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HISTORY OF STOCK EXCHANGES

UP. STOCK EXCHANGE LIMITED

BRIEF HISTORY

The U.P. Stock Exchange Association Ltd., Kanpur occupies a veryprominent place among the existing Stock Exchanges in India. The

Exchange was inaugurated on 27th August, 1982 by the then Finance

Minister Shri Pranab Mukherjee. Right from its inception it has beenplaying a very prominent role in the development of capital market

of Northern India. UPSE is the only Stock Exchange in whole of

Uttar Pradesh and the membership of this Stock Exchange is notrestricted to the territories of Uttar Pradesh only. Initially it had 350

members which were now increased to 540 members belonging to

almost all important cities of the country. Members living outside

Kanpur have contributed a lot by creating the equity cult in whole ofthe Uttar Pradesh. Not only this members are highly qualified and

professional and devoted to the cause of capital formation in the

country.

Founder: Dr.

G.H.Singhania

The Exchange was initially started in the

rented building but with the efforts of

our members, a new complex wasconstructed and was inaugurated by His

Excellency Shri R Venkataraman the

then President of India on 8th February,

1989.

At present we have 843 companies listed

with the total capitalization of Rs.81184

Crores. The annual turnover of thisExchange for the last three years is:

1998-99: 18429 Crores, 1999-2000:

23876 Crores and 2000-01: 25112

Crores. Thus every year we haveincreased our turnover creating more and

more awareness among the people of

Northern India.

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This Stock Exchange is wedded to the investors protection and investors education as we

have firm conviction that any investor protection cannot be achieved without proper awareness

and education of investors. Thus the Exchange has a very active investor service Cell and alsoa very equipped Research and Development Wing is functioning. We have also a very

effective system of readdressing the investors complaints.

The Exchange has one of the best developed Exchanges of the country so far its infrastructure

is concerned. The Ex-Finance Minister Dr. Manmohan Singh, Ex-Commerce Minister ShriPranab Mukherjee, other Central Ministers and Chief Ministers Uttar Pradesh have visited this

Exchange and appreciated its efforts in maintaining the transparency and the integrity of the

market. To keep pace of changing technology the Exchange has embarked upon the Project ofScreen Based Trading. The On-line Trading based on VECTOR Software supplied by CMC

has commenced on UPSE from 11th November 1997.

To increase the further business and to facilitate the On-line trading facility to about 22

members at Lucknow an additional trading floor has been established at Lucknow. At present

at the Additional Trading Floor at Lucknow 22 Lucknow based members have been allottedComputer Terminals which have been connected with UPSE main Server via VSAT.

As per recent decision of SEBI for the revival of the smaller Stock Exchanges in the country,

they can obtain the membership of big Stock Exchanges like, BSE, NSE, CSE etc. through

forming a subsidiary company of the Exchange and in turn the members of the Exchange cantrade through the said subsidiary as sub-broker(s).

Accordingly we have incorporated a wholly owned subsidiary namely UPSE Securities Ltd.

and obtained the membership of BSE to enable the members of UPSE on BOLT.

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STOCK EXCHANGES IN INDIAN BACKGROUND

The Stock Exchange concept is more than a century old for the economy of India. The

Bombay Stock Exchange was formed in 1875, while Calcutta Stock Exchange & Madras were

formed in 1980 and the Delhi Stock Exchange was formed in the year 1947. The multi-tier

securities exchange model was adopted in our country in October 1990 with the establishment of

OTCEI. High profile National Stock Exchange was set up in 1993 to encourage stock exchange

reform through system modernization and competition.

In common parlance, stock exchange means, a place where stocks are traded .The word

stock means Bond/ Equity shares/ Preference shares/Debentures etc and exchange means

trading/transaction. Stock exchange provides liquidity for the stocks and securities.

It is market that provides a platform to the owners of the securities/stock to sell their holdings at

reasonable prices and also provides an opportunity to the prospective buyers to purchase the same.

Meaning of stock Exchange

According to Securities Contract (Regulation) Act, 1956, A body of individuals whether

incorporated or not constituted for the purpose of assisting or controlling the business of

buying, selling, or dealing of securities.

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Functions of stock exchanges

A stock exchange has been variously described such as the barometer of adversity and

prosperity of a nation, the nerve centre of finance and politics of a nation as in the most of the

world. All the changing political, economic and industrial conditions of the nation are reflected on

the stock exchange. A stock exchange gives encouragement to the promotion of Joint Stock

Enterprise for the large manufacturing industries. It serves as a pivot of money and fortress of

capital. Therefore, stock exchange is an important system in the capitalist economy.

A stock market is a market, which aims at providing as continuous, free and fair market,

where buyers and sellers can come in contact and deal in shares and debentures. It provides a ready

market where shares and securities can be exchanged and transferred with the minimum of time

and maximum of profit. Unhealthy speculation and other undesirable practices are condemned;

otherwise stock exchange will be a disaster. Some of the economic functions of stock exchange are

as follows:

Provides Ready Market-

A Stock Exchange provides a free, fair & continuous market in securities. A holder of

securities may at any time get back his money by selling off his holdings in a Stock

Exchange. It promotes investment by offering a vide choice in securities both on

consideration of yield and safety against depreciation in their values.

Facility for transfer of securities-

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Stock Exchange provides sufficient marketability of the securities a dealt there in and

ensures their price connectivity. In Stock Exchange, every security constitutes a separate

market for itself. One cannot buy and sell securities unless some facility, by which buyers

and sellers can meet together and deal in securities, is provided. The Stock Market provides

the facility as it is simply a place of traffic in stocks and shares.

Mobility of Capital-

In addition to provide a market, the stock exchange has largely helped in directing the

accumulated wealth of the country into fruitful channels. The stock exchange is not like

investment trust or any other investment institution. It merely provides an open market for

the sale and purchase of securities. It directs the flow of new earnings into investment

leading to the production of wealth into two ways. First, by purchase of securities by the

buyers (savers) directly. Secondly, by placing the saving with financial institutions to

reinvest the funds in securities.

Stability and Liquidity of Capital-

An investor can withdraw his capital at any time either for other investment or for personal

need by selling the shares in the stock market. It is interesting to note that capital can be

withdrawn without affecting the industry. Thus, the investment is made liquid and easily

disposable.

Increase the Number of Dealings-

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The stock exchange provides the facility for secondary distribution of new securities, after

the original sale of securities. The supply of shares of a particular industry cannot be

increased with every change in prices, though the stock available in the market at a

particular time may vary a little. The Stock Exchange creates an interest and willingness in

the mind of investors to invest in securities. It increases the marketability of securities,

since some securities are brought and sold again and again. Readily saleable securities

serve a good collateral security for loans.

Safety of Dealings

An organized stock exchange functioning under government regulation provides a

reasonable measure of security and safety of dealings in securities to the investors through

its rules and regulations. The risk of the investor is considerably reduced when he

purchases securities, which are ordinarily dealt in a Stock Exchange. The stock exchanges

before giving permission to deal require the observance of a rigid set of rules by the

company and call for certain information with a view to safeguard the interest of the

investors. The information supplied is examined impartially and then permission is granted.

Thus, it creates confidence in the minds of the investor.

Financing Industry

The Stock Exchanges encourages investment in industries more than any other institution.

The investment flows in corporate securities so that the nation can achieve industrial

development and economic progress. Moreover, the condition of the company is visible

since the price of securities shows the real worth, which depends upon the serving capacity

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and future development of the company. In short, industrial development, saving

investments and capital formation are the benefits of a Stock Exchange.

Wider Share Ownership Establishment

In addition to the basic function, a well organized modern Stock Exchange is also expected

to educate the masses in the art of investment in Stock Exchange and thereby, promote

wider ownership amongst individual is of particular significance to the developing

countries wherein savings are scattered for further income. Through it, new sources of

capital can be tapped.

Economic Barometer

An ideal Stock Exchange serves to allocate only just enough funds for any industries and

checks the flow of capital when an industry begins to show diminishing or uneconomical

returns. This is achieved through keeping an eye on price movements of the securities.

Other Functions

Other functions performedby Stock Exchangeare that the market price established in

trading are useful for tax purpose. The stipulation on disclosure and transparency ensures

availability of information on listed companies, particularly in regard to financial

conditions and protect investor interest by eliminating dishonest and irregular practices in

the brokerage made.

