Vadodara Stock Exchange Ltd. 5z6p19

1 Vadodara Stock Exchange Ltd. PREFACE It is quite true that the world outside your home is many times different from what you have perceived. Similarly, the theoretical knowledge in the classroom may differ from the practical knowledge.

Firstly I would like to express my deepest and sincere gratitude towards the respected professors of MSU BBA who gave this opportunity to know that what is actually happening in the company.

I had prepared the project report on VADODARA STOCK EXCHANGE LTD. At Vadodara, this is a great privilege for me as a student of T.Y. B.B.A.

In the following pages, I have tried to the best of my ability to include the maximum information that i have obtained during my project at VADODARA STOCK EXCHANGE LTD. A sincere attempt has been made to explain the working of the VADODARA STOCK EXCHANGE LTD.

ACKNOWLEDGEMENT I hereby it the truth that during the project at VADODARA STOCK EXCHANGE LTD. Many known and unknown persons had helped us directly or indirectly by giving us maximum information. They had tried their level best in explaining the procedures of company. I feel highly obliged to Prof. JAGDISH THAKAR who gave me the opportunity to be prepared project report on VADODARA STOCK EXCHANGE LTD.

Finally I must thank MSU BBA to give me a chance to pursue the BBA program and I also feel highly obliged to our Director and to the professors of our collage.

With warm regards,

Ansari Mo Mustak Jannathusen TY BBA Roll no:-04

Place: - VADODARA Date:-

DECLARATION

This is to declare that the project report on the “VADODARA STOCK EXCHANGE LTD.” Is and original one and has not been submitted earlier to this university or any other institution for the fulfillment of the requirement of the curriculum of Bachelor of Business istration.

With warm regards,

Ansari Mo Mustak Jannathusen TY BBA Roll no:-04 Place: - VADODARA Date:-

GUIDE CERTIFICATE

THE MAHARAJA SAYAJIRAO UNIVERSITY OF BARODA B.B.A. COLLAGE ACKNOWLEDGEMENT

DATE:-

This is to certify that the project report on “VADODARA STOCK EXCHANGE LTD.” Has been conducted and completed by Mr. ANSRI MO MUSTAK JANNATHUSEN it is being submitted for the partial fulfillment of the requirements of the Degree of Bachelor of Business istration as per syllabus prescribed by THE MAHARAJA SAYAJIRAO UNIVERSITY OF BARODA. He has prepared this report during the academic year 2009-10 is appreciated.

GUIDE

(Prof. JAGDISH THAKAR)

EXECUTIVE SUMMERY

Indian stock markets are one of the oldest in Asia. Its history dates back to nearly 200 years ago. There are 23 Stock Exchanges across the country. Here I undertook this study to have a look on functioning of Stock Exchanges. And to persuade this purpose I selected Vadodara Stock Exchange as an model. With this study I have interacted with the officials of VSE and tried to understand

the functioning of Vadodara Stock Exchange and its

subsidiary VSE Stock Services Ltd. I have visited various departments of VSE and studied its functions. I have also analyzed financial condition of VSE and with ratio analysis I have compared its current financial condition with previous year. On the basis of above, I gave some suggestions that is to promote their strong points like low charges of DP services, to set up a marketing team for promotion, various steps should be taken to continue to exist as a RSE and other suggestions like to update their website regularly, upgrading systems and better utilization of asset.

1

2 Vadodara Stock Exchange Ltd.

STOCK EXCHANGE: AN INTRODUCTION An individual desires to invest whatever he has saved. The best financial derivates, which give a mammoth yield, are the stocks of corporate companies. In

order

to

bring liquidity these

instruments

are

traded

systematically in a Stock Exchange. In a Stock Exchange a person who wishes to sell his security is called a seller, and a person who is willing to buy the particular stock is called the buyer. The rate of stock depends on the simple Law of Demand and Supply. Stock Exchange is an organized secondary market where securities like shares, debentures of public companies. Government securities and bonds issued by municipalities, public corporations, utility undertakings, port trusts and such other local authorities are purchased and sold. Since buying and selling of different exchanges,

the

demand and

prices

types

of

securities

takes

place

in

stock

of particular securities reflect their relative

supply. The prices of individual

security

indicate

the

financial health of individual company. The share prices over a period are indicated as index of the financial status of an organization. Thus investor can take decision about the suitability of particular securities for investment in of safety, profitability and risk. Besides, he can change his decision when necessary as liquidity of investment is provided by easy transferability

of

securities through

the

stock

exchanges.

The

stock

exchange not only offers the best bids but also the following advantages: ·

One of the key advantages of stock exchanges is that they are an efficient medium for rising of resources and channeling savings from the general public by the way of issue of equity/debt capital by t stock companies which are listed on the stock exchanges.

·

The

second

main

benefit

is

the

wide-spread

dissemination

of

information and the need to disclose adequate information not only the quarterly or yearend financial results but also major events which have an impact on the working of the company.

2


History of stock exchange in India 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 scanty 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.

rapid development

The

1850's

witnessed

a

of commercial enterprise and brokerage

business attracted many men into the field and by 1860 the number of brokers increased to 60. In 1860-61 the American Civil War broke out and cotton supply from United States 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 and

established

in

Bombay,

the

"Native Share

Stock

Brokers' Association". In 1895, the Stock

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

3


VADODARA STOCK EXCHANGE LIMITED (VSEL) Introductio n Vadodara Stock Exchange Limited (hereinafter, referred as “the Company”, “the Exchange”, or “VSEL”), was established as a company limited by guarantee in 1990, but was subsequently converted into a company limited by shares in 2005. The main object of VSEL is to facilitate, assist, regulate and control the trade of business in securities and effectively serve the interest of the general public and the investors. Under the Provisions of Securities & Contracts (Regulation) Act, 1956, VSEL was accorded recognition by the Government of India on 5th January 1990 as Stock Exchange. VSEL is

also regulated and controlled by the

Securities & Exchange Board of India (SEBI), which is a statutory body established under the Securities & Exchange Board of India Act, 1992 . The operations of VSEL were shifted to its own, larger premises at, Fortune Tower, 1995.

in

the

year

Currently, VSEL has a network of 290 and about 484 companies are currently listed on the Exchange. Over the years, though there has been a decline in the listing of securities & subsequent trading operations on the Exchange, VSEL has diversified into Depository Participant (“DP”) operations, which presently has over 47,000 client s. It has also incorporated

a

subsidiary,

VSE

Stock

Services

Ltd.,

which

acquired

hip rights of BSE cash segment & NSE cash segment. VSSL currently has a network of 94 sub- brokers (who are of VSEL), dealing with over 33,000 clients, having a average daily turnover of Rs. 70

crores.

