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Regulatory Framework
The Indian Capital Market is governed by various Acts, Rules and Regulations (main on being mentioned herewith) and primarily supervised by the Securities and Exchange Board of India (SEBI) which came into being in 1988. SEBI supervises the role of the stock exchanges (like BSE, NSE, etc.) and the depositories (CDSL & NSDL) for the overall development of capital market environment in India and also monitors and regulate their activities. SEBI is responsible to the Government of India and comes under the direct preview and supervision of the Ministry of Finance.
  • Indian Contract Act, 1872
  • The Companies Act, 1956
  • Securities Contracts (Regulation) Act, 1956
  • Securities Contracts (Regulation) Rules, 1957
  • Securities and Exchange Board of India Act, 1992
  • SEBI (Stock Brokers & Sub-Brokers) Rules, 1992
  • SEBI (Stock Brokers & Sub-Brokers) Regulations, 1992
  • SEBI (Insider Trading) Regulations, 1992
  • SEBI (Prohibition of Fraudulent And Unfair Trade Practices Relating to Securities Markets Regulations, 1995
  • The Depositories Act, 1996
Trading Account Code
A client is required to sign the client registration requirement with the broker with whom he agrees to trade. Each Client is provided with a Unique Client Code wherein all his transactions of buy and sell of securities will be executed.
Right to trade
To trade in any segment, a client must have the right to trade in that particular segment. This right is received from the Exchange after signing the requisite documents along with the supporting documents as required by the regulatory authorities.
Derivatives Market
Derivative is a product whose value is derived from the value of one or more basic variables called bases in a contractual manner. The Futures & Options market being a highly leveraged market, it is of utmost importance that rules governing Margins and MTM collections are not violated.

Towards this end NSE Risk Management System has a real time system for calculation of margins and exposure on positions taken by clients and Clearing

Product Offer in Derivatives:
  1. Futures on Individual Securities
  2. Options on Individual Securities
  3. Futures on NIFTY Index
  4. Options on NIFTY Index
Important Terminology in Derivatives Market:-
  1. Futures:- Future contract is an agreement between two parties to buy or sell an assets at a certain time in the future at a certain price.

  2. Option: - Option are of two Type: - Call And Put. Calls give buyer the right but not the obligation to buy a given quantity of the underlying assets, at a given future date. PUTS give the buyer the right but not an obligation to sell a given quantity of the underlying assets at a given price on or before a given date.

  3. Hedging (Calendar Spread):- A Calendar spread is a position in an underlying with one maturity which is hedged by an offsetting position in the same underlying with a different maturity. For Example a short position in a Nov future contract on Reliance and a long position in the Oct future contract on Reliance is a Calendar Spread. Calendar Spread attract lower margins because they are not exposed to market risk of the underlying. Calendar Spread effect is remove during the last 5 days of the Expiry of the contract.

  4. Contract Cycle: - The Period which a contract trades. The Contracts on the NSE Have 3 Months cycles which expires on the last Thursday of the month.

  5. Expiry Date:- It is the date specified in the future contract. This the last day on which the contract will be traded, at the end of which it will cease to exist.

  6. Initial Margin: - This is the amount that must be deposited in the margin account at the time a future Contract is first entered into is known as Initial Margin.

  7. Exposure Margin: - This is somewhat lower thsn the initial Margin. This margin is charge in case if the client carried forward its open position for the next trading day. This is set to ensure the adequate balance in the margin account. If the balance in the margin account falls below the exposure margin the investor receive the margin call.

  8. Mark-To-Market: - In the future market at the end of the day, the margin account is adjusted to reflect the investor’s gain or loss depending upon the future Closing Price. This is Called Marking-to Market.

  9. Future Price: - The Price at which the future contract trades in the future market.

  10. Spot Price: - The Price prevailing in the Spot market

  11. Exercise of Option Contract: - Investor can exercise its option from the exchange only in case of In –the Option. In- the- Money option is an option that lead to positive cash flow to the holder if it exercised immediately. In short only the buyer of the option who is in Profit can exercised its option upto the 4.15 P.M during the working days.

