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UNDERSTADNING SECURITIES MARKETS & PERFORMANCE

Financial market

A financial market is a place in which people trade i.e. buy/sell of financial securities and derivatives.

Types of financial market

 1. Money market

The money market is an organized exchange market where participants can lend and borrow short-term, high-quality debt securities.

Types of money market

1. Organized money market / short term borrowings - systematically coordinated by the RBI and other market regulators such as T-bills (are short term debt instruments issued by the Government of India), CDs.

2. Unorganized money market / Indigenous bankers - is not regulated or registered in India such as money lenders, pawn brokers etc

2. Security market

Securities “The term “securities” has been defined in Section 2 (h) of the Securities Contracts (Regulation) Act, 1956”

Securities includes Shares, Scrips, Stocks, Bonds, Debentures, derivatives, govt securities and other marketable securities in nature.

The security represents the terms exchange of money b/w 2 parties, security is issued by companies, financial institutions and govt.

“The market in which securities are issued, purchased by investors and subsequently transferred among the investors”

Types of Security market

1.      Primary market
2.      Secondary Market

 Types of Primary market

IPO OR NEW ISSUE - Companies which needs capital to increase its business growth intends to raise the fund using IPO before entering the stock exchanges.

1. Issued through investment banks hired.
2. IPO issue the net worth of the company should be 1 RS crore.
3. IPO issue size must not exceed 5 times the company’s net worth.

Steps to register the IPO.

1. Provide the 3 years financial report to NSE.
2. "0" in NCLAT & NCLT (national company law appellate tribunal / national company law tribunal)
3. No constant losses
4. Paid of equity capital of RS 10 Crores
5. "0" disciplinary action against any of shareholders or BOD

Private Placement - It refers to issuing large quantity of shares to a select set of investors. According to Companies Act 2013, the number of investors to whom shares are issued under private placement should not exceed fifty. Private placements can be in the form of qualified institutional placements (QIP) or preferential allotment. 

Onshore and Offshore Offerings - While raising capital, issuers can either issue the securities in the domestic market and raise capital or approach investors outside the country. If capital is raised from domestic market, it is called onshore offering and if capital is raised from the investors outside the country, it is termed as offshore offering.

 Offer for Sale (OFS) – is a form of share sale where existing shareholders to sell shares that have already been allotted to them to another party.

 

 Secondary market

   "Trade life cycle"

 

 OTC MARKET – “Decentralized market where unlisted securities traded directly b/w 2 parties to buy/sell securities through electronic mode.”

Ex – FOREX is an OTC market

Ex: there is small company looking to raise a capital which doesn’t meet the requirement of listing or you’re an investor who wants to invest in some exotic funds which is not listed in NYSE or NSADAQ. This people enter into OTC market, where trading is done electronically.

OTC allows investor to trade stocks, bonds, derivatives and other financial instruments directly b/w 2 parties without the supervision of a formal exchanges.

EX: AAPL, MFST…etc are traded in OTC market.

OTC markets do not have physical locations or market makers (a firm or individual who actively quotes both B/S sides in market for particular securities)

OTC shares are called penny stocks since they trade for > 5$ per share.

Ex;- OTC is like pharmacy, where medication can be bought without doctors prescriptions.

 

“FINRA (financial industry authority) was est 1939 to regulate the OTC market, operated through network of market makers who facilitate the trade b/w investors”

Feature	Exchange	OTC
Platform	Centralized	De-centralized
Pricing	Determined through auctions	Negotiated b/w buyers & sellers
Transparency	High	Low
Regulation	Govt agencies and exchanges life NASDAQ	Less regulated by agencies like FINRA & SEC
Products	Stocks, bonds, options and futures	Delisted securities, stocks, bonds, debentures.

 

How Can I Invest in OTC Securities?

Investing in OTC securities is possible through many online discount brokers, which

typically provide access to OTC markets.