4


Brief History & Background VSEL is one of the several Regional Stock Exchanges in India. Earlier, all the Stock Exchanges f u n c t i o n e d u n d e r t h e f r a m e w o r k o f B o m b a y S e c u r i t i e s Contracts Act, 1925. The Securities Contracts (Regulations) Act, 1956 was enacted thereafter and all the stock exchanges within India were required to get recognition from the Ministry of Finance. Accordingly, VSEL received the recognition as Stock Exchange from the Government of India on 5th January 1990. Originally incorporated in 1990 as a company limited by guarantee, VSEL was later converted into a company limited by shares and a fresh certificate of incorporation was issued on 2nd September, 2005. VSEL went live on 17th July, 1996, marking a memorable event in its history and ing the stream of Indian Stock Exchanges having gone LIVE for electronic trading. CMC Ltd. had facilitated implementation of fully automated stock trading, settlement and clearing system. The Exchange installed VECTOR (Versatile Engine f or C e n t r a l i z e d T r a d i n g a n d On -line R e p or t i n g ), b u i lt a ro un d t he Central Trading System (CTS). All the brokers interacted with CTS through Brokers Work Station (BWS). The Market operations and surveillance were connected to the CTS through their work stations Operations Work Station (OWS) and Surveillance Work Station (SWS) respectively. In November 1999, SEBI issued a circular permitting the regional stock exchanges to acquire hip of NSE and BSE for facilitating stock broking activities and incorporation of a subsidiary company for this purpose. This lead to the birth of VSE Stock Services Ltd. (“VSSL”) (formerly VSE Securities Limited) as a subsidiary of VSEL.

5

6 Vadodara Stock Exchange Ltd. In July 2000, VSEL also commenced providing online, real-time Depository Participant (DP) services, of Central Depository Services Ltd. (CDSL), under the name VSE Clearing House.

Capital Structure The Issued, Subscribed and Paid-Up Share Capital of VSEL as on 31st March 2007 amounted to Rs. 29 lacs comprising of 290,000 equity shares of Rs. 10/- each. The Company had recently offered 11,60,000 equity shares of Rs 10/- each on Rights basis to its shareholders in the ratio of 4 equity shares for every 1 equity share held by each shareholder, aggregating to Rs.1,16,00,000/-. The said Rights issue was subscribed to the extent of 2.37 times. Consequent to the allotment of shares to the pursuant to the Rights issue, the paid-up equity share capital of the Company increased to Rs. 140.27 lacs comprising of 14,02,754 equity shares of Rs 10/- each; the allotment of 47,246 equity shares of Rs. 10/- each is kept in abeyance by the Company pending the compliance with the Demutualisation Scheme & SEBI approval, post which, the paid-up equity share capital will enhance to Rs. 145 lacs.

6


Member s VSEL has a vast network of 290 , of which there are 54 corporate and the balance 236 are individual . Presently there is no trading on the Exchange; the Trading are routing their business through the subsidiary of the Exchange – VSSL. Presently, 90 of VSEL also function as ed sub-brokers of VSSL. Further, the geographical dispersion of of VSEL is evident from the fact that nearly 100 are located at Mumbai.

C o rp o r a te M em bers 1 9 %

Individua l 8 1 %

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Governance istration

&

VSEL has a strong governance and istration mechanism, which encomes

a

right

balance

of

experts

with

highest

level

of

educational background, practicing professionals and independent experts in various fields of Financial Sector. The management and istration of VSEL’s operations are headed by the Managing Director and a team of Senior Management Professionals who are experts in the fields of Finance, istration, Personnel, Technology, Legal, and Education & Training. The Board of Directors of the Exchange comprises of Nine , of which, one is a SEBI Nominee and Five (including the Chairman) are Public Representatives, who are all eminent persons in the fields of Finance

& s, Education, Law, Capital Markets, Banking and other

related fields. The Managing Director

is

an experienced member of

Institute of Company Secretaries of India and Indian Institute of Bankers, and has over 20 years of experience in the field of Company Law, Secretarial matters, Corporate Laws and the experience of functioning

Securities Laws; he also has

as CEO of VSSL. There are two Member

Directors, who bring with them rich experience in Capital Market operations. The aforesaid composition of Board of Directors is in compliance with the Demutualisation Scheme, which restricts ’ representation in the Board to 25%. The E x c h a n g e

has

constituted

four

Statutory

Committees

-

D i s c i p l i n a r y Committee, Arbitration Committee, Defaults Committee and Investors Services Cell Committee. Apart from these Statutory Committees, it has also formed other Sub Committees to assist in the istration – Ethics Committee, Delisting Investment

Committee,

Committee

Audit and

Committee, hip

Committee. Besides, the Exchange has also formed three

Services

8

9 Vadodara Stock Exchange Ltd. special

purpose

committees

–

SEBI

Inspection

&

Compliance

Committee, Management Committee and Demutualisation Committee.

Existing Profile As

Business

mentioned earlier, VSEL

is

currently

engaged

in

providing

Depository Participant services to its clientele. In this regards, VSEL is ed under SEBI (Depositories & Participants) Regulations 1996 vide registration number IN-DP-CDSL-77-2000. A chart depicting the process flow for DP operations of VSEL is given in Annexure ‘E’. The Clearing House of VSEL, which carries out the DP operations, has witnessed sustained growth during the last few years, primarily on of the buoyancy in the

capital markets as well as competitive

services & rates offered by it. VSEL has continuously strived to improve upon the compliances and the indicators.

service

Active & Dormant

Total

50,000

50,000

40,000

40,000

30,000

30,000

20,000

20,000

10,000

10,000

0

0 2003-04

2004-05

2005-06 2007

2006-07 June

Active s Dormant s Total s

As on June 2007, VSEL had over 46,000 client s, increasing by almost four times in four years, from 11,126 in 2003-04.

Year

Total s

Active s

Dormant s

200304 200405 2005-

11,126 18,240 29,575 39,569 46,220

8,84 3 14,73 2 24,31

2,28 3 3,50 8 5,26


The primary source of revenue for the DP operations is the transaction charges; besides, the Company also earns revenues in form of annual maintenance

charges,

documentation

charges,

dematerialization

/

rematerialisation charges, etc. VSEL also provides a lot of other benefits & facilities to its clients such as display of ISIN numbers of listed companies, informing the clients about ISIN numbers of companies coming out with IPO (at the time of their initial listing),

investor

education,

investor

awareness,

assistance

to

the

customers in filling the instruction slips, executing bulk instructions with minimum hassles to the clients, etc. As a result of its constant endeavor to provide qualitative DP services at competitive rates, VSEL has, within a short span of time, built a sound reputation & image for itself and is able to easily survive in an intensely competitive environment, rubbing shoulders with several private DPs. The DP operations of VSEL have also been rated as largest ‘no-branch’ DP operations of CDSL in the State of Gujarat.

Investor Services Over

the

decades,

the

exchange

has

actively

focused

on

the

empowerment of investors in the market by providing information on the market through the investor’s services centers established by the Exchange. In addition to this, Investment Education/Training Center maintained by the Exchange plays a vital role in enhancing the knowledge base of the participants through seminars. The said Center is proposed to be made available to the corporate sector for conducting external seminars & conference as well in Future .