  12. Premium:- In case of Option Buy, the buyer of the option is require to pay the option premium to the seller of the option and in case if someone sold the option then that client is charge with the future margin and side by side also receive the premium from the buyer of the option.

  13. Scrip in Ban Period: - Penalty as prescribed by the exchange is imposed on the client in case market-wide exposure in a particular script reaches or cross 95%. The client has to compulsorily reduce the position till the market-wide position come below 80%. The client can take the fresh position only after the market-wide position in scrip closes below 80% on a particular day. No fresh position will be allowed to the client once the market-wide exposure in a particular scrip crosses 95% till it comes down to 80%. Minimum Penalty Rs.5000/- per lot per expiry.

  14. Basket Trading: - Basket trading is not allowed in F&O segment.

Equity Market
The equity trading is offered on both BSE and NSE segment, on T+2 settlement cycles.

Certain Term in Equity Market:-
  1. Gross Exposure: - Gross Exposure is the combination of Buying Exposure as well as the Selling Exposure.

  2. Buying Exposure: - Buying Exposure is the amount upto which the client can buy the shares and keep its open position. Buying Exposure is the amount upto which the client can buy the shares and keep its open position.

  3. Turnover Exposure:-Turnover limits restricts sum of buy and sell value of the client. Turnover is the total trading that takes place throughout the day. It is always calculated in such a way that the transactions entered by the client is added up to come to the actual position

  4. Transaction for delivery: - It means the client intends to give full (fund) consideration for his purchases or give full delivery for his sales for settling the trade. In case of delivery sale transactions, the shares available in his demat account of CDSL will only be considered. In case of delivery purchase, clear funds available in his ledger will only be considered. Transactions for delivery are also referred to as Investment Transactions.

  5. Transaction for trading (Intraday):- It means the client will square off his purchase or sale position before the cut off time and will not take or give delivery of the shares transacted. Transactions for trading are also referred to as Trading Transactions.
Surveillance Check of the Orders Placed by the Client
In case of Cash Market:-
  • Margin Available
  • M2M
  • Maximum Single order Quantity
  • Maximum Single order value
  • Minimum Single order Quantity.
  • Minimum Single Order value.
If the Client Orders pass through all the Surveillance Check then the client gets order confirmed and the same is Executed if the price and time match with the opposite counter Party.

In Case Of F&O market:-
  • Margin Available
  • M2M
If the Client Orders pass through all the Surveillance Check then the client gets order Confirmed and the same is Executed if the price and time match with the opposite Counter Party.
Type of Risk
All investments involve some form of risk. Consider these common types of risk and evaluate them against potential rewards when you select an investment.

Industry/sector risk: - Industry risk relates to uncertainties caused by particular features of the industry sector in which a company operates.

Exchange risk: - A number of companies generate revenues in foreign currencies and may have investments or expenses also denominated in foreign currencies. Changes in exchange rates may, therefore, have a positive or negative impact on companies which in turn would have an effect on the investment of the fund.

Credit Risk: - In short, how stable is the company or entity to which you lend your money when you invest? How certain are you that it will be able to pay the interest you are promised, or repay your principal when the investment matures?

Market Risk: - At times the prices or yields of all the securities in a particular market rise or fall due to broad outside influences. When this happens, the stock prices of both an outstanding, highly profitable company and a fledgling corporation may be affected. This change in price is due to "market risk". Also known as systematic risk.

Inflation Risk: - Sometimes referred to as "loss of purchasing power." Whenever inflation rises forward faster than the earnings on your investment, you run the risk that you'll actually be able to buy less, not more. Inflation risk also occurs when prices rise faster than your returns.
Settlement No. :-

Each trading day has a unique settlement no. and the trade on that can be identified with the help of that settlement date.

Settlement Process:-
  1. In case of Cash Market: - Transaction in cash market is settled on T+2 Basis. After that every client is required to make the payment of its debit for purchase or can take out the payout of its credit in case of sell.