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AN INTRODUCTION TO SELECTED STOCK EXCHANGE:

Besides the regional stock exchange three national stock exchanges have been set up in India

The Bombay Stock Exchange: (BSE)

The Indian Stock Market is one of the oldest markets in Asian Markets. Its history dated back to

nearly two centuries when the records of security dealings in India with merger and obscure. The

East India Company was dominant in those days and business in its loan securities was transacted

to words the close of the 18th century. By the 1830 business in 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.

The Bombay Stock Exchange has been converted into company for very recently. Now it is known

as Mumbai Stock Exchange Ltd.

The National stock Exchange (NSE)

The National Stock Exchange of India Limited was set up to provide access to investors from

across the country on an equal pooling. NSE was promoted by leading financial institutions at the

best of the Government of India and was incorporated in Nov.1992 as a tax-paying company,

unlike other stock exchanges in the country.

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On its recognition as a stock exchange under the securities contracts (Regulation) Act, 1956 in

April 1993, NSE commenced operations in Nov. 1994 and operations in the derivatives segment

commenced in June 2000

Inter-connected Stock Exchange Ltd. (ICSE)

In October 1997, SEBI granted an in-principal approval to the proposal of the inter-

connected Stock Exchanger Ltd. (ICSE) to set up a national level Stock Exchange under section-4

of the Securities Contract Regulation Act (SCRA). ICSE has been promoted by 14 regional stock

exchanges and may be incorporated as a company under the provisions of the companies Act 1956.

ICSE provide training, Clearing, settlement, risk management and surveillance support to

the inter-connected market system. The Stock Exchange has set up ISE securities and services

limited (ISS) to take membership of NSE and BSE, so that trader and dealers through ISS can

access other markets in addition to the local market. It is a landmark development in integrating

securities market.

Legal and Regulatory Frame Work:

The four main legislations governing the securities are-

a) The securities contracts regulation Act 1956 provides the regulation of transactions in

securities through control over stock exchanges.

b) The Companies Act 1956 which sets out the code of conduct for the corporate sector in

relation to the issue, allotment and Transfer of Securities and disclosure to be made in

public issues.

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c) The SEBI act, 1992 which establishes to project investors and develop and regulate

securities market.

d) The depositories act, 1992 which provides for maintenance and transfer of

ownership of dematerialized securities.

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SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

GENESIS:-

The SEBI was established on April 12,1988 through an administrative order, but it

became a statutory and really powerful organization only since 1992.The CICA was replaced and

the office of the CCI was abolished in 1992,and the SEBI was set up on 21 February 1992 through

an ordinance issued on January 30 1992.The ordinance was replaced by the SEBI Act on April

4,1992.Certain powers under certain sections of SCRA and CA have been delegated to the SEBI

.The regulatory powers of the SEBI were increased through the Securities Laws(Amendment)

ordinance of January 1995 which was subsequently replaced by an Act of Parliament. The SEBI is

under the overall control of the Ministry of Finance, and has its head office at Mumbai .It has now

become a very important constituent of the financial regulatory framework in India.

OBJECTIVES:-

The philosophy underlying the creation of the SEBI is that multiple regulatory bodies

for securities industry mean that the regulatory system gets divided ,causing confusion among

market participants as to who is really in command .In a multiple regulatory structure, there is also

an overlap of functions of different regulatory bodies. Through the SEBI, the regulation model

which entrusted to a single highly visible and independent organization, which is backed by a

statue, and which is accountable to the Parliament and in which investors can have trust.

CONSTITUTION AND ORGANISATION:-

The SEBI is a body of six members comprising the chairman, two members from

amongst the officials of the ministries of the central government dealing with finance and law, two

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members who are professionals and have experience or special knowledge relating to securities

market, and one member from the RBI. All members, except the RBI member are appointed by the

government, who also lays down their terms of office, tenure, and conditions of service, and who

can also serve any member from office under certain circumstances .The Central government is

empowered to supersede the SEBI in public interest ,of if on account of gave emergency it is

unable to discharge its functions or duties, or if it presently defaults in complying with any

direction issued by the government ,or if its financial position and administration deteriorates.

The work of the SEBI has been organized into five operational departments each of

which is headed by an executive director who reports to the chairman. Besides, there is a legal

department and the investigation department .The department has been dividing into divisions. The

various departments and the scope of their activities are as follows:-

The Primary Market Policy, Intermediaries Self Regulatory Organizations

(ISRO) and Investors Grievance and Guidance Department:-

It looks after all policy matters regulatory issues in respect of the primary market

registration merchant bankers, portfolio management service's investment advisors ,debenture

trustees ,underwriter, SROs and investor grievance ,guidance ,education and association.

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The Issue Management and Intermediaries Department:-

It is responsible for vetting of all prospectus and letters of offer for public and right

issues for coordinating with the primary market policy, for registration, regulation and monitoring

of issues related intermediaries.

The Secondary Market Policy, Operations and Exchange Administration,

New Investment Products and Insider Trading Department:-

It is responsible for all policy and regulatory issues for secondary market and new

investment products, registration and monitoring of members of stock exchanges, administration of

some of the stock exchanges,

Market surveillance and monitoring of price movements and insider trading, and EDP and SEBI's

data base.

The Secondary Market Exchange Administration, Inspection and Non-

member Intermediaries Department:-

It looks after the smaller stock exchanges of Guwahati, Indore, Bhubaneswar,

Ludhiana and Cochin. It is also responsible for inspection of all stock exchanges

and registration, regulation and monitoring of non-member intermediaries such as sub brokers.

Institutional Investment (Mutual Funds and Foreign Institutional Investment),

Mergers and Acquisitions,

Research and Publications, and International Relations and IOSCO Department:-

It looks after policy, registration, regulation and monitoring of Foreign Institutional Investors

(FIIs), domestic mutual funds, mergers and substantial acquisitions of shares

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CORPORATIZATION AND DEMUTUALIZATION 2005

Most of the Stock Exchanges around the world were set up as association of the Trading members.

The objective to set up association was aimed to create a formal institution for mutually regulating

the securities transactions among the members. Thus, most of the Stock Exchanges were promoted

as non-profit organizations. While, the management of the Stock Exchange was generally vested

with elected representative(s) of the trading members, executives carried out the day-to-day

functioning of the Stock Exchange.

However, during last two decades attempts have been made to change the profile of the

Stock Exchange by demutualising them and reconstituting them as commercial corporate entities.1

Demutualization of a Stock Exchange entails that it is no longer remains entity for mutual benefit

of trading members but beholds the larger objective of becoming the system with adequate checks

for proper mobilization of capital & protecting the interest of investors at large.

Corporatization is a critical enabler that would support the efforts in expanding and strengthening

the Indian capital market. While things are becoming more business oriented,

The corporatized Stock Exchanges will improve its flexibility and efficiency in terms of its

responsiveness to market needs2.

The need for corporatization of Stock Exchanges in India has recently came into lime

light after functioning of Mumbai Stock Exchange is alleged to have been manipulated by the

some of the Trading members on governing Board of the exchange, which followed by stock

markets crash in spite of what was seen as one of the favorable & progressive Union Budget in

recent years3.

After the stock scam of March 2001, the Government finally announced that all stock

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Exchanges would have to mandatorily go in for demutualization within a specified timeframe4.

This was aimed at preventing conflict of interests, which arise when

Stockbrokers are involved in the management of the stock exchanges also.

It is in this context it becomes necessary to study the need and impact of Corporatization of Stock

Exchanges and its relevance in Indian context before a clear roadmap could be prepared to take

this process forward, for which SEBI constituted a Group under the Chairmanship of Justice M. H.

Kania, former Chief Justice of India comprising of eminent personalities, in fields of law,

accountancy, finance, company law affairs and taxation to advise SEBI on this matter and to

recommend the steps that need to be taken to implement the announcement of the Government.

So as a result of this the Government has approved the corporatization of stock exchanges in India

by which ownership and trading rights would be segregated from each other .corporatization and

demutualization of stock exchanges are complex subjects and involve number of legal, accounting

and company law issues. These roadmaps could be prepared to take process forward.

