Question

(T.Y.B.Co
Secondary market reform does not include
(a) Screen based trading
(b) LAF
(c) Depository system (d) Rolling settlement
Foreign Institutional In​

Answer 1

Explanation:

The Government securities market saw a strengthening of the primary dealer system. The excess demand for investment funds moderated, and the liquidity conditions eased in early 1996-97. The yield to maturity on auctioned 91-day treasury bills fell steadily to 6.92 per cent in November 1996 from the high of 12.97 per cent at the beginning of the year. The fall in the yield on 364-day treasury bills was relatively less pronounced, but it also fell to 10.33 per cent by end-December, 1996 from 13.12 per cent in end-March, 1996. The coupon rate on 10 year GOI bonds fell only marginally to 13.85 per cent in 1996-97 from 14 per cent in 1995-96. This significant softening in the cut-off yields along with the decline in the call rates indicated an easing of demand-supply gaps in the money and credit market conditions.

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Primary Market Reforms

The eligibility criteria for issuers were strengthened in 1996-97. At the same time, SEBI took several measures to provide issuers with more flexibility in the issue process. As part of this effort, stringent and detailed disclosure norms were prescribed, greater transparency in the draft prospectus required, and separate criteria for finance companies prescribed.

Criteria for accessing the securities markets were strengthened. Issuers proposing to make the first offer to the public of equity, or any security convertible at a later date into equity, are now required to have a track record of dividend payment in three of the immediately preceding five years. Issuers not meeting this requirement can get their securities listed, provided their project is appraised by a financial institution or scheduled commercial bank, and the appraising institution contributes at least 10 per cent of the project cost. This requirement was also imposed in the case of issues by listed companies where the post-issue equity capital exceeds five times the equity capital prior to the issue.

In view of the circumstances in which public sector banks operated in the past, they have been permitted to comply with less stringent criteria. The entry criteria required for other issuers would not apply to public sector banks. Further, public sector banks have been allowed to price issues at a premium provided they have a two year profitability record, as against the three year requirement for other issuers.

SEBI announced several measures aimed at providing greater flexibility to the issuers. Offer documents would no longer be vetted by the SEBI. Merchant bankers and issuers would remain responsible for ensuring compliance with the norms on disclosure and investment protection prescribed by the SEBI. A number of steps were taken to encourage the development of a debt market. Debt issues not accompanied by an equity component, can be sold entirely by the book-building process, subject to Section 19 (2) (b) of the Securities Contracts (Regulation) Rules. The requirement of 90 per cent minimum subscription in case of offers for sale has been done away with for exclusive debt issues, subject to certain disclosures and exemptions under the Companies Act. Issuers have been allowed to list debt securities on stock exchanges, even if their equity is not listed. Book-building has been allowed for equity issues of less than Rs.100 crore, subject to compliance with the SC(R) Rules. For all companies in whose issue the promoters' contribution exceeds Rs.100 crore, promoters have been allowed to bring in their contribution in a phased manner, irrespective of their track record. Corporate advertisements between the date of issue of acknowledgement card and the date of closure of the issue, have been allowed, subject to specific conditions which include the disclosure of risk factors. To ensure that public issues were widely subscribed to and held new norms of shareholding were prescribed. (Box 4.1).

Answer 2

Answer:

Secondary market reform does not include LAF

Explanation:

Secondary market reforms:-

• The National Stock Exchange (NSE)  founding:

The National Stock Exchange (NSE) was founded in November 1992 and first opened for business in 1994. Since then, it has evolved into a sophisticated, electronic market with the world's fourth-largest equities trading volume.

• Over the Counter Exchange of India (OTCEI):

It took place in 1992. It was promoted by a group of India's biggest financial institutions, including UTI, ICICI, IDBI, IFCI, LIC, and others.

It will be an electronic national stock exchange that will list a whole new set of companies that will not be listed on other exchanges.

• New Issues Disclosure and Investor Protection (DIP) Guidelines:

To eliminate gaps and systematic shortcomings, protect investors' interests, and ensure the orderly growth and development of the securities market, the SEBI has established DIP standards to control new issue activities.

Companies seeking to raise primary market capital must now disclose all relevant facts and risks associated with their plans.

• Depository System:

The adoption of a depository system and a scriptless trading mechanism in the Indian stock market has been significant development since 1996.

Previously, trading was done through the physical transfer of securities.

A depository is an organization that keeps electronic records of shareholders' securities, transfers securities between account holders, facilitates ownership transfers without handling securities, and ensures their safety.

• The National Securities Clearing Corporation Ltd. (NSCL):

In 1996, the NSCL was founded. Since July 1996, it has been insuring all NSE trades.

The NSE's post-trade activities are managed by the NSCL. Its main functions include trade clearing and settlement, as well as risk management.

• Trading in Central Government Securities:

Trading in government securities was launched in January 2003 to encourage greater participation of all types of investors, including retail investors, across the country.

Government securities can be traded in the same way that equities are traded: through a countrywide, anonymous, order-driver, screen-based trading system of stock exchanges.

• Mutual Funds:

One of the most significant developments in the Indian capital market is the emergence of diversified mutual funds.

Their primary goal is to mobilize public savings and invest them in stock market securities.

Mutual funds are an essential way for individuals to invest in the stock market.

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