However, it's essential to note that not all brokers offer the same level of access or support for OTC investments. Some brokers may limit trading in certain OTC securities (such as "penny stocks") or charge higher fees for these transactions.

OTC broker: - Interactive Brokers, tradestation and zacks trade

 

How Are the OTC Markets Regulated?

1. OTC is regulated by SEC & FINRA.
2. SEC - securities exchange commission sets the regulatory framework for OTC.
3. FINRA – oversees the day to day operations and compliance of broker- dealers participating in the OTC Market. 

STOCK EXCHANGES – Trade happens virtual b\w buyer & seller of stock, Trades executed & settled by clearing agencies acts as intermediaries b\w 2 Parties.”

A stock exchange is a centralized location where the shares of publicly traded companies are bought and sold. 

1. Fixed income instruments - regular interest payment on the principal amount invested such as bonds, debentures
2. Variable income – the returns vary as per the market volatility such as equity, derivatives
3. Hybrid instruments – offers both fixed and variable returns on investments such as convertible debenture bonds

 

List of stock exchanges

New York Stock Exchange: the New York Stock Exchange (NYSE) requires a company to have issued at least 1.1 million shares of stock worth $40 million and must have earned more than $10 million over the last three years.

NASDAQ Stock Exchange: NASDAQ requires a company to have issued at least 1.25 million shares of stock worth at least $70 million and must have earned more than $11 million over the last three years.

London Stock Exchange: the main market of the London Stock Exchange requires a minimum market capitalization (£700,000), three years of audited financial statements, minimum public float (25%) and sufficient working capital for at least 12 months from the date of listing.

Bombay Stock Exchange: Bombay Stock Exchange (BSE) requires a minimum market capitalization of ₹250 million (US$3.0 million) and minimum public float equivalent to ₹100 million (US$1.2 million).

The Shanghai Stock Exchange (SSE): To be eligible for an initial public offering (IPO) a company must meet certain criteria such as minimum market capitalization, a minimum net profit, and a minimum number of shareholders. Also, the company’s total share capital must not be less than RMB 30 million. 

Secondary market products

1.      Equity (shares, scrip, and stocks)

2.      Debentures

3.      Foreign currency Bonds

4.      Mutual funds

5.      Derivatives

6.      CD's

7.      Government securities

8.      Other financial instruments which is tradeable in the markets or OTC.

 1.      Equity - > fractional ownership in a business, who bears the risk of market fluctuations and benefits the profit earning from business either by Dividends or increase in the share value.

" The no. of shares hold in hand; the value might increase or decrease based on company performance in the market."

 

" EQUITY = TOTAL ASSETS - TOTAL LIABILITIES" 

 

Advantages         High returns          Hedge against inflation         Ease of investment          Voting rights             Decision-making rights

Disadvantages             High risk             Paid as per performance.             Liquidity risk – company unbale to pay is debt.             Social & political change

TERMINOLOGY USED IN EQUITY

1. FACE VALUE – Nominal price value of the company shares issued in the market. DIVIDENDS is calculated based on FV of the equity shares.

Ex:- if the FV is 10, company issue 30 % dividend on per share value = 10*30% = 3 per shares, If Ram holds 300 shares = 300*3=900 Rs dividends is given.

Equity capital = face value * no of shares

Or

Face value = Equity capital / no of shares o\s

 

Face value changes unless the STOCK SPLIT or STOCK CONSOLIDATION

Stock split – 1 STOCK will be split ’ed into multiple stocks with no change in the overall capital holdings, which results into reducing the per share price for trading. The higher the price of the share the lesser the buyer, to over come this most of the companies go for Split options to engage the traders and to increase the value of the stock.

Stock consolidation – reverse of stock split – where multiple shares is gathered into 1 share as per the company decision and stock consolidation is not good factor and it decreases the value of equity price.

Stock consolidation is done by underperforming companies to maintain the trading flow in the exchanges before it gets delisted from the SEBI.