10

11 Vadodara Stock Exchange Ltd. With a view to the investors in resolving their grievances, Exchange has established an Investor Services Center

at

Vadodara.

The center co- ordinates with the investors, companies and the in resolving their problems and also offers them counseling services. The Investors Services Cell Committee comprising of Public Representatives, SEBI Nominees and oversee the functioning of the Cell and they are authorised to take appropriate steps for amicable settlement of the Grievances. The

Exchange

has

Information Center

established to

cater

to

well

equipped

the

varied

Library

and

information

Investor

needs

of

investors, corporates, and others. The center has a collection of wide range of books, periodicals, journals, annual reports, prospectus and

research

publications

relating

to

Capital

markets,

Circulars

&

Notifications issued by authorities are also available. Draft prospectus, offer documents and other related information are displayed regularly. The Exchange has set up an Investor Protection Fund

for providing

compensation to individual investors in case of default by a member of the Exchange. In case the member broker defaults in his obligation towards investors in respect of deals that took place through the trading system of the Exchange, then the concerned investors are compensated from this fund. VSEL’s

website

WWW.VSE-INDIA.COM

also provides

valuable

information

about the latest market commentary, research reports about companies, daily status of international markets,

a separate module for internet

trading, information about listed companies and brokers and sub brokers of the Exchange and its subsidiary.

11


Corporate Governance Report Corporate Governance is a process or set of systems and processes to ensure that a company is managed to suit the best interest of all its stakeholders. The Company does not matter

of

creating

checks and

view corporate governance as a

balances,

rather,

good

corporate

governance is about creating an out- performing

organization,

encoming

client

increasing

employee,

and

stakeholders’ satisfaction and creating shareholder value. In line with the spirit of the

corporate

governance standards,

principles

of transparency, ability, trusteeship and

integrity at the very core of its basic believes

that, it is

character.

the The

Company company

has firmly

the right of its stakeholders to have information

regarding company’s financial performance. The Company’s corporate governance philosophy is based on the principles of integrity, fairness, equity, transparency, ability and commitment to values. The Exchange, consequent upon notification of VSE (Corporatisation & Demutualization) Scheme, 2005 is required to attain 51% shareholding by the of public other than trading . Exchange is proactively making its best efforts to practice Corporate Governance in spirit. For the purpose of effective istration and to inculcate best practices various committees have been functional and majority representation is by Public & Shareholders Representatives. The details of the said committees are as follows:

12


Infrastructure Assets

&

VSEL owns a nine-storeyed (excluding basement as well as ground floor) building – Fortune Tower – having an aggregate area of 156,238 sq. ft. The said building

is

located

at Sayajigunj in Vadodara,

well-developed area surrounded establishments,

three

star

by

commercial

a

complexes

&

hotels, shopping complexes, & business

establishments, etc., complete with all basic infrastructure amenities & facilities. The said building is in vicinity of the Vadodara railway station & central bus stand and has good connectivity with the other parts of the city. The said building is used by VSEL for carrying out its operations and also houses the offices of several .

13


VSEL

also

owns

premises

easuring

4,183

sq.

ft.

at

Paradise

Complex, adjacent to Fortune Tower, at Sayajigunj. VSEL has invested substantially in developing & maintaining advanced technological systems for its operations. It has deployed CROSS, a DP back office software, which is developed and maintained by Acer E-solutions.

Personn el VSEL & VSSL have combined staff strength of 50 personnel, comprising of managerial & staff. Over the years, the staff of the Exchange and VSSL has acquired valuable skills, expertise and experience in securities market. The staff is led by highly qualified and skilled professionals who

have

comprises

rich experience of

a

mix

in

financial

markets.

The

staff

at

VSEL

of professionals, post-graduates, graduates, and

under-graduates. The average experience of the staff with VSEL / VSSL is 13-14 years, which highlights staff retention. INVESTOR AWARENESS PROGRAMMES Exchange

is

regularly

Market, Financial share

inviting

Services their

Experts

Sector

knowledge

in

the

field

andTaxation and

on

Securities

to

experience

with

the

brokers, sub brokers and the public at large. Programme on ‘Post Budget Analysis’ has been regular feature at the Exchange.

14

15 Vadodara Stock Exchange Ltd. INVESTOR TRUST

PROTECTION

FUND

SEBI, in order to compensate the legitimate investment claims against the defaulter member, issued comprehensive guidelines. In of the guidelines the Exchanges are required to create a separate trust and the istration of which to be vested with independent trustees distinct from Exchange. As you are aware, the Exchange has already setup “Vadodara Stock Exchange Limited Investor Protection Fund Trust”. The independent trustees are looking after management and istration of the trust since April, 2006 and also that a separate Balance been

prepared

for

the

current

Sheet year

has

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VSE STOCK SERVICES LTD. (VSSL) Brief History & Background VSSL, a subsidiary of VSEL, was incorporated in May 2000. It has acquired the hip rights of Cash Market (CM) segment of The Bombay Stock Exchange Ltd. and the CM Segment of The National Stock Exchange Ltd. It provides Trading platforms of these larger Stock Exchanges to the investors of the region, through a vast network of sub-brokers servicing such investors. VSSL commenced its operations on BSE in May 2000 and on the NSE in February 2005. VSSL was initially incorporated as a wholly owned subsidiary of VSEL. However, currently, VSEL is in the process of transferring 49% stake in VSSL to the of VSEL, after the completion of which, VSEL’s holding in VSSL will be 51%. The Issued, Subscribed and Paid-Up Share Capital of VSSL as on 31st March 2007 amounted to Rs. 400 lacs comprising of 40,000 equity shares of Rs. 1,000/- each. However, currently, VSSL is in the process of sub-dividing the equity share capital of VSSL into equity shares of face value of Rs. 10/each, consequent to which its share capital will comprise of 40,00,000 equity shares of Rs. 10/- each

16


Business Profile VSSL does not have any proprietary interest in trading and also does not deal in its own . As a regulatory & business policy, it only provides a trading platform to SEBI ed sub-brokers, who are also SEBIed brokers / of VSEL. VSSL operates through a network of 94 ed sub-brokers, of which 88 were active during the year 2006-07. The company operates a total of 429 terminals trading

of

BSE

and

35

terminals

of

NSE,

which

facilitates

/ investments by over 33,000 clients. It currently has an average

daily turnover of Rs. 70 crores. During the past few years, VSSL has witnessed tremendous increase in the business volumes and turnover: Trading Volume (Rs.) 30000

25127

25000 20000 15000 10000 5000

8250

9085

2003-04

2004-05

12183

13784

3999

0 2002-03

2005-06

2006-07

2007-08

The peak daily turnover of VSSL during the year 2006-07 was Rs 83 crores & recently crossed Rs. 100 crores. Around 10% of turnover is in delivery segment and balance 90% is in trading segment.