Historically, brokers owned, controlled and used to manage stock exchanges. In case of dispute,

the self often got procedure over regulations leading inevitably to conflict interest. The regulator

therefore focus on reducing the dominance of members in the management of stock exchanges and

advised to reconstitute their governing council to provide at least 50% non brokers representatives.

This did not materially alter the situation. Thus finally in face of volatility in the securities market,

government proposed in marc 2001 to corporatize the stock exchanges by which the ownership,

management and trading members could be segregated from one another.

DEPARTMENTS OF U.P.S.E

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CHAIRMAN Mr. KD GUPTA

EXECUTIVE DIRECTOR Mr. B.K NADHANI

U.P.S.E SECURITIES LTD (SUBSIDIARY CO.) Mr. VED PRAKASH (CEO)

LISTING & MEMBERSHIP DEPT Mr. BP GUPTA

SECRETARIAL DEPARTMENT Mr. CHANDRA BABU PR

FINANCE & ACCOUNT Mr. S.C KAPOOR

MARKET OPERATION / MARGIN Mr. JK DIXIT

LEGAL DEPARTMENT Mr. JN SHUKLA

CLEARING HOUSE Mr. LS PANDEY

SURVEILLANCE DEPARTMENT Mr. ATUL AGGARWAL

R& D / INVESTORS SERVICE CELL Mr. RAJENDRA VERMA

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UTTAR PRADESH STOCK EXCHANGE (UPSE) ASSOC LTD.

HISTORY/BACKGROUND

1. Name of Stock Exchange : The Uttar Pradesh Stock Exchange Association Ltd.

2. Registered Address : `Padam Towers 14/113, Civil Lines, Kanpur

3. Date of Establishment : 15th November, 1979

4. Nature of organization : Corporate body.

(Whether a company or Association of persons)

(If company, please indicate whether limited by guarantee or shares).

(If company limited by shares, then indicate shareholding pattern)

Public Limited Company registered under the Companies Act, 1956.

Total Shares issued: 1000 (One share of Rs.2000/- each)

Shareholding pattern in the recognized Stock Exchange as on 30.09.2008

Category of

Shareholder

No. of

Shareholders

Total Number of

Shares

Percentage of Shares

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TRADING MEMBERS

Individuals 177 177 17.7Corporate (Listed) 03 03 0.3

Corporate (Unlisted) 62 62 6.2

Any other (specify) NIL NIL --

TOTAL (A) 242 242 24.2

PUBLIC

Individuals 257 717 71.7

Corporate (Listed) NIL NIL NIL

Corporate (Unlisted) 32 41 4.1

Any other (specify) NIL NIL NILTOTAL (B) 289 758 75.8

Total (A+B) 531 1000 100%

Uttar Pradesh Stock Exchange Association Ltd. was inaugurated on 27th August, 1982 and

occupies one of the prominent places among 24 Stock Exchanges in India. It plays an important

role in the development of the capital market of North India.

Initially, it had only 350 members which have grown up to 540 at present. The membership is open

to companies even beyond the territories of Uttar Pradesh. At present UPSE as 683 companies

listed with the total capitalization of Rs 81,184 crores. The annual turnovers of this exchange for

past three years are:

Year Total Turnover

(Single Sided)

(Rs. In Crores)

Delivery

turnover

% of turnover

to Delivery

2006-07 806.50 0.28 0.032007-08 476.39 0.98 0.21

2008-09 (up to

31.10.2008)

170.60 0.05 0.03

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This stock exchange is wedded to the investors protection and investors education as UPSE has

firm conviction that any investor protection cannot be achieved without proper awareness and

education of investors. Thus, the exchange has a very active investor service cell and also a very

equipped research and development wing in functioning. UPSE has also very effective system of

readdressing of the investors complaints.

The exchange is one of the best developed exchanges of the country so far its infrastructure is

concerned. The Prime minister Dr. Man Mohan Singh, Finance minister shri Pranab Mukherjee,

other central ministers and chief ministers of Uttar Pradesh have visited the exchange and had

appreciated its efforts in maintaining the transparency and the integrity of the market. To keep pace

of changing technology the exchange has embarked upon the project of screen based training. The

online trading based on VECTOR software supplied by Cmc has commenced on UPSE from 11th

November, 1997.

To increase the further business and to facilitate the online trading facility to about 22 members at

luck now an additional trading floor was established at Lucknow. Seeing lack of participation by

investors, UPSE has closed down its landmark Additional Trading Floor (ATF) at Lucknow. The

ATF was set up initially to further increase business and to provide online trading facility to

Lucknow based members. It commenced online trading in March 1999 with 22 members, who

were allotted computer terminals at the ATF. The terminals were connected with UPSE's main

server via VSAT.

It is noteworthy to note that at present out of 17 regional stock exchanges recognized in India only

2 regional stock exchanges are functioning and are still generating some turnover. UPSE is among

those two regional stock exchange, the other one being Calcutta stock exchange.

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As per decision of SEBI for the revival of the smaller stock exchanges in the country, they can

obtain the member stock exchanges like NSE, BSE, and CSE etc by forming a subsidiary company

of the exchange and in turn the members of the exchange can trade through the said subsidiary as

sub- brokers.

Accordingly they had incorporated a wholly owned subsidiary namely UPSEC and obtained the

membership of BSE to enable the members of UPSE on BOLT. They are at present trying to get

membership of NSE.

MAJOR OBJECTIVES OF UPSE

To organize and carry on the stock exchange and regulate the business of the exchange ,

stocks, shares , debentures , debenture stocks , government securities , bonds and equities

of any description and with a view to establish and conduct stock exchange in Kanpur.

To acquire the membership of any other recognized exchange in India and abroad including

membership of OTCEI , broad base the operation of stock exchange for the benefit of

general public & investors.

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To promote one or more subsidiary whether wholly or partly owned with object to promote

& trade in shares & stocks , debenture bonds and other securities of any description issued

by companies , statutory corporations, government of state or union Government , financial

institutions.

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UPSE SECURITIES LIMITED

(Commonly referred in as subsidiary company)

The formation of UPSE securities ltd is the outcome of various underlying reasons. To understand

that, time would have to be set back to late 20 th century... Prior to that ,the regional stock

exchanges were receiving a great source of revenue as listing fees of various companies .Every

company was supposed to list themselves in regional stock exchange where their head office

existed .so besides mandatory listing in regional stock exchange ,it was the fashion among

companies to list themselves in more and more stock exchange But slowly in 2003 ,SEBI totally

called the mandate and awarded freedom to get listed in any stock exchange All factors contributed

to companies to get delisted from regional stock exchanges. This move vanished the major source

of revenue of RSE. So, it was decided in a meeting held on September 9, 1999 to promote or float

a subsidiary company to acquire membership right of other big stock exchanges i.e. NSE /BSE

subject to under noted conditions:

The subsidiary company shall be 100% owned by stock exchanges promoting/floating such

subsidiary company. The name of the company shall not contain the word stock

exchange.

The members of stock exchange shall register themselves as sub .brokers of subsidiary

company to enable them through subsidiary company.

The subsidiary company shall register only the members of stock exchange, which is

promoting the subsidiary company as its brokers, and no other client/sub broker shall be

entertained by subsidiary company.

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The sub broker of the subsidiary company shall maintain separate deposits with the

subsidiary company. The Base Minimum Capital deposited by the sub broker with the

promoting stock exchanges shall not be transferred to the subsidiary company.

The trading / exposure limit of the sub-brokers shall be based on the deposit received by

the subsidiary company from the sub broker and these limits shall not exceed the limits as

prescribed by the stock exchange of which the subsidiary company is a member.

The subsidiary company shall collect margins from the sub brokers for the payment of

margins to the respective stock exchange of which subsidiary company is the member. The

margin imposed by the subsidiary company on its sub broker shall not be less than the

margin payable to the stock exchange of which the subsidiary company is the member.

The stock exchange shall incorporate the above mentioned condition in the Memorandum

of association and Article of Association of the subsidiary company.

So based on this decision taken on the meeting it was decided by board of directors of UPSE to

set up their wholly owned subsidiary named UPSE SECURITIES LIMITED.

