Reforms and recent developments in Indian Secondary market:

Reforms and recent developments in Indian Secondary market:

Secondary market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange. Majority of the trading is done in the secondary market. Secondary market comprises of equity markets and the debt markets.

History:

The origin of the stock exchanges in India can be traced back to the later half of 19^th century. In 1956, the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act. The Bombay Stock Exchange developed the BSE SENSEX in 1986, giving the BSE a means to measure overall performance of the exchange. In 2000 the BSE used this index to open its derivatives market, trading SENSEX futures contracts. The National Stock Exchange of India was promoted by leading financial institutions under Government of India, and was incorporated in November 1992 as a tax-paying company. In April 1993, it was recognized as a stock exchange under the Securities Contracts Act, 1956. NSE commenced operations in the Wholesale Debt Market segment in June 1994. The Capital market segment of the NSE commenced operations in November 1994, while operations in the Derivatives segment commenced in June 2000. At present India have 23 stock exchanges.

Reforms and developments:

·        Till recent past floor trading took place in all the stock exchanges in India. In this system the trade takes place through open outcry system during the official trading hours. Trading posts are assigned for different securities where buy and sell activities of securities took place.

·        In 1994 NSE and OTCEI was set up with the screen based trading facility. After one year BSE introduced the screen based trading system. And after that more and more stock exchanges adopted screen based trading system.

·        In 1992 foreign institutions investors have been allowed to invest in India.

·        In 1993 private sector mutual funds have been allowed.

·        In 2001 Derivatives in the form of futures and options are introduced for trading and hedging purpose.

·        SEBI has made compulsory to all the intermediaries to register with it.

·        At present trader can trade through laptops, palmtops and mobile phones also.

·        The trading cycle has been shortened to T+2 from T+5 so that investor should not wait for sale proceeds of his investments.

·        At present almost 99% of the scrips are dematerliased. Almost all the traders are in the demat form.

·        Now balance sheet and prospectus of the company are available to the investors.

·        At present NAV has to be published.

·        Insider trading and unfair practices are strictly prohibited.

Conclusion:

SEBI has got still many future plans for secondary market in pipeline. The Central Registry of market intermediaries and professionals with unique identification number is under construction. And T+1 settlement is also in line. Structural consolidation, infrastructural improvements, product-innovation, refinement of regulations, and integrated surveillance are some of the future plans.