17

18 Vadodara Stock Exchange Ltd. The services provided by VSSL are as under: ü Trading at BSE & NSE Cash Segment ü Electronic Contract Notes ü Efficient Pay Out of Securities and Funds ü All Demat related Services ü Strong Risk Management Features ü Direct Billing of Clients ü Auto Pay In for VSSL clients having Demat s in VSE CDSL DP

IT Infrastructure VSSL has placed a great deal of emphasis on Information Technology to strengthen its functioning and performance of Online Trading Platform for BSE and upgrade

NSE

trading

its hardware,

operations. software

It

and

has

strived

networking

to

systems

continuously to

enhance

the quality and standard of services provided to its counterparts. VSSL uses ODINTM – Integrated: Multi-Exchange, Multi-Segment Front Office Trading

System.

ODIN

is

developed

and

maintained

by

Financial

Technologies (India) Limited, Mumbai. The major modules in ODIN are ü ODINTM – Integrated Manager ü ODINTM – Market Information Server ü ODINTM – EICON Server ü ODINTM – Integrated ü ODINTM – Integrated Trader Workstation ü ODINTM – Database ü ODINTM – IML Server ü ODINTM – Secondary Broadcast Server (SBS) ü ODINTM – Integrated Mini VSSL uses TRADE PLUS, a Back office software, which is developed and maintained by Acer E-Solutions, which is connected to the subbrokers through browser based software, TRADE NET.

18

19 Vadodara Stock Exchange Ltd. It has installed multiple Intel servers supplied and installed by multinational suppliers like HP / IBM. All software’s are running on WINDOWS Platform. Connection to BSE is through 128 Kbps Leased line, with VSAT serving as a back-up. It is connected to NSE through VSAT. VSSL has network of around 450 terminals, out of which, 275 are on LAN and balance 175 are on WAN connected through leased Line / ISDN / PSTN and VPN connected through Internet.

19


STRUCTURE OF VSEL BSE/NSE Member Broker Of BSE

VSEL VSSL DP

VSEL Have 94 Sub-Broker is also Member Of VSEL

VSE Stock Services Ltd Subsidiary Of VSEL & DP having 46,000 clients

BROKERS

CLIENTS

34,000 Clients Dealing Under 94 Sub-Brokers

Over the years, though there has been a decline in the listing of securities and trading operations on the Exchange, VSEL has diversified into Depository Participant (“DP”) operations, which presently has over 46,000 client s. It has also incorporated a subsidiary, VSE Stock Services Ltd. (“VSSL”), which acquired hip rights of BSE cash segment and NSE cash segment. In July 2000, VSEL also commenced providing online, real-time Depository Participant (DP) services, of Central Depository Services Ltd. (CDSL), under the name VSEL Clearing House.

20

ED AND CORPORATE OFFICE: RD

3

21

FLOOR, FORTUNE TOWER, SAYAJIGUNJ, VADODARA – 390 005

BOARD OF DIRECTORS BANKERS UTI BANK LTD. RACE COURSE BRANCH VADODARA – 390 007

DR. EDWIN G. MACWAN, CHAIRMAN SHRI VISHNUBHAI I. PATEL, TRADING MEMBER DIRECTOR SHRI KAMAL KISHORE NARIA, TRADING MEMBER DIRECTOR SHRI V.K.KHUBCHANDANI, SEBI NOMINEE DIRECTOR SHRI DEVESH A. PATHAK, PUBLIC INTEREST DIRECTOR DR. MAHESH K. THAKAR, PUBLIC INTEREST DIRECTOR SHRI SANJEEV S. SHAH, PUBLIC INTEREST DIRECTOR SHRI JAIDEEP VERMA, PUBLIC INTEREST DIRECTOR SHRI DIPAK RAVAL, MANAGING DIRECTOR

AUDITORS M/S. D. C. PARIKH AND CO. CHARTERED ANTS VADODARA – 390 005

21

Vadodara Stock Exchange Ltd.

ADVISORS: HARIBHAKTI MRI CORPORATE SERVICES PVT. LTD., MUMBAI


KEY MILESTONES OF Vadodara Stock Exchange Limited

Incorporation of VSEL Formation of Brokerage Subsidiary-VSE Stock Services Ltd Commencement of Trading on BSE cash segment Commencement of Online real time depository services Trading and settlement in Demate scripts Commencement of Trading on NSE cash segment Approval of Demutualization Scheme

22/01/1990 29/05/2000 29/05/2000 01/07/2000 2002 16/02/2005 15/09/2005

22


Brain Function Automation Department B

Veins & Vessels Banks

Heart Function

H

Department

K Right Hand BSE

Right Leg CDSL

Kidney Function Margin Left Hand NSE

Left Leg NSDL

23


Brain function

Automation department

The human brain is the sources of the conscious, cognitive mind. The mind is the set of cognitive process related to perception, interpretation, imagination, memories, and crucially language of which a person may or may not be aware. The brain regulates autonomic

processes related to

essential body functions such as respiration and heart beat, especially through the autonomic nervous system. Likewise automation department regulates the automatic process from brokers to exchange / exchange to brokers. Without automation stock exchange

cannot exist,

because

all

transaction

take

place

through

computerize network system. Automation work as intermediary of

sub-

brokers to member-brokers(VSE) / member-brokers to the BSE/NSE.

Heart function Department The

heart

is

a

specialized

muscle

that

contracts

regularly

and

continuously, pumping blood to the various parts of the body and the lungs. The pumping action is caused by a flow of electricity through the heart that repeats itself in a cycle. Like wise department works as a heart and pumps fund from brokers to BSE/NSE and BSE/NSE to brokers. Money is working like blood in human body. department works as a collection of cheques for payin and get issue the cheques for pay-out to the client or sub-brokers.

24


Kidney function department

Margin

Two kidneys are vital organs that perform many functions to keep blood clean and

chemically.

They are located near the middle of our back.

Kidneys are sophisticated reprocessing machine. Every day our kidney process about 200 quarts of blood to sift out about 2 quarts of west product and extra water. Likewise margin department’s function is like kidney. The main function of margin

department

is

to

collect

a

margin

for

NSE/BSE

pay-ins.

Without margin no physibility is possible. Margin department collects margin from various brokers for pay-ins to BSE/NSE. Few out of all brokers do fail to pay margin so their limit is decrease and in long-run of defaultment, there terminals also kept close for some time up to the settlement of margin.

Veins

and

Vessels

Banks Veins are flexible and acted its activities in extreme condition. The vein valves are necessary to keep blood flowing towards the heart, but they are also necessary to allow blood to flow against the force of gravity. The vein valves provide footholds for the blood as it climbs its way up. Blood vessels are hollow tubes that circulate our blood. Likewise banks also a perform the job of transferring funds from one place to another 24*7 for the easy settlement of the funds on both the ends ( viz BSE/NSE & brokers).