UPSE securities ltd., a wholly owned subsidiary of U.P Stock Exchange Assn. Ltd. was

incorporated on 19.04.2000 with the object to obtain membership of larger Exchanges such as

BSE/CSE and provide trading facilities on these exchanges to the member of U.P stock exchange

as its sub brokers as per the policy/guidelines issued by SEBI. Accordingly the company acquired

the membership of BSE and commenced on-line trading of BOLT with effect from 26.01.2001.

The company is limited by shares and its 100% shares are held by UPSE .Its issued and

subscribed share capital was of RS 1,80,73,700 which was its initial funding and till date their has

been no subsequent funding.

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To facilitate pay-in and pay-out of funds, the company has adopted the branch model of business

module for settlement of transactions at company level and consequently separate bank account

and beneficiary demat account, designed to each of the active sub-broker, treating it as a virtual

branch of the company facilitating the accounting etc.

Other basic informations about the UPSE are:

UPSEC will open equivalent number of bank accounts for each sub brokers in the name

and style of UPSEC securities ltd. These banks accounts will be opened either with

Standard Chartered Bank ,

M.G road, Kanpur or with UTI bank LTD, Mall road, Kanpur as per the choice of the sub

broker concerned.

It will be the responsibility of the sub brokers to clear all the dues / pay in of their clients

within time as per the schedule of the UPSEC i.e. T+1 basis.

The shortfall in the pay in of the fund, if met by the sub broker from their own account,

shall be credited to the contingency deposit account of the sub brokers. UPSEC will not

pay any interest on this deposit.

Every client of the sub- broker will have to clear his / her debit balance in respect of the

transactions undertaken latest by T +4 days.

UPSEC will issue the contract notes to all the clients of the sub- brokers on the regular

basis.

Brokerage will be charged from the clients of the sub brokers as per the instructions filled

up in the client registration forms received through the sub-brokers or any written

modification authorized by the clients and the sub brokers thereafter.

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The share of brokerage of UPSEC from the total brokerage charged to the clients of the

sub-brokers shall be 0.009% subject to minimum of 1 paisa per share. UPSEC shall refund

the excess brokerage to its sub brokers weekly.

All other statutory and legal charges such as stock exchange turnover charges, stamp duty,

STT, service tax etc as applicable will be levied separately in the contract notes issued to

the clients of the sub brokers.

Sub- brokers who are interested in second, third trading terminal are allowed to have them

by allotting them separate ID on the following terms and conditions:

- Sub broker will have to pay a sum of Rs 5000 for each such trading terminal.

- Separate monthly charges such as TWS charges, VSAT support charges etc as

applicable from time to time will have to be paid by the sub broker for each such

terminal.

- Each such terminal shall be subject to fulfillment of margin and other applicable

business rules.

- Presently BSE has allowed trading only in cash segment.

TRADING ON BSE STARTED ON -- 29-11-2001

NUMBER OF REGISTERED SUB-BROKERS -- 113

NUMBER OF ACTIVE MEMBERS -- 70

CURRENT NUMBER OF CLIENTS -- 8000(APPROX)

TURNOVERS: (IN CRORES)

2000-01(FROM 29-01-2001) -- 67.99

2001-02 -- 981.88

2002-03 -- 1907.64

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2003-04 -- 2334.55

2004-05 -- 2493.73

2005-06 -- 1813.24

2006-07 -- 2164.10

2007-08 -- 3124.08

PROFIT / LOSS OF THE COMPANY

YEARS PROFIT/LOSS AMT IN Rs

2000-01 LOSS 3,99,241.91

2001-02 LOSS 10,67,493.51

2002-03 PROFIT 7,84,000

2003-04 PROFIT 18,20,000

2004-05 PROFIT

12,93,000

2005-06 PROFIT

7,98,0002006-07 PROFIT

6,36,000

2007-08 LOSS

21,964

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Thus, the scope of UPSEC is indeed very wide and in future periods it will surely further expand

the levels of business leading to the lucrative gains to the corporate, investors and finally its

members.

LISTING DEPARTMENT

Before talking about listing department I would like to throw light on the basic jargon words used

in this department.

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Listed company means a company which has any of its securities offered through an offer

documents listed on recognized stock exchange and also includes public sector undertaking whose

securities are listed on recognized stock exchange.

Public issue means on an invitation by a company to the public to subscribe to the securities

offered through a prospectus.

Right issue means an issue of capital under sub section (1) of section of companies acts 1956 to

be offered to the existing shareholder of company through a letter of offer.

Composted issue means an issue of securities by listed by listed company on a public cum right

basis offered through a single offer document wherein the allotment for pubic & right component

of the issue is proposed to be made simultaneous.

Offer documentmeans prospectus in case of public issue of offer for sale & letter of offer in case

of a right issue.

Unlisted companymeans a company, which is not, listed company.

Application for listingNo company shall make any public issue of securities unless it has made an

application for listing of those securities in stock exchange(s)

Security At the time of public/right Issue Company deposit 1% security of the issue.50% in cash

&50% in bank guarantees for protection of investors.

Depository means a body corporate register under SEBI (Depositories and Participants)

Regulation, 1996.

Listing AgreementAt the time of listing it is a requirement of the exchange that there must be

filed with the application an agreement in terms to qualify for admission and continuance of said

securities upon the list of exchange.

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As per listing agreement companies agree to submit all the required documents with the exchange

for the information.

DelistingThere are two types of delisting: voluntary delisting & compulsory delisting.

Voluntary delisting: Voluntary delisting being by the promoters of the company.

Procedure for voluntary delisting: Any promoter or acquirer desirous of delisting securities of the

company under the provision of these guidelines shall:

a) Obtain the prior approval of the shareholders of the company by a special resolution passed at its

general meeting.

b) Make a public announcement in manner provided in these guidelines.

c) Make an application to the delisting exchange.

d) Comply with such other additional conditions as may be specified by the concerned stock

exchange.

Compulsory delisting of companies by exchange

The stock exchange may delist companies which have been suspended for a minimum period of six

months for non-compliance with the listing agreements.

The stock exchanges may also delist companies as per norms provided in schedule.

The stock exchange shall give adequate & wide public notice through newspapers including (one

English national daily of wide circulation) & through display of notice on the notice

board/website/trading systems of the exchange.

The stock exchange shall give a show -cause notice to the company or adopt procedure provided

under part B of schedule III for delisting under clause15 (1) and (2).

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MEMBERSHIP DEPARTMENT

The department mainly deals with Memberships/Membership

Admission/Transfer/Conversion/Registration/Surrender of Certificate of Registration of SEBI.

Admission to Membership of the Exchange is Governed by the eligibility criteria as specified

in Article 19 of the Articles of the Exchange which states :-

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An individual applying for Membership of Exchange should :-

1) Be not less than 21 years of age.

2) Have a qualification of Matriculation of equivalent examination (SEBI requires

minimum Intermediate)

3) Be a citizen of India.

4) Possession a minimum of two years experience.

In dealing in securities or

As portfolio manager or

As investment constitute

Minimum net worth / capital of Rs.lac as certified by CA

Its an undertaking to the effect that:-

He/ She are not associated with any defaulting member of Exchange.

He/ She have not introduced any fake account /forge/stolen share in the market.

No investigation /enquiry are pending against him/her in any Exchange.

BODY CORPORATE:-

1) Minimum net worth requirement for corporate seeking admission to membership of the

Exchange, is Rs 20 lacs in case of direct corporate and Rs 10 lacs in case of conversion

cases i.e. in case of individual to corporate .

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2) Two Designated directors to remain on the Board of the Company. Eligibility criteria for

designated directors to be the same in case of individuals.

3) Entity must have been incorporated under companys act 1956.

4) It must at all times maintain requisite net worth.

5) It should comply with section 12 of companies act.

6) And it should satisfy all such conditions as may be prescribed in the articles.

For any change in status and constitution of Members in terms of SEBI Cir No.30 dated

09.07.03 member is required to obtain prior Approval of exchange as well as SEBI. At the

same time, of effecting any change member must ensure that all SEBI and Exchange dues

have been paid.

AUDIT AND INSPECTION DEPARTMENT:-

1. Maintaining records of Audited Balance sheets of Members:-

Every year, every active member is required to submit their audited balance sheet and Net

worth certificate in the Exchange.