  2. In case Of FO Segment: - All Future and options contract are cash settled on T bases.
Power Of Attorney:-
If the Investor sign the POA (Power of Attorney) in that case whatever share which the investors sold are directly place by the broker itself if the shares are lying in client DP or the Broker Beneficiary account

Whenever any client sold their shares it the obligation of that client to make the arrangement of delivery of that shares to its respective broker so that it can place the shares to the exchange. But in case if the shares which are sold by the client are delivered short by the clients and which have to go to the exchange are auctioned by the exchange. Final Bill for the auction is entering on T+5 Bases.

Payout Shortage:-
Sometime it happens that shares are short delivered by the exchange to the client in such case on T+3 exchange give opportunity to take participate in the auction market and then on T+4 (in case of BSE) and T+5( in case of NSE) shares are delivered to the client by exchange.

Margin/Payment Collection
  1. In case of Cash Market: - As per Exchange all the Investors are suppose to make the payment of its buying on T+2

  2. In case Of FO Segment: - All the investors are required to make the payment of there MTM, Margin shortfall on T+ 1 Bases.
Useful Websites:-
The following are the useful sites for getting the required information about the Securities market as well as legal procedure for resolution of grievances.





DOs and Don’ts for investors
Investing in Derivatives
DOs Don’ts
Go through all rules , regulations, bye-laws and disclosures made by the exchanges Do not trade on any product without knowing the risk and rewards associated with it.
Make ensure that the contract note has been issued by the ARG’ s authorized person only,  
Pay the brokerage/ payments/ margins etc. to the ARG or authorized person only.  
Ensure that for every executed trade you receive duly signed contract note highlighting the details of the trade along with your unique client-id  
Ensure receipt for collateral deposited with ARG towards margin  
Go through details of Client-Broker Agreement and know your rights and duties.  
Be aware of the risk associated with your positions in the market and margin call by ARG.  
Collect/pay mark to market margins on your future position on a daily basis.  
Dealing with Brokers & Sub-brokers
DOs Don’ts
State clearly who will be placing orders on your behalf. Do not pay more than the approved brokerage.
Insist on client registration form to be signed by you before commencing operations. Do not undertake deals for others.
Insist on contract note/conformation memo for trades done each day. Do not neglect to set out in writing, orders for higher value given over phone.
Insist on bill for every settlement. Do not sign blank delivery instruction slip(s) while meeting security pay in obligation.
Ensure that name of ARG, trade time and number, transaction price and brokerage are shown distinctly on the contract note. Do not accept contract note/ confirmation memo signed by any unauthorized person
Insist on periodical statements of accounts Do not delay payment/ deliveries of securities.
Issue cheques / drafts in favor of ARG  
Ensure receipt of payment/ deliveries within 48 hours of payout.  
In case of disputes, file written complaint to Customer Grievances within reasonable time.  
In case of sub-broker disputes, inform the H.O. about disputes within 6 months.  
Familiarize yourself with the rules, regulations and circulars issued by stock exchanges/ SEBI before carrying out any transaction.  
Dealing in Securities
DOs Don’ts
Complete all the required formalities of opening an account properly (Client Registration, Client agreements forms, etc.) Do not trade on any product without knowing the risk and rewards associated with it.
Read and properly understand the risks associated with investing in securities/ derivatives before undertaking transactions. Do not hesitate to approach the proper authorities for redressal of your doubts/ grievances.
Ask all relevant questions and clear your doubts with your R.M. before transacting. Do not leave signed blank Delivery Instruction Slips of your Demat account lying around carelessly or with anyone.
Familiarize yourself with the rules, regulations and circulars issued by stock exchanges/ SEBI before carrying out any transaction.  
Be vigilant in your transaction.  
Insist on a contract note for your transaction.  
Verify all details in contract note, immediately on receipt.  
Crosscheck details of your trade with details as available on the exchange website.  
Scrutinize minutely both the transaction and the holding statements that you receive from ARG’s Depository Participant.  
Keep copies of all your investment documentations.  
Handle Delivery Instruction Slips (DIS) Book issued by DP’s carefully.  
Insist that the DIS numbers are-printed and your account number (client id) be pre stamped.  
Pay the margins required to be paid in the time prescribed.  
Deliver the shares in case of purchase within the time prescribed.  
Be aware of your rights and responsibilities.  
In case of complaints approach the right authorities for redressal in a timely manner.  
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