25


Two hands NSE

BSE

and

Our two hands are same but some task being assigned to them is different, still they work like competitor. Same as in the stock market BSE and NSE is same but competitor company work as two hands in mechanism of stock market. Each and every broker has terminals of NSE & BSE and they works on both.

Two legs NSDL

CDSL

and

A man can not stand or walk without their legs. Likewise stock market can not stand or walk without CDSL / NSDL. Two

autonomous

bodies

inter

dependent

for

transferring

securities,

and holding securities of each other. This depositories are able to provide various services to the investors and clearing member.

26


FUNCTIONS AND VARIOUS DEPARTMENT OF VSE Vadodara Stock Exchange and its subsidiary consist of various department enumerated below: 1. Settlement Department 2. Margin Department 3. Surveillance Department 4. Listing Department 5. Department 6. Automation Department 7. Personal Department 8. hip Departed 9. Central Depository (VSE Clearing House)

27


1. Settlement Department Settlement department mainly deals with those transactions, which have taken place during the course of the day and by member brokers. The transaction of securities of companies which have made arrangements for dematerialization of their securities are settled only in Dematerialized mode on T+2 on net basis, i.e. buy and sell position of a member broker in the same scrip are netted and the net quantity and value is required to be settled DAY ACTIVITY T= trading on BOLT and daily ing of statements showing details of transaction and margins at the end of each day. =ing of provisional securities and fund obligation statements by member-broker =6A/7A entry custodians.

by

the

member

T+1= confirmation of 6A/7A

broker/confirmation

by

the

data by the custodian up to 11:00 am.

ing of final securities and funds obligations statement by member – brokers. T+2= pay-in of funds and securities by 11:00 am and pay-out of funds and securities by 1:30 pm The member –brokers are required to submit the pay-in instructions for funds and securities to banks and depositories respectively at 11:00am T+3= auction 11:00am

on

BOLT

at

T+4= auction pay-in and pay-out of funds and securities by 12:00 noon and 1:30 respectively

pm

28

29 Vadodara Stock Exchange Ltd. The delivery order/receive order provides information like the script and quantity of securities to be delivered/received by the member broker through clearing house. The money statement provides script wise/item wise details of payment/receipts of monies by the member brokers in the settlement.

The securities, as per the delivery orders issued by the

exchange, are required to be delivered by the member broker to the Clearing House on the day designated for securites pay-in i.e. T+2 day. DEMAT PAY-IN As regard to CDSL, the member broker gives pay-in instruction to their respective DP’s. the securities are transferred by the DP’s to Clearing Member (CM) Principal . The member brokers are required to give confirmation to their DP’s, so that securities are processed towards pay-in obligation. FUNDS PAY-IN After the reconciliation of securities completed, the bank of member broker directly

maintained

with

9

clearing banks

are

debited through computerized posting for their fund

settlement obligation. Once the pay-in of securites and funds is completed, the Clearing Member arranges for the pay- out of securities and funds. SECURITIES PAYOUT Securites are credited by Clearing house in the pool of member broker. The exchange also provides facility to directly to the clients BO . Inter depository settlement takes place if transfer is there from one depository to another. In case of physicals securities, the receiving are required to collect the same from clearing house on Pay-out day.

29


FUNDS PAYOUT The bank of member brokers having pay out of funds are credited by the Clearing

House with the clearing bank on the same day. This

process is called as funds pay-out. if a

member fails to deliver the

securities, then the value of shares delivered short is recovered from him at standing/closing price of script on trading day. AUCTION An auction tender is issued by the exchange to the member broker informing them about the names of the script short or not delivered, quantity slated for auction and date and time of the auction session on the BOLT/the auction for the undelivered quantity is conducted on T+3 day between 11:00am and 12:00 noon for all the script’s under CRS except those in “Z” group and on “trade to trade” basis which are directly closed. In auction, the highest offer price is allowed up to close out rate of scrip and the lowest offer price be 20% below the closing price of the scrip on a day prior to day of auction i.e. pay-in day.

30


2. Margin Department VSE act as Exchange.

broker

to

Mumbai

Stock

Margin trading is trading with borrowed funds/securities. It is essentially a leveraging mechanism which enables investors to take exposure in the market over and above what is possible with their own resources. Corporate brokers with net worth of at least Rs 3 crores are eligible for providing margin-trading facility to their clients subject to their entering into an agreement to that effect. Before providing margin-trading facility to a client, the member and the client have been mandated to sign an agreement for this purpose in the format specified by SEBI. The facility of margin trading is available for Group 1 and those securities, which are offered in the initial public offers and meet the conditions for inclusion in the derivatives segment of the stock exchanges. For providing the margin trading facility, a broker may use his own funds or borrow from scheduled commercial banks or NBFCs regulated by the RBI. The “total exposure” of the broker towards the margin trading facility should not exceed the borrowed funds and 50% of his “net worth”. While providing the margin trading facility, the broker has to ensure that the exposure to a single client does not exceed 10% of the “total exposure” of the broker. Initial margin has been prescribed as 50% and the maintenance margin has been prescribed as 40%. In addition, a broker as to disclose to the stock exchange details on gross exposure including name of the client, unique number under the SEBI (central database of market participants) regulations, 2003, and name of the scrip. If the broker has borrowed funds for the purpose

of providing amount

margin-trading

facility,

the

name

of

the

lender

and

31

3 32 Vadodara Stock Exchange Ltd. borrowed should be disclosed latest by the next day. The stock exchange, in turn, has to disclose the scrip-wise gross outstanding in margin s with all brokers to the market. Such disclosure regarding margin trading done on any day shall be made available after the trading hours on the following day. There are following margin practice at VSE: ü Volume margin ü Loss/mark to market ü Volatility margin ü Scrip margin ü Intra day gross trading limit margin ü Net exposure margin