The department is responsible for collection of the Audited balance sheets to be submitted

by

All active members and imposing penalties in cases of late submission of B/S beyond the

stipulated time

2. Inspection of books of account of members:-

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As per SEBI guidelines, Exchange is required to conduct inspection of 20% active

members in each financial year.

Accordingly, the department selects the names of the members to be inspected (Finalized

by Executive Director), on the basis of turnover in the manner that the cross section of all

members is covered. Few names are selected against whom complaints have been lodged in

the Grievances & Complain Department by Investors. Few other names are taken from the

members against whom surveillance action has been initiated.

The work of inspection of brokers is assigned to independent Charted Accountants.

The C.A. as per the checklist provided by the Exchange conducts inspection. Inspection

reports are forwarded to members, there by seeking replies. Inspection files are placed

before the Disciplinary Committee for consideration and further action.

3. SEBI Registration fees paid by the Members:-

As per SEBI Stock Brokers and Sub Brokers Regulations 1992, every broker registered

with SEBI and hold a certificate of Registration of SEBI, is required to pay SEBI fees

based on his turnover through the Exchange.

This work is also handled by the department.

Members are advised to summit a C.A. certificate showing their turnover under different

heads i.e. jobbing of market trades etc. in the prescribed format in the Exchange with the

prescribed limits.

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4. SEBI Registration Fees/ SEBI Turnover fees/ SEBI fees:-

Schedule III of SEBI Stock Brokers and Sub Brokers Regulations 1992 specify the fees to

be paid by the stock brokers.

Every Member is required to pay registration fees in the manner set out below:-

Where the annual turnover does not exceed Rs. 1 crore during any financial year, a sum

of Rs 5000 for each financial year

Where the annual turnover exceeds Rs 1 crore during any financial year, a sum of Rs 5000

plus one hundredth of one percent of the turnover excess of Rs 1 crore for each financial

year.

After the Expiry of Five financial years from the date of initial registration as members ,

he is required to pay a sum of Rs 5000 for each and every block of five financial years

commencing from the sixth financial year after the date of grant of initial registration.

Every year , details of various components of the total turnover are to be finished by each and

every Active Member in the Exchange within the prescribed time limit.

Turnover shall be computed as aggregate of sale and purchase done by the Member in his own

account and the account of his clients.

In case of jobbing transactions which have been square off during the same day and such

transactions have not been taken by the broker on the behalf of his clients fees at the rate of

0.005% is payable on the sale transaction i.e. Rs 500 on every Rs. 1crore .No fee is payable on

purchase Transaction. Thus at large, incidence of fees on total jobbing transaction comes to Rs.

250 per Rs.1 crore.

In case of members fails to submit the transactions details then fee at a flat rate of 0.1% on the

total turnover is payable by the member i.e. Rs 1000 0n every Rs 1 crore turnover.

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SECRETARIAL DEPARTMENT

Governing board: The governing board of Uttar Pradesh stock exchange association limited

consisted or 13 members, prior to SEBI step of appointing an administrator instead, classified as

follows:

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Six elected members under the provisions of the articles of association of exchange.

2 government nominees appointed by SEBI

4 public nominees (a list of 12 persons was sent by UPSE association limited board with

the approval of SEBI.

1 member is Executive director who is appointed by the UPSE association limited board

with the approval of SEBI.

At every Annual general meeting of the exchange 1/3 of the members elected on the

governing board retire by rotation; provided that where a person has been a member,

elected for 2 consecutive terms on the governing board, he shall not be eligible for

reelection for a further period of 2 years.

As per existing articles, there is a provision for election of president of the exchange out of the

non elected members on the governing board. He will hold the office of president for a period

of 1 year.

However w.e.f. 12 July, 2002 SEBI has supposed the governing board of the exchange &

appointed an administrator and all the powers and functions of the governing board are with

Administrator, under section 11 of the Securities Contract (Regulation) Act, 1956.

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Statutory Committee

In addition to the committee of Board of Directors, if any referred to in the above Article, the

Board of Directors, every year and as early as convenient after every Annual General Meeting

,appoint the following committee, namely:

Arbitration Committee

Defaults Committee

Disciplinary Committee

This committee consists of 60% non -members and 40% members with prior approval of SEBI.

President and Executive Director are members of each of such committees and the President

generally besides over each of the meetings of such committee.

Besides the above committees, the following committees are also constituted by the governing

Board of Exchange every year:

Computer Breakdown Committee.

Ethics Committee.

Screening Committee.(membership transfer, admission related)

Compulsory delisting committee.

Investors service committee.

Surpassing the Board by a single administrator all the powers have transferred to administrator.

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Besides handling the corresponding work with SEBI/Ministry/Income Tax the following works are

also handled in secretarial section.

Compiling and forwarding the monthly development, report of SEBI.

Coordinating with other departments of the exchange for the implementation of various

SEBI circulars.

Compiling and forwarding the pre-inspection report.

Compiling and forwarding the compliance report on the SEBI inspection report (conducted

every year).

The section also fulfills all statutory requirements under companies act like:

Preparation of board meeting, notices, agenda, minutes.

Preparation of notices calling AGM & EGM.

To handle all the company related affairs under companies act.

Similarly works relating to UPSE Securities Ltd. (a wholly subsidiary of UPSE Assoc Ltd) are also

handled by the section.

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FINANCE & ESTABLISHMENT

Finance department keeps watch over the financial matters. Apart from keeping record of daily

financial activities, the department also tackles the HR activities under establishment Department.

The UPSE Assoc. Ltd is registered under section 12A of the income tax act 1961, the accounting

standard 22 (Accounting for taxes on income) is not applicable to the company.

Therefore, a statement of income & expenditure A/c is prepared in place of profit & loss A/c. And

according to the taxation compliance, it has to spend its 85% of income on various valid heads, if

not; it has to make declaration about expenditure plans.

Membership fees Rs 6000 per annum.

Listing fees based on paid up share capital.

Interest on BMC and other securities.

Maintenance charges of terminals.

Penalties and fines.

Transaction fees (Minimum Rs 10000 and beyond graded system is applicable).

1% of listing fees (up to 2004-05, it was 2%) is for investor service cell fund, 10% of

which is transferred to UPSE investor protection fund.

UPSE Investors protection fund is created to protect from the losses incurred due to

exchanges exchange members. But an exchange ceils compensation limit Rs 10 lakh per

broker.

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UPSE has a heavy infrastructure (building & premise) that UPSE gives on rent to its

members only for various purposes. Outsiders also may hire it for social or Academic

purpose only.

The Exchanges are required to contribute 5% of the listing fees collected by them from

companies to SEBI every year.

The expenditure head also includes operational, legal and other nominal expenditures.

The department also maintains the regular records of its employees, maintains their provident

fund and also works for their welfare.

In terms of Rule 14 of the SC(R) Rules, 1957 every recognized Stock Exchange is required to

maintain and preserve the following books of accounts and documents for a period of five years:

I. Minute books of the meetings of

A. Members

B. Governing body

C. Any standing committee or committees of the governing body or of the general body

of members

II. Register of members showing their full names and addresses. Where any member of the Stock

Exchange is a firm, full names and addresses of all partners shall be mentioned.

III. Register of authorized clerks.

IV. Register of remises or authorized assistants.

V. Record of security deposits.

VI. Margin deposit book.

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VII. Ledger.

VIII. Journals.

IX. Cash Book.

X. Bank Pass Book.

The Inspection Team may verify whether the Exchange has complied with the requirements of the

above rule and check the said books.

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MARKET OPERATION (MARGIN DEPARTMENT)

SEBI form time to time put in place various risk containment measures to address the risks

involved in the cash and derivative market. In order to contain risk arising out of the transactions

entered into by the members in various script either on their own account or on behalf of their

clients the exchange has .Therefore adopted a well defined risk management tool by the way of

margin, the Exchange accordingly impose margins on the members. Other highlights of the

department are:

Base Minimum capital is Rs. 400000 is required without this trading is not allowed.

50% is in liquid assets (cash & FDR).

50% in other liquid assets (share and mutual funds)

Members are allowed trading on the amount deposited over and above BMC.

As soon as the margin touches the margin point, the terminal automatically gets prohibited for

trading.

