indiabulls he would be in Margin Call 1, but depending on the amount borrowed

the client could possibly be in Margin Call 2, Margin Call 3, or Square-up Call.

The formula for computing Margin Call is as follows: -

Cash Remaining*100 / MLP Stocks

Cash Remaining is calculated on real time basis which means that it is the

current position at any given point of time (after last pay-in payout) depicting the

amount remaining of the client up till the last trade initiated by the client on that

given day. Cash Remaining is usually not displayed in the PIB software and is

calculated using the FOCUS software used by the Risk Management Team.

Incase, if any trade is initiated after the last pay-in payout or any amount is

deposited in the clients account it will be reflected in Cash Remaining.

MLP Stocks is the total value of the Margin Lending Product or A Category

shares held by the client after the last pay-in payout. This also includes any

shares bought by the client on the day of trade.

The percentage computed after using the given formula determines in which

margin call the client comes under.


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Margin Call 1 Squared Off Alert sent to clients

Margin Call 2 60% - 69.99% Alert sent to clients

Margin Call 3 70% - 79.99% Alert sent to client & their

respective RMs

Square-up Call 80% and above Alert sent to client & their

respective RMs to reduce

position immediately

Squared Off 80% and above Position Squared Off by

RMS Dept.

Margin Calls are of 2 types viz.

1) Where the risk management team monitors clients on real time basis during

market hours and sends margin call alerts to their respective client relationship

managers.

2) Where the risk management team runs the EOD (End Of Day) Process,

computes the limits and sends margin call alerts to the clients and sends a report

to their respective client relationship managers.

And in the end there were none this famous line taken from one of Agatha

Christies book briefly describes that if a client has taken a buy or sell position in

intraday he has to square-off his position or transfer his position to delivery else

the square-up process run at 3.15 p.m. would eventually square-off the clients

intraday portfolio (to leave no shares in client in intra-settlement).

Square-up process means a trade to counter the previous trade of a client forparticular scrip in intraday which was entered earlier during the day. In square-

up process shares bought in intraday are sold and vice-versa. During the square-

up process a client is not allowed to take any intraday positions and all

outstanding intraday positions are blocked.


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Indiabulls is India's leading retail financial services company with 135 locations

spread across 95 cities. While their size and strong balance sheet allow them to

provide their clients with varied products and services at very attractive prices,

their over 750 Client Relationship Managers are dedicated to serving their clients

unique needs.

Indiabulls is lead by a highly regarded management team that has invested

crores of rupees into a world class Infrastructure that provides their clients with

real-time service & 24/7 access to all information and products. Their flagship

offers real-time prices, detailed data and

news, intelligent analytics, and electronic trading capabilities, right at clients

finger-tips. This powerful technology is complemented by their knowledgeable

and customer focused Relationship Managers.

Indiabulls offers a full range of financial services and products ranging from

Equities to Insurance to enhance clients wealth and hence, achieve their financial


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goals.

Indiabulls' Relationship Managers are available to help with clients financial

planning and investment needs. To provide the highest possible quality of

service, Indiabulls provides full access to all products and services through multi-

channels.

Comprehensive services for independent investors,

active traders & Non-Resident Indians.

research on 401+ companies updateddaily.

Value added services for seamless delivery.

Take care of your life while you take care of business.

Their Retail Equity Business caters to the needs of individual Indian and Non-

Resident Indian (NRI) investors. Indiabulls offers broker assisted trade

execution, automated online investing and access to all IPO's.

Through various types of brokerage accounts, Indiabulls offers the purchase and

sale of securities which includes Equity, Derivatives and Commodities

Instruments listed on National Stock Exchange of India Ltd (NSEIL), The Stock

Exchange, Mumbai (BSE) and NCDEX.

Indiabulls is providing following investors services:

- Comprehensive services including

research and investing guidance for independent investors.


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- Indiabulls is dedicated to empower Active Traders

through personal service and advanced trading technology.

- With an extensive

range of investment products, a customer will discover an unwavering

commitment to helping him/her invest in India.


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Building and maintaining clients ideal portfolio demands objective, dependable

information. Indiabulls Equity AnalysisTM helps satisfy that need by rating stocks

based on carefully selected, fact-based measures. And because they are not

focused on investment banking, they don't have the same conflicts of interest as

traditional brokerage firms. This objectivity is only one:

The Indiabulls Equity AnalysisTM model attempts to gauge investor expectations,

since stock prices tend to move in the same direction as changes in investorexpectations.

Stocks with low and potentially improving investor expectations tend to

receive A or B ratings

Stocks with high and potentially falling investor expectations tend to

receive D or E ratings

Stocks lying in-between the investor expectations tend to receive C ratings

Over the next 12 months, A-rated stocks have a return outlook of stronglyoutperforming the market while E-rated stocks have a return outlook of strongly

underperforming the market

Indiabulls' systematic approach is dependent on the accuracy of financial data

provided by third parties. Indiabulls Equity AnalysisTM may not capture more

subjective, qualitative influences on return and risk, such as management

changes and pending lawsuits.Indiabulls Equity AnalysisTM also do not reflect the possible impact of late-

breaking news since the ratings are updated daily. Thus, it is important to

conduct additional research prior to making a trading decision.


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Indiabulls is a depository participant with the National Securities Depository

Limited and Central Depository Services (India) Limited for trading and

settlement of dematerialized shares. Indiabulls performs clearing services for all

securities transactions through its accounts. They offer depository services to

create a seamless transaction platform execute trades through Indiabulls

Securities and settle these transactions through the Indiabulls Depository

Services. Indiabulls Depository Services is part of their value added services for

their clients that create multiple interfaces with the client and provide for a

solution that takes care of all their needs.