3. Surveillance Department One of the objectives of the Exchange is to promote and inculcate honorable and just practices of trade in securities transactions and to discourage malpractices. The Securites and Exchange Board of India (SEBI) had directed the separate

stock

exchange

Surveillance Department

in

August

1995

to

with

staff

exclusively

set

up

a

assigned

to

surveillance functions. The exchange has set up a separate SB to keep a close watch on price movement of scrip’s, like

price

rigging,

etc.,

monitor

detect

market

the member-broker’s

manipulations position

to

ensure that defaults do not occur. The SB monitors exposure of the on a daily basis. It also scrutinizes the prices and volumes of the scrip’s on a daily basis. As per the guidelines issued by SEBI, the exchanges are required to apply a daily Circuit Filter of 20% on all the scripts except on the script’s on which derivative products are available or are included in the indices on which derivative products are available. On these script’s exchange

has imposed

32

33 Vadodara Stock Exchange Ltd. dummy circuit filters to avoid punching error by , if any. The imposition of circuit filters on scripts ensures that the price of the scrip cannot move upward or downward beyond the limit set for a day. The large variation in the prices as well as the volumes of the script’s are scrutinized and appropriate actions are taken. The script’s, which reach new high or new low and companies, which have high turnover, are watched. The prices and volumes in the newly listed scripts are monitored. In case certain abnormalities are notices, then circuit filters are reduced to make it difficult for the price manipulators to increase or push down the prices of a script within a short period of time. The exchange imposes special margin in the scripts where it is suspected that there is an attempt to ramp up the prices by creating artificial volumes. The exchange imposes special margin in the scripts where it is suspected that there is an attempt to ramp up the prices by creating artificial volumes. The exchange also transfers the scripts for trading and settlement if a trade-to-trade basis would result into giving/taking delivery of shares on a gross level and no intra-day/settlement netting off/squaring off

facility

would

be

permitted. In cases where the abnormal movements continue despite the aforesaid measures, trading in the scrip is suspended. The exchange has developed an Online Real Time (OLRT) Surveillance System, which has

been

commissioned from July15, 1999. Under this

system, alerts are generated by the system online, in real time, based on certain preset parameters like the price and

volume

variation in

script’s, taking unduly large positions not commensurate with their financial positions or having concentrated positions in one or a few script’s etc. This system includes databases such as company profile, member’s profile and historical database member’s

of

turnover

and

price

movement

in

scripts,

33

34 Vadodara Stock Exchange Ltd. turnover, their pay-ion obligations, etc. the system generates alerts on the basis of pre-set parameters during the trading hours and corrective action based on further investigations is taken in such cases.

4. LISTING DEPARTMENT Listing department of VSE lists the securities of corporate bodies at the Exchange by making an agreement with the companies, which fulfills the and conditions as required by VSE. This agreement is prepared in order to secure the rights of investors and to control/guide the risk of investor to some extent. There are around 51 clauses in listing agreement that a company has to fulfill. Some of the mail clauses of listing agreement are clause 35, 41, 47 and 49. Clause pattern

31:

defines

shareholding

Clause 41: defines declaration and publication of unaudited result Clause 47: appointment of company secretary as a compliance officer Clause 49: corporate governance According to this agreement it is the duty of each company to inform VSE about any major decision which can affect the functioning of the company so that VSE can inform its member broker and in turn they can inform their respective clients who are investors in the company. Thus, the investors can decide upon whether to invest in the company or not and in this manner VSE controls/guides the risks of investors by informing them about the decision of the company in which they are investing.

34


5. s Department s department at VSE does not have a wide scope. But in general, its main activity is of handling monetary effects in cash and cheque for all companies i.e. ü Vadodara Stock Services Exchange Limited-Listing fee ü VSE Stock Services Limited-BOLT ü (hip card of Mumbai Stock Exchange purchased by VSSL is known as BOLT. ü VSE clearing/CDSL ü Activities of s department Ü Collection of cheque for pay-in and pay-out bills from and

depositing

the

same.

Pay-in

and

pay-out

rolling/regular and auction and settlement is

summary

of

inserted in PC and

cheques of are entered in pay- in slip. Thereafter it is deposited in bank and debit/credit take place in of member as per the transaction. ü Depositing cheque of listing fee, which is collected for hip card of VSE Ltd. ü

Calculating staff’s salary after considering leave, loan, advance salary, half day etc. of each employee.

ü

All

govt

formalities

in

monetary

are

programmed

and

calculated example income tax, municipal tax etc. ü Billing of any material purchased for these 3 companies. ü Calculating of monthly rent of BOLT terminals allotted to . ü Collection of maintenance charges from .

35


6. Automation Department Activities: ü VSE Ltd. has around 80 sub-brokers; their connectivity of terminals with Mumbai Stock Exchange is checked by Automation Department. ü Mumbai Stock Exchange has given equipment ‘VSAT’ to VSE, which is connected

to

IDU.

Through

IDU

automation

department

can

check connection of those who are sub-brokers of VSE securities Ltd. ü This dept solves problems occurring between VSAT and IDU. ü In each office of member there are 3 network connections and on each floor

there

is

1

HUB

room

is

connected

with

another.

Automation dept has to check and solve all problems related to HUB room. ü It has to check the file of transactions sent to them by Mumbai Stock Exchange everyday. ü

They have to prepare Data Cumulative of shares, which are transacted by sub-brokers by taking file from surveillance and entering the same in software.

ü They have to provide various information to other departments like data cumulative,

pay-in,

pay-out

billing

and

contracts

to

; pay- in/pay-out billing to s department ü Data regarding delivery of shares as per transaction to clearing house. ü Although VSE has its trading days from Tuesday to Monday but here only those are active who are sub-broker to it and who deal with Mumbai market, all other remaining are inactive.

36


7. Personnel Department They keep all the information of the employees. Functions: ü Man-power planning ü Recruitment ü Probation ü Promotion and transfer ü Training ü Performance appraisal system Exchange continues to focus on training needs of the employees. Efforts are directed toward

upgrading the knowledge, skills and attitude of

employee by deputing them to various workshops, seminars. Most of the staff have been trained for depository operations and are holding DP System Certification.

37


8. HIP DEPARTMENT:As we have seen that the Listing Department lists the securities of Corporate bodies at Department

VSE. Whereas

the

of

s individual persons as

VSE

hip

of VSE and issues them a hip card. The main activity of this dept. is of record and registration of the , Collecting turnover fee, Collecting audit reports and working as a middleman between SEBI and of VSE. At present there are 290 at VSE Individual

236

Corporate

54

TOTAL

290

Initially when VSE was established all the were selected after conducting an interview for them. 6 Directors, 1 Executive director and 1 Government nominee were in the interview . The criteria decided for a person to be a member of VSE are ·

AGE: 21 years

· QUALIFICATION : 10+2 (old SSC will also do) ·

NET WORTH : minimum 5 Lac

·

EXPERIENCE : 3 years in capital market

·

CERTIFICATES : No Objection Certificate of other stock exchange if he is a member of other stock exchange.

Minimum 3 years working as a member in a stock exchange is compulsory for multiple hip. A person can become member of all recognized stock exchanges in India but only after providing the NOC of other stock exchange. If any of these sell their hip card to other person then

this dept. s the name of other person at SEBI and transfer their name on

38

39 Vadodara Stock Exchange Ltd. the card after checking that whether he falls in the criteria for a member of VSE and no interview is conducted for him. In case if that person does not fall in the criteria to become a member of VSE than his hip card gets automatically canceled. SEBI has the right to cancel the hip card of any member due to any reason which SEBI feels satisfying. VSE has stopped issuing more hip cards and making more because at present these 307 are also not functioning properly as market has slow down. To fasten the business of the of VSE, VSE Securities Ltd. has become a member of The Mumbai Stock Exchange and so the of VSE are becoming sub-brokers of The Mumbai Stock Exchange so that they can have a wide scope for their business. Until now 80 such of VSE has become the sub-broker of

The Mumbai Stock Exchange to get some business even from Mumbai

market.