There are three types of Margin in Stock Exchange:

Value at Risk.

Mark to Market.

Extreme Loss Margin.

All are calculated and applied on-line.

Margins are calculated on daily basis. M2M Loss is deducted from the deposits of members.

Formula:-

Liquid assets M2M =Surplus Liquid

Surplus Liquid-VAR ELM=Surplus.

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OVERVIEW:

The core of the risk management system is a Liquid Asset, deposited by the members with the

Exchange/Clearing Corporation. These liquid assets shall cover the following four

requirements/risks:

M2M LOSSES: - Mark to Market losses is on outstanding settlement obligation of the matter.

VaR: - VaR margin is to cover potential losses for 99% of the days.

ELM Margin: - Margin to cover the expected losses in situation that lie outside the coverage of

VaR Margin.

M2M LOSSES: - M2M Losses shall be collected in following manner:-

The stock exchange shall collect M2M Margin from member/broker before the start of the

trading day.

The M2M Margin shall be collected/adjusted from/against the cash/equivalent

component of the liquid net worth deposited with the Exchange.

The M2M Margin shall be collected on the gross open position of the members. The gross

open position for this purpose would mean the gross of all next position across all the

clients of the members including his proprietor position.

The margin so collected shall be also with the pay in including early pay-in of securities

VaR Margin: - Computation

The VaR Margin is the margin intended to cover the large loss that can be encountered on 99%

of the days (99% value at risk). For liquid stocks the margin covers one day losses while for

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liquid stocks it covers three days losses so as to allow clearing corporation to liquidate the

position over three days. This leads to a scaling factor of square root of three for liquid stocks.

For liquid stocks, the VaR Margins are also based on the volatility of the stock while for other

stock; the volatility of the market index is also used for computation.

Computation of VaR Margin includes following terminologies:-

SCRIP SIGMA: - Scrip sigma means the volatility of the security computed as at the end of

the previous day. The computation usage the exponentially weighted moving average manner

as in the derivative market.

SCRIP VaR: - Scrip VaR means the highest of 7.5% or 3.5% scrip sigma.

INDEX SIGMA: - Index sigma means the daily volatility of the market index (S&P CNX

NIFTY OR BSE SENSEX) computed as on the ending of the previous trading day. The

computation usage the exponentially weighted average moving method applied to daily returns

in the same manner as in derivative method.

INDEX VaR: - The highest of 5% or 3% of the higher of the Sensex VaR of Nifty VaR would be

used for this purpose. The VaR Margins are specified as follows for different group of stock:-

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Collection of VaR Margin:-

The VaR Margin shall be collected on an upfront basis by adjusting against the total liquid

assets of the member at the time of trade collection of T+1 day is not acceptable.

The VaR Margin shall be collected on the gross open position of the Member. The Gross

open position for this purpose would mean the gross of all net position across all the clients

of a member including his proprietary position.

For the purpose there would.

The VaR margin so collected shall be released along with the pay in including early pay-

ion of securities.

EXTREME LOSS MARGIN:-

45

LIQUIDITY

CATERGORISATION

ONE DAY VaR SCALING FACTOR

FOR LIQUIDITY

VaR Margin

Liquid Security

(Group 1st)

Scrip VaR 1.00 Scrip VaR

Less Liquid Securities

(group 2nd)

Higher of scrip VaR

and three times of

Index VaR

1.73(Square root of 3) Higher of 1.73 times

scrip VaR and 5.20

times Index VaR

Ill Liquid Securities

(group 3rd)

Five times Index VaR 1.73 8.66 times Index VaR


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It covers the expected loss in situation that go beyond those envisaged in the 99% VaR

estimated used in VaR margin.

The ELM for any stock shall be higher of 5% or 1.5% times the Standard Deviation of

daily logarithms return s of the stock price in the last six months.

The computation shall be done at the end of month by taking the price data on a rolling

basis of past six months and the resulting value shall be applicable for the next month.

The ELM shall be collected/ adjusted against the total liquid assets of the member on a real

time basis.

The ELM shall be collected on the gross open position of the member. The gross open

position would be same as mentioned above.

The ELM so collected shall be release along with pay-in.

BASE MINIMUM CAPITAL:-

The Stock Exchange shall have the BMC requirement as provided below:-

BSE, NSE & CSE Rs. 10 lakh.

Ahemdabad stock exchange & DSE Rs. 7 lakh.

Other Stock exchanges. Rs.4 lakh

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Provided that the Stock Exchange shall maintain the BMC at Rs.1 lakh of the average daily

turnover is less than Rs 1 crore for any three consecutive months.

BASE MINIMUM CAPITAL CAN BE EXPLAINED IN DETAIL:

Point

no.

SEBI Points Exchanges Reply

8 (1 ) Minimum Base Capital of the

Exchange( Adjustable & Non

Adjustable Capital )

Non Adjustable

Capital required for all risk other than

market risk ( for example operation risk

and client claims )

8 ( 2 ) Composition of BMC Rs. 50,000.00 12.50% Cash

Rs. 1,50,000.00 37.50% Cash/FDR

Rs. 2,00,000.00 50.00% Cash/FDR

Approved

Securities

8 ( 3 ) Minimum Period of validity Fixed

Deposit.

2 / 3 years

8 ( 4 ) Procedure for continual monitoring

expiry of BG and FDs

Month wise reviewing the FDRs and

necessary notices issued to the concerned

members in advance for renewal and

also sending the FDRs to the Bank for

renewal.

At present there is no BG deposited in

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the Market Operation Department.

8 ( 5 ) Institutions whose FDs/ BGs are

accepted

FDR accepted of all scheduled banks

and Standard Chartered Bank, Vysya

Bank8 ( 6 ) Securities accepted towards the

BMC

Yes.

8 ( 7 ) Methodology & Frequency for

valuation of Securities

Daily basis

8 ( 8 ) Whether Securities Pledged in

favor of the Exchange.

Yes.

8 ( 9 ) Safe custody of Securities

(Custodian of the Exchange)

Fire proof Almirah and details of Back-

up of Securities is kept in Bank Lockers.

Demat securities are pledged with Stock

Holding Corporation of India Ltd.

8 (10 ) Action taken if BMC falls below

minimum prescribed.

The trading terminal of the concerned

member is deactivated automatically and

efforts for the recovery of BMC are

being made continuously.

8 (11 ) Process of replenishment of the

shortfall in BMC

Requiring the members concerned to

complete the BMC through notice or

telephonic mode and till completion of

BMC the trading terminal of the

concerned member will remain

deactivated.

8 ( 12 ) Action taken by the Exchange

against member for non

replenishment of shortfall.

As stated above

8 ( 13 ) Process of calculation of Free 50 % of Liquid Assets and 50% of

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Capital. other liquid

8 ( 14 ) Process to replace existing

collaterals of the banks from whom

the collaterals were being

discontinued to be accepted by the

Exchange ( if any )

Nil

8 ( 15 ) Note on Additional BMC

requirement of the Exchange which

includes the following among other

things :

Composition,

Procedure of continual monitoring

Withdrawal of Additional Capital,

Manner and timing of collection.

Period of lock-in.

Procedure of release of Additional

Capital.

50 % of Liquid Assets and 50% of

other liquid

As per members request releasing the

excess Additional Capital.

8 ( 16 ) Please provide a note on the inter

segment transfer of BMC.

Not Transferable.

8 ( 17 ) Please provide note on BMC

requirements in case of composite

members :

N.A.

8 (18 ) Please provide the details with

respect composition of BMC and

AC in the following format for the

As per details given below

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above given sample dated

22.10.2008

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LEGAL DEPARTMENT

Legal Department is one of the key departments of any organization as Law has to maintain certain

compliances to maintain law and order.

Stock Exchange has a legal department that deals with the legal matters. Legal department

consists of a panel of legal experts who are legal representative of UPSE and take cares of its legal

requirements.

The main function of the department is to protect investors interest and to solve their grievances.

However, grievance is tried to sort out at initials stage by Grievance Department working under

Membership Department. If judgment is not satisfactory, an Arbitrator is appointed. If still

Member is not satisfied and further appeal is in court against Stock Exchange , Legal

Department comes into action as representative of UPSE and pleased on behalf of UPSE.