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When it comes to business, they are right up there. Taking all those split second

decisions, avoiding pitfalls and making sure clients money works hard for them.

But the business of life requires just as much attention and probably even more.

That's they are proud to bring to market an offer exclusively for their clients. As

a part of theri endeavor to provide their clients with world-class products and

services, Indiabulls gives them the opportunity to avail of the whole range of

Birla Sunlife Insurance Products through the Indiabulls network of 750

Relationship Managers over 135 locations nationwide. This means, they can take

care of life, while taking care of business.


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The client would have to send a demand draft or cheque of Rs.500 along with

this registration kit towards account opening fees. The account should activate in

about 7 working days after receipt of complete account opening kit (registration

kit) from the client.

A client can also opt to open a net enabled Bank Account with Indiabulls.

Indiabulls have net banking tie ups with IDBI bank, UTI bank, HDFC Bank, OBC

and Citibank and a client can make use of their payment gateways to effect

instant/online fund transfer between his (clients) Trading Account and his Bank

Account.

The brokerage charges applicable are as below:

0.5% for trades that result into delivery

0.1% for intra-settlement trades for either leg of the transaction

This is subject to 5 paise per share in case of intra-settlement trade and

10 paise per share in case of trades resulting into delivery. (minimum

brokerage for delivery trades below Rs. 3600/-, is Eighteen Rupees per

scrip).

In addition to the above a client will have to pay the following taxes:

Turnover tax: Rs. 600 per Crore [variable charge]

Security Transaction Tax: Rs.75 per Lakh [fixed charge]

Service tax: 10.20% on Brokerage (10% Service Tax + 2% Surcharge on Service

Tax) [fixed charge]


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Indiabulls Depository Services

Indiabulls is a depository participant with the National Securities Depository

Limited and Central Depository Services (India) Limited for trading and

settlement of dematerialised shares. Indiabulls performs clearing services for all

securities transactions through its accounts. We offer depository services to

create a seamless transaction platform execute trades through Indiabulls

Securities and settle these transactions through the Indiabulls Depository

Services. Indiabulls Depository Services is part of our value added services for

our clients that create multiple interfaces with the client and provide for a solution

that takes care of all your needs.

SCHEDULE OF CHARGES (NSDL-DPID : IN302236)Charge Head Charges

Account with POA Account withoutPOA

Stamp Paper Charges Rs.200/- Rs.100/-AMC Nil Rs.250/-Custody Charges Nil NilTransaction ChargesBuy (Market / Off-Market) Transfers

Nil Nil

Transaction ChargesSell (Market / Off-Market) Transfers

Rs. 17/- perTransaction Rs. 17/- perTransaction

Failed Inst. Nil Rs.20/- perinstruction.

Pledge Creation /Confirmation /Closure/Invocation

Rs.25/- perTransaction

Rs.25/- perTransaction

D'MAT Re.1/- per certificate(max Rs.250 /-)+Rs.25 courier charges

Rs.3/- per certificate(max Rs.250 /-)+Rs.25 courier charges

D'MAT Rejections Rs.20 per rejection +Rs.25 courier

Rs.20 per rejection +Rs.25 courier

Re'mat Charges Rs.15 request or0.02% whichever ishigher.

Rs.15 request or0.02% whichever ishigher.

Delivery InstructionBook

Nil Rs.10/-No charges for firstbook.


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Fax Indemnity(Optional)

N.A. Actual

CHARGES ON NON PAYMENT OF DUES :Penalty and InterestCharges

A penalty of 2% per month on the valueoutstanding on the bill after one month from

the due date.Non-Payment of billafter 30 days from thedue date of thepayment

The depository services for the account will betemporarily withdrawn. The renewal chargesfor resuming the depository operations will beRs.100 per account.

SCHEDULE OF CHARGES (CDSL) DP Id: 12029900Charge Head Charges

Account with POA Account withoutPOA

Stamp Paper Charges Rs.200/- Rs.100/-AMC Nil Rs.250/-

Custody Charges Nil NilTransaction ChargesBuy (Market / Off-Market) Transfers

Nil Nil

Transaction ChargesSell (Market / Off-Market) Transfers

Rs. 17/- perTransaction

Rs. 17/- perTransaction

Failed Inst. Nil Rs.20/- perinstruction.

Pledge Creation /

Confirmation /Closure/Invocation

Rs.25/- per

Transaction

Rs.25/- per

Transaction

D'MAT Re.1/- per certificate(max Rs.250 /-)+Rs.25 courier charges

Rs.3/- per certificate(max Rs.250 /-)+Rs.25 courier charges

D'MAT Rejections Rs.20 per rejection +Rs.25 courier

Rs.20 per rejection +Rs.25 courier

Re'mat Charges Rs.15 request or0.02% whichever ishigher.

Rs.15 request or0.02% whichever ishigher.

Delivery Instruction

Book

Nil Rs.10/-

No charges for firstbook.

Fax Indemnity(Optional)

N.A. Actual

CHARGES ON NON PAYMENT OF DUES :Penalty and InterestCharges

A penalty of 2% per month on the valueoutstanding on the bill after one month fromthe due date.


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Non-Payment of billafter 30 days from thedue date of thepayment

The depository services for the account will betemporarily withdrawn. The renewal chargesfor resuming the depository operations will beRs.100 per account.

In case of delays in the payment of charges, the demat account will be

frozen for all operations till such time all dues are cleared subject to 30

days notice from the payment due date.

All instructions for transfer must be received in physical form from the

clients upto 4:00pm on

finance capital market n

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