9. CLEARING HOUSE VSE has its own Clearing House known as VSE Clearing House. As the depositories are important intermediaries in the securities market that is scrip- less or moving towards such a state. The principle function of depository is to dematerialize securities and enable their transactions in book-entry

form. Dematerialization of securities occurs when securities

issued in physical form is securities

are credited

destroyed

into

and

an

equivalent

number

of

the beneficiary owner’s . All the

players have to be conversant with the rules and regulations as well as with

the

technology

for

processing.

The intermediaries in this system

have to play strictly by the rules. A depository established under the Depositories Act can provide any services connected securities

with

recording

of a l l o t m e n t of

in the

record

of

a depository. A

depository cannot directly open s and provide services to

39

40 Vadodara Stock Exchange Ltd. clients. Any person willing to avail of the services of the depository can do so by entering into an agreement with the depository through any of its Depository Participants. Depository (DP)

Participant

A Depository Participant is describing as an agent of the depository. They are the intermediaries between the depository and the investors. The relationship between the DPs

and the depository is governed by an

agreement under the Depository Act, 1996. In a strictly legal sense, a DP is an entity who is ed as such with SEBI under the provisions of SEBI Act. As per this Act, a DP can offer depository related services only after getting certificate of registration from SEBI.

40

VSE CLEARING HOUSE - VSEL

Counter 1

(1) Billing

Counter ll (All types Form & DIS)

Holding / Txn / Demat / General / IPO Inquiry

DIS ENTRY

Interaction with DIS BO

MISC

(3) DIS Accept System

(6) Modification Misc forms

(10) (11) Holding txn Demat IPO

(4) DRF Accept

(7) DIS Request Form verification

(11) Holding txn. Demat IPO

(14) Off Market

(19)

AOF Scan / System Bill Printing

(8) DIS Stamping issue

(12) AOF Entry

(15) Inter Depository

(17) DIS Authorized All segment &

(5) AOF Accept

(13) DRF Entry

(16) On Market

(18) DIS Authorized All Segment & Interaction With DIS BO

(20)

MAY I HELP YOU

Vadodara Stock Exchange Ltd.

DIS Maker / cheker

(3) Billing

41


CDSL Performs the following functions through DP ·

Enable the surrender and withdrawal of securities to and form the depository

·

Dematerialization and Rematerialisation.

·

Maintains investor holdings in the electronic form.

·

Effect settlement of securities traded on the exchanges.

·

Carries out settlement of trades not done on the stock exchange.(Offmarket trade)

·

Transfer of securities.

·

Pledging/unpledging of dematerialized securities.

·

Electronic credit in public offering of companies or corporation actions.

·

Receipt of non-cash corporate benefits like Bonus rights, etc. in electronic form.

·

Stock lending and Borrowing.

·

Freezing/locking of investor’s .

DEMATERIALISATION Introduction: ·

Dematerialization is the process by which a BO can get his physical securities

converted

into

electronic

form.

Pre-requisites

for

dematerialization are: ·

Investor should have a Demat with any DP of CDSL.

·

Securities to be dematerialized must have been itted in CDSL I.e. ISIN for the securities should be available in CDSL.

·

Investor should be the ed holder for the securities in the books of the company.

The BO submits a request to the DP in the Dematerialization Request Form (DRF) along with the certificates. The DP verifies the information on the DRF 42

43 Vadodara Stock Exchange Ltd. and physical certificates and enters the details in the system to set up a request electronically. The DP sends the physical documents to the concerned Issuer / RTA .if the issuer/RTA finds the DRF and certificates in order, it s CDSL as the ed holder of the securities and conform the DRN electronically to CDSL. On receiving such conformation, CDSL credits the BO . If the issuer / RTA reject all or some of the certificates in a Demat request then the same are sent back to the DP mentioning the rejection(s). DP will then ask the BO

to

rectify

the certificates again

the for

rejection

and

dematerialization

send under

a

fresh

Demat request.

Dematerialization Process 1 BO

DP

7 3

6

2

5 Issuer/RTA

4

CDSL

1) DRF with certificate

5) Conforms electronic request

2) Setup electronic request

6) Credit in the BO’s

3) DRF with Certificate

7) Access electronic request

4) Statement of holding

43

44 Vadodara Stock Exchange Ltd. REMATERIALIZATIO N Rematerialisation is the process of

converting

securities, held in a

Demat (i.e. electronic form) to physical form. A BO intending to convert the securities into

physical

form submits a remat request to

the DP in a Rematerialisation Request Form (RRF). DP verifies the information on the RRF and enters the details in the system to setup a

request electronically. The system generates a unique serial

number called as Rematerialisation Request Number (RRN), which can be used for future reference. The DP sends the RRF to the Concerned Issuer/ RTA. If the remat request is in order, the issuer/RTA approves the same and confirms the RRN electronically to CDSL. On receiving such confirmation, CDSL debits the BO . Physical certificates are sent by the Issuer / RTA directly to the investor. The process flow of a remat request is given below:

1

BO

DP 7

8

Issuer/RTA

3

6

5

CDSL

4 1) 2) 3) 4)

RRF with Certificate Setup electronic request RRF Accesses electronic request

5) confirms electronic request 6) Credit in the BO’s 7) Statement of holdings 8) Physical Certificate

2

44

45 Vadodara Stock Exchange Ltd. Off-Market Transaction Off-Market transaction can be used for transfer securities from one BO s to another BO . Both s are in CDSL. Both s may with same DP or different DPs. In off-market transactions the buyer or the receiving is not with a CH/CC. Following possible:

combination

of

off-market

transactions

·

BO to BO

·

BO to CM for pay-in

·

CM to BO for pay-out

·

CM to CM

are

On-Market Transaction ·

In on-market transaction receiving / buyer is always with CH/CC.

·

Investor buy / sell securities on the trading mechanism provided by the stock exchange through SEBI ed CM’s.

·

The day on which the trade is executed is called as the trading day or the “T” day. On receiving confirmation from the CM, of execution of the trade, the buyer BO has to deliver the funds to the CM and the seller BO has to deliver the securities to the CM. the CM delivers the funds and securities receive from BO to the CH/CC of the stock exchange before the stipulated time specified by the stock exchange.

·

The CH/CC of the stock exchange then delivers the securities to the buying CM’s and funds to the selling CM’s, who have executed trades on behalf of their clients.

45

46 Vadodara Stock Exchange Ltd. ·

This activity of the CH / CC of the stock exchange of delivering funds and securities to the respective sellers / buyers is known as “settlement of market trades”. The date on which settlement has taken place is known as “settlement date”.