The cases mainly related to:-

Cases filed against the members for bad delivers.

Cases filed as an appeal in the District Court and then in High Court.

Cases filed by the members and non members against any order passed by the Exchange.

In cases any broker / member declared as defaulter.

The legal department gives advice to various departments on legal matters when required.

Whenever there is a proposed change in byelaws of exchange, the legal department takes

proper steps for incorporation of such changes.

Co ordination with other departments of the Exchange for implementation of various sebi

circulars.

Compiling and forwarding the pre inspection reports.

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Compiling and forwarding the compliance report on the SEBI inspection report (conducted

every year).

The section also fulfills all statutory requirements under Companies Act like:-

Preparation of board meetings Notice, agenda and minutes.

Preparation of Notice calling AGM & EGM.

To handle all the company related affairs under companies a ct.

Similar works relating to UPSE Securities ltd. (a wholly subsidiary of UPSE Assoc. Ltd.)

are also handled by the section.

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CLEARING DEPARTMENT

Clearing House is one of the important department of Uttar Pradesh Stock Exchange as it looks

after the pay in and pay out of funds and shares .It acts as an effective mediator between the

brokers of the exchange and investors who want to purchase or sell the securities .Clearing House

helps the stock exchange in providing the facilities of sales and purchases of shares to the client

through their brokers ,and enabling the trading settlement as per the rules and regulations

prescribed by the SEBI .In stock exchange nobody can sell or purchase securities directly,

therefore clearing house makes an adjustment in transactions taking place and helps in evaluating

the total sales and purchases of the stock exchange.

Presently rolling settlement T+2 are applicable in the exchange .The settlement takes

place as:

Timing

Start

Time

End Time Remarks, if

any

Activity Involved in this session

Beginning

of day

9.35 9.42 All the application servers start in this session,

but broker cannot login in this session.

Pre-open

Session

9.42 9.50 Members can login in this session and place limit

orders (i.e., orders with price) only. The orders

are not matched during this session

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Opening

Session

9.50 9.55 During this session, the members could stay

logged on but cannot put orders. During this

session, opening price for each scrip is

computed, based on the price which maximized

trading volume i.e. price at which maximum

trades can be executed based on the orders

placed during pre-open session. In case there are

not trades matched the previous days close price

becomes the current days opening price.

Trading

Session

9.55 3.30 Normal trading session. Members can place

orders and do trading.

Closing

Session

3.30 3.40 System is not available for use. Closing price for

each scrip is computed based on weighted

average of last half an hour trades in particular

scrip. In case there is no trade during the last half

an hour, the average of last five trades is taken

for arriving at closing price.

Post

Closing

Session

3.40 3.55 Only Broker can login and allowed to do client

code rectifications only.

End of day

Session

3.55 Members can download their trades.

Break - - No session

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Session

Odd-Lot

Session

9.56 3.28 No Trading

Spot

session

- - No Trading

Auction

Session

1.30 2.30 During this session only solicitor members

(members other than member who failed to give

delivery) can place orders. The solicitor orders

once placed cannot be cancelled. Modification of

orders is only allowed to the extent of bettering

the price or increasing the qty.

When an investor sell their securities then it is necessary to deposit their shares and securities in

the exchange's account in case of sale and in case of purchase the amount is paid to the exchange

by the investor through their broker.

If any broker / client fail to deposit their shares in the exchange up to the time of pay in of

securities then those shares would be treated as shortage or short delivery.

In case of short delivery shortage is recovered by on-line auction on T+2 day. If

securities are not available in the on-line auction on T+2 day within the prescribed price limit then

the transaction is closed out as per the rules and norms of the exchange.

At the time of auction of short delivery the loss is borne by the defaulter broker and if

profit is earned by auction then that profit is deposited in Investor Protection Endowment Fund

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account of the exchange .On T+3 day the settlement of auction delivery is done, therefore clearing

house plays a significant role in the trading of shares/securities.

A BRIEF NOTE ON AUCTIONS & CLOSE OUT CARRIED OUT AT

EXCHANGE

If securities are not available in online auction on T + 2 day within the prescribed price limit (i.e.

25% of the current market rate), then the transaction is closed out as per the standard procedures

specified by SEBI.

The close out price will be the highest price recorded in that scrip on the exchange in the

settlement in which the concerned contract was entered into and up to the date of auction / close

out.

OR

20% above the official close price on which auction offers are called for ( and in the event of there

being no such closing price on that day , then the official closing price on the immediately

preceding trading day on which there was an official closing price).

WHICHEVER IS HIGHER

Since in the rolling settlement the auction and the close outtakes place during trading hours hence

the reference price in the rolling settlement for the close out procedure would be taken as the latest

available closing price at the exchange.

As per SEBI letter no.SMD / POLICY / CIR- 08 / 2002 dated 16 th April 2002 that in cases of close

out to the extent of short delivery if the shares cannot be acquired in auction or cum basis then the

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mark up price would be 10% instead of 20%

DEACTIVATION OF TRADING TERMINAL AND IMPOSITION OF

PENALTY

In case of any default by a members regarding timely pay in of the fund trading terminals of the

concerned members is being deactivated and penalty is also being imposed upon the concerned

members as prescribed by the exchange from time to time. On the receipt of complete amount of

the pay-in and penalty imposed the trading terminal of the concerned member is being reactivated.

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 malpractice. the surveillance function at the

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exchange has assumed greater importance over the years .SEBI has directed the exchange in

August 1995 to set up a surveillance department with staff exclusively assigned to surveillance

department to keep a close watch on price movements of scrip, detect market manipulations like

price rigging etc, monitor abnormal price and volumes which are not consistent with normal

trading pattern and keep a watch on the exposure of members .the surveillance department

performs the following function:

1. RISK MANAGEMENT: - The Risk Management system has improved in the recent past

because of positive steps taken by the exchange in terms of prescribing capital adequacy norms for

members, margins, on-line surveillance and inspection of broker's books. The Margin system has

become more sophisticated to consider the factors of volatility volumes and other factors. The

Margins are required to be compulsorily collected from the client by the brokers. A Quarterly

certificate has been prescribed for compliance of margin system with the infrastructure of risk

management enhanced. The Stock Exchange as well as investors would be better protected towards

risk of various scams that had shaken the market.

The various Margins collected by the Exchange are:-

.Mark to market margin

.Value at risk margin

.Extreme loss margin

2. PRICE MANIPULATION:-The functions of price monitoring and investigation have been

entrusted to the surveillance department, where large variation in the prices as well as scrip is

scrutinized and appropriate actions are taken. The scrip which reaches new high or new low and

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companies which have high turnover are watched. Also the prices and volumes in the newly

introduced scrip are monitored. Detailed investigations are conducted in the cases where price

manipulation is suspected and disciplinary actions are taken against the members concerned.

3. INSIDER TRADING:-The most important function of this department is to prohibit insider

trading .Insider Trading denotes dealing in a company's security on the basis of confidential

information related to the company .It generally means trading in shares of a company by a person

who is in the management of the company or are close to them on the basis of undisclosed price

sensitive information regarding the working of the company that they know but is not available to

others.

4. MEDIA ALERT:-This is also an important function, before the company information gets

printed in newspapers; they have to be verified by the department. This is necessary in order to

find out whether company is concealing any material facts.

5. OTHER MANIPULATIONS:-Other manipulations like carry forward trading are also

taken care of.

PURPOSE OF SURVEILLANCE

Purpose of surveillance is to prevent risk which may arise due to:

Carry forward trade

Trade away from market price

Price manipulation

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Insider trading

Circular trading

Creating false market

In order to detect abnormal behavior / movement it is necessary to know the normal market

behavior. The necessary actions are initiated like imposition of special margin , suspension

and deactivation of terminals etc. to control abnormal market behavior the department

carries out investigation , if necessary , based on preliminary examination Analysis and

suitable actions are taken against members involved based on investigation. The detailed

activities are as follows:

ONLINE SURVELLIANCE: one of the most important tools of surveillance is the

online real time surveillance system with main objective of detecting potential market

abuses at a necessary stage to reduce the ability of the market participants. To unduly

influence the price and volume of the scripts traded at the exchange, improve the risk

management system and strengthen the self regulatory mechanism at the exchange the

system has a facility to generate the alerts online based on certain preset parameters like

prices and volume variations in scripts, members crossing intraday limits or gross exposure

limits.

OFFSHORE SURVEILLANCE: the offshore surveillance system comprises of various

reports based on different parameters and securities thereof:

High / low difference in price

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% change in prices over a week / fortnight / month.

Top scripts by turnover

Scripts hitting new high / low etc

The surveillance actions or investigations are initiated in the scripts identified from the

above stated reports.

R&D DEPARTMENT

R&D Department performs three works:-

Assistance to investors by Investors cell service.

Maintains library.

Provides stationary.

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Conduct research and development.

INVESTOR SERVICE CELL:-

This wing has been functioning since 1992 under SEBI directors & providing valuable services to

investors. Investor service Cell has been made to help (potential) investors in many ways. Whether

its about their queries of stock market or solving their investment problem. The assist them in

their queries of stock market and solving their investment problems. The cell assist them in

technical matters that consist of legal provision/procedure that secures their interest .Besides , cell

works to aware investors about their rights and duties. INVESTA is an endeavor in this direction

by SEBI. SEBI has designated different Stock Exchanges to arrange INVESTA zone wise.

UPSE has been designated 176 places in UP and UTTARANCHAL for cause. The program also

makes investors aware about the precaution to be taken while investing and investment decision is

left on investors direction.

The whole account of INVESTA is given by R&D Dept. to Finance dept. and to management of

stock Exchange. All expenses are borne by SEBI for this sake a separate fund Investor Protection

Fund is maintained.

RECORDS TO BE MAINTAINED BY INVESTA:-

This is the duty of R&D dept. to maintain the necessary records of INVESTA because the same

has to be submitted to the SEBI. The various records which are to be maintained by R&D dept. for

INVESTA are:-

Schedule for monthly program to be approved by the administration.

Attendance registers for INVESTA.

Monthly statement of Program conducted.

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OTHER SERVICES:-

UPSE has set up UPSE & BSE Terminals for investors to enable them to know the quote of

various scrip listed on that.

Information regarding change of names of companies, mergers of companies, e-merger of

companies is made available.

Address of companies is can be known from here.

IPOs forms of various companies are available.

A view terminal has been provided on which the investors can watch CNBC, ZEE

BUSINESS, NDTV PROFIT and other business news channels.

If the investors have queries regarding any member, he can contact the Investor Service

Committee, formed for this purpose.

LIBRARY AND STATIONARY:-

Departments maintains a rich library of various Acts , Laws ,Amendments, Articles regarding

Capita Market like SEBI manual, Income Tax Act, Companies Act, Listing Agreements and

the latest changes done by SEBI. Departments also subscribe various books, magazines and

newspaper regularly, like The Times Of India, Economics Times, Business Standard, The

Financial Express, Business Line and all the other leading newspaper and Magazines like Dalal

Street, Capital Market and various magazines are available for members/ investors.BSE

quotations regarding book closure, dividend etc and financial reports of companies are also

made available for their knowledge sake.

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Department also deals with Stationary cell. Share transfer deeds, challans, receipt books Bye

laws etc. are sold on No profit No loss basis. The cell regularly maintains the stationary records

(sale, purchase and stock) that is sent to and approved by the Accounts Department.

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WORKING OF LISTING DEPARTMENT

This department deals with all the work relating to the listing of securities.

The company which is not listed on the stock exchange should adopt a request letter of application

for the enlistment of its securities therein. The company must apply for listing of the share in the

prescribed application form within 10 days of the filling of prospectus with the registrar of

companies along with certain documents. i.e.

Memorandum and Article of Association

Debenture Trust deed

Prospectus

Underwriting agreement

Particulars of dividend, arrear of dividend

Director report, balance sheet for last 10 years

Short history of the company etc.

The company desirous of listing has to execute with the exchange a detailed agreement in the

prescribed form. The listed company which need further issue. Does applies on other prescribed

letter of application and supporting documents, there are four steps in the listing procedure.

Application company communicates to the stock exchange

Preparation and printing of formal application

Investigation of committee of thaw board of directors

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LISTING OF SECURITIES WITH STOCK EXCHANGE

Meaning of listing

Listing means admission of the security of a public limited company on a recognized stock

exchange which provides a forum for the purchase and sale of securities.

Prior to the promulgation of companies (Amendment) act.1988 listing of securities offered

to the public for subscription was not compulsory. Companies were free either to enlist or not to do

so at their discretion.

But Section 73 (before amendment) provides that if the prospectus of an Issue contains a provision

that the securities arising out of the Issue will be listed on the Stock Exchanges, it has to do so and

failure of which may result in the refund if applications money collected. Thus listing was not

mandatory. Nevertheless companies generally prefer to enlist their securities for envious reasons.

But listing was not made within a reasonable time.

Having regard to undesirable activities and in order to protect the interest of the investors, a

sub-section was introduced into Section 73 of the companies act 1988. This sub-section provided

for the compulsory listing of all issue of securities offered to the public for subscription at one or

more Stock Exchangs.

Further, according to the listing requirements of the stock exchange provide that, if the

issue amount exceeds 3 crores the company has to make arrangements to enlist the securities in

one or more Stock Exchanges, apart from the Regional Stock Exchange.

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SECTIONH 73 Explained:

According to section-73, every Company intending to offer Shares or Debentures to the public for

subscription by the Issue of a Prospectus shall before such issue make an application to one or

more recognized Stock Exchanges for permission Share and Debentures intending to be offered to

be dealt with in the Stock Exchange.

If a Prospectus starts that an application has been made for permission for the Shares and

Debentures offered thereby to be dealt in one or more Stock Exchange, then any allotment made on

any application shall be void, if the permission by the Stock Exchange is not granted before the

expiry in 30 days from the date of closure of Subscription Lists. The entire application money

collected shall be refunded without interest within 8 days after the Company becomes liable to

repay it.

The money standing to the credit of such separate bank account shall not be utilized for any

purpose, other than the following:

a) Adjustment against allotment of shares, where the shares have been permitted to be dealt

on the Stock Exchanges

Or

b) Repayment of money received from the applicants, where applications have not been

granted by the Stock Exchange.

By reading the opening words of this section it seems that the provisions contained there in

not applicable for the following issues:

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(a) Issues made otherwise than through a Prospectus.

(b) (b) Issues of other instruments, which do not tantamount to the issue of Capital.

For example, if a company issue only Warrants or Coupons. It will not be hit by the provision of

Section 73 as they do not involve any issue of Capital.

Presently, this initial application has to be submitted to the concerned stock exchange before filing

of the prospectus with the ROC who may insist for these Acknowledgements.

Advantages of Listing

Listing of securities has certain advantages which can be summarized as follows:

1) The investors get periodic reports of the listed companies which help them to know

the performance of the company. Following the recommendations of the High

Powered Committee on Stock Exchange Reforms the Government vides guideline

no. F/14/2/SE/85 dated September 27, 1985has made it obligatory for all listed

companies to submit unedited financial results on a half-yearly basis within 2

months of the expiry of that half year.

2) The transactions of listed companies are reported in daily newspapers and the

investing public gets regular information about the worth of the securities.

3) Listing ensures liquidity to the investing public and free transferability of securities.

More so after incorporation of Section 22A in the Securities Contract (Regulation)

Act, free transfer of shares has been ensured.

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4) The listed companies are treated as widely held companies get wide publicity and

thus get an opportunity for further issue of securities once they consider that their

worth will attract the public for subscription.

Disadvantages of Listing:

1) Once the Shares are listed, the Company subjects themselves to various regulatory

measures of Stock Exchanges and SEBI.

2) Listed companies must submit notices and disclose vital information to the Stock

Exchanges

3) The Company has to send notices of Annual General Meeting, (AGM) Annual

Reports etc., to a large no. of shareholders, resulting in unnecessary expenditure.

4) Companies have to spend heavily in the process of placing the Securities with the

Public

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QUALIFYING CRITERIA FOR LISTING

Before going for the listing of securities there are certain minimum requirements which a

company has to comply with before its securities can qualify for listing on a recognized

Stock Exchange. These are:

a) Minimum issued capital:

As per requirem

Documents

viresh yadav