·

The process of delivery of securities by the seller CM to the CH/CC for settlement is known as “pay-in of securities” and the process of delivery of securities by the CH / CC to the buyer CM is known as “pay-out of securities”.

·

Pay-in and pay-out of securities takes place at pre-determined timings decided by the stock exchanges.

Settlement of on-market trades is currently done on a T+2 basis i.e. settlement take place

on

2nd

working day after the trade has been

executed by the CM. settlement of funds effected by clearing banks and depository plays no role in this whereas settlement of securities in dematerialized form is effected through depository system.

46

47 Vadodara Stock Exchange Ltd. PLEDGE UNPLEDGE

AND

The depository act, 1996 permits the creation of pledge and Unpledge against securities, securities held in a depository can be pledged or Unpledge against a loan, credit, or such other facility availed by the beneficial ownEr of such securities. For this purpose, both the parties have to the agreement, i.e., the pledgor and pledgee must have a beneficiary with CDSL. However, both parties need not have their with the same DP. The nature of control securities

on

the

offered as collateral determines whether the

transaction is a pledge or Unpledge. If the lender (pledgee) has unilateral right (without reference to borrower) to appropriate the securities to his if the borrower (pledgor) defaults or otherwise, the transaction is called a pledge. If the lender needs concurrence of the borrower (pledgor) for

appropriating securities to his , the transaction is called

Unpledge.

CDSL Confirmation

Request

Confirmation

Pledgee’s DP

Confirmation

Request

Pledgor’s DP

Request

Request Agreement

Pledgee

Pledgor LOAN

47


· Agreement is signed between the pledgor and pledgee outside the CDSL system. ·

Pledgor gives a pledge creation request to his DP who enters it in the system. Securities are transferred from ‘free balances’ head to ‘pledged balances’ head in the pledgors .

·

The request reaches the Pledgee’s DP through the CDSL system. Pledgee is intimated by his DP.

· Pledgee gives a pledge confirmation to his DP who enters it in the system. Status of pledge instruction is changed to ‘pledged’. · Loan is given by pledgee to pledgor outside the CDSL.

FREEZE AND UNFREEZE OF Freezing is an action performed on a BO as a whole or individual ISIN balances held with in a BO to safeguard the balances present in the BO . Freezing represents temporary blocking of entire balance or part of balance in a BO as such. If the freeze is initiated by the BO then the BO will continue to get all the corporate action, cash / non cash benefits. If the freeze is initiated by DP / CDSL, The Issuer / RTA may choose to keep the benefits in abeyance. Multiple freezes can exist for the same since freeze can be initiated by BO/DP/CDSL. If freeze initiated by DP is released then the other freeze will still be active.

48


FINANCIAL CONDITION OF VSE COMPARED TO LAST YEAR. BALANCE SHEET AS AT 31ST MARCH 2008

49


PROFIT & LOSS FOR THE YEAR ENDED ON 31ST MARCH 2008.

50


RATIO ANALYSIS OF VSE LTD. SR.NO. RATIO 1. CURRENT RATIO: CURRENT ASSETS CURRENT LIABILITIES 2. DEBT EQUITY RATIO: DEBT EQUIT Y ASSETS: 3. RETURN ON TOTAL PAT *100 TOTAL ASSETS 4. RETURN ON CAPITAL EMPLOYED: PBDT *100 5. RETURNEQUITY+DEBT ON EQUITY: PAT *100 EQUITY+RESERVES & SURPLUS

2008 3.07

2007 1.81

0.28

0.39

1.77%

3.39%

69.35%

42.88%

4.37%

2.04%

ANALYSIS: Ø Current ratio of VSE Ltd. clearly shows high amount of unutilized current asset. Ø Debt equity ratio of VSE Ltd. shows better position in debt compared to equity of VSE Ltd. compared to last year. Ø Return on total asset ratio shows major decline compared to last year. Ø ROCE & ROE shows better position of VSE compared to last year.

51


SUGGESTION S PROMOTION OF STR ONG POINTS: Vadodara Stock Exchange should promote their strong points to compete with other broking firms. VSE has its own clearing house. They provide services through other brokers in three places apart from VSE like Anand, Bharuch, Surat. It has huge 63000 plus DP s but brokers for all of these is not VSE brokers. So VSE should target those s who have their s with other brokers. VSE has very low charges of DP services of VSE Clearing house compared to other DP

service providers. So they should undertake marketing

activities to promote such low charges. Many VSE brokers have DP s with other firms. So VSE should promote its DP services among VSE brokers. VSE should try to provide DP services to broking firms. Thus this can be a major source or revenue if efforts are made in this direction. As the charges are already less the distribution network of broking firms can be used to increase the base.

SET UP A MARK ETIN G TEAM: VSE should set up a marketing team for promotion of their strong points which we discussed above. Calcutta Stock Exchange already have a marketing team, so VSE should take cue from it and set up a marketing team.

52


STEPS TO BE TAKEN TO CONTINUE TO EXIST AS A RSE: Demutualised stock exchanges have usually listed on the stock exchange itself and regulatory conflicts have been addressed through specific provisions in the listing agreement. This will lead to better corporate governance. Due to the access to the national trading platform through the subsidiary route has reduced the incentive of VSE to trade in its own cash segment. So VSE should make the

efforts

shares which

to are

re-commence exclusively

listed

trading in on

the

exchange by ing with some other RSE and forming an alternative trading platform. After recommencing trading in its cash segment VSE should also diversify in the derivatives & commodities. Only being in equity isn’t going to work in the long run. In order to survive in the competitive market VSE should provide an electronic equities exchange for the shares listed on the exchange. It can also create a platform for book building for initial public offerings (IPOs). The exchange can try to create its own distinct identity once trading starts in its cash

segment. For instance, Nasdaq in US is renowned for

technology companies. Similarly,

AIM at London attracts SMEs from all

over the world. Thus they can study the pattern of transactions happening to create their own niche.

53

54 Vadodara Stock Exchange Ltd. OTHER SUGGESTIONS VSE should update their systems for more effective and speedy work. VSE should update its website more often. VSE has a hall on the ground floor of its building, which was used extensively for trading

during the “open-outcry” system but today,

the screen based trading has rendered it redundant. VSE currently rents it

for

commercial purposes like Employment Fairs and Art of Living

Seminars etc. But the fees charges are very nominal. Moreover the hall it rented hardly for round about 30-40 times a year. Thus VSE needs to use this asset more efficiently by raising the charges for use and by marketing it further to increase the frequency use.

of

54


REFERENCES Websites http://www.sebi.gov.in/corpo/vadodaraorder.html http://www.munothfinancial.com/stock_faq.php http://www.bseindia.com/about.asp http://www.bseindia.com/hist.pdf www.mayin.o rg/ajayshah/A/SEBI_RSEreport.pdf

Other References Information memorandum of VSE Annual Report of VSE Hooper, Vincent J., “A World of Regional Stock Exchanges”, May 2002.

55

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