“The capital value remains same”.

 Ex – ABC goes to SC for 5 shares into 1 and Ram holds 100 shares of 5 Each at present. So, 100/5 = 20 shares and equity price 5*5=25 per share = so total 20*25 = 500 or 100*5 = 500.

 

2. BOOK VALUE – Shareholder’s Equity Total net worth of the company (total cash remaining once the company assets is sold or by the time of winding up of the company)

BE = total assets – total liabilities

Total asset – current asset + non-current asset

Total Liabilities = current liabilities + non-current liabilities

 

3. Market Value – market Capitalization, per value of the shares currently trading in the market multiplied by number of O\S shares.

MVE = O\S shares * current price of share

 

4. REPLACMENT value – cost of replacing the existing assets based on the current market price.

 

5. INTRINSIC VALUE – Assets worth based on how much profits the company makes. (future growth)

Ex: Employee is an asset to the company; their performance determines the company growth.

 

6. Market Capitalization – money required to buy the entire company at the current market price.

Market capitalisation = O\S shares * current value of the shares.

 

7. Enterprise value - entire value of the business without any considering the capital structure. When the market value is difficult to determine, Analysts uses balance sheet to determine the current value of the business.

EVE = Market capitalisation – present cash or other financial instruments

 

8. EPS – Earning per shares.

EPS = NET INCOME – PREFERRED DIVIDENDS / O\S EQUITY SHARES

Net Profit or net income = TOTAL REVENUE – TOTAL EXPENSES

 

Ex: ABC Ltd has a net income of $1 million in the third quarter. The company announces dividends of $250,000. Total shares outstanding is at 11,000,000.

The EPS of ABC Ltd. would be:

 EPS = ($1,000,000 – $250,000) / 11,000,000

       EPS = $0.068.

 

9. Dividends per share - a portion of profits earned during a year is disturbed to the equity shareholders, Dividends is paid on the face value of the share price.

 

10. PE ratio – PRICE EQUITY RATIO is price at which the investor is willing to pay for stock for the earnings of the company.

PE ratio = market price per share / EPS

 

A high P/E ratio mean that a stock's price is high relative to earnings & possibly overvalued. A high PE ratio means that a stock is expensive, and its price may fall in the future.

A low P/E ratio might indicate that the current stock price is low relative to earnings.

The lower the P/E ratio is, the better it is for both the business and potential investors.

 

11. PRICE-TO-BOOK VALUE RATIO (P/BV) – it measures the current market price (CMP) with its book value and locate the undervalued companies.

P/B ratios under 1.0 are typically considered solid investments by value investors.

 

P/R ratio = CMP / book value per share

CMP (Market Price per Share) = Current market price of the share

Book Value per Share = (Total assets - total liabilities) ÷ number of outstanding shares

 

12. Differential Voting Rights (DVR) - are a class of shares that grant varying voting rights to different shareholders within a company. They allow certain shareholders to exercise multiple votes per share, amplifying their influence over decision-making processes.

 

Equity Analysis and valuation

1. Technical analysis – is based on all the information that can affect the performance of a share such as, company fundamentals, economic factors, and market sentiments are reflected in the stock prices.

a.      It converts the data into chart for better understanding of the movement of stocks

b.      Short term investor and traders will invest based on technical analysis.

c.      Not suitable for long term investment

d.      3 essential tools

                                                i.      Historical data

                                              ii.      Trading volume with price movement

                                            iii.      Time span inflicting the price change.

 

2. Fundamental Analysis – it involves both quantitative and qualitative studies. focus on long term investment. The analysis is based on the Company returns on the share capital as its main invest is on Equity share capital investment.

e.      It involves comprehensive study of companies macro-economic trends.

f.      

Competitive factors

g.      Company cost valuation

h.      Companies financial position

i.       Management strategies

DEBENTURES -> Kinds of bonds or instrument notes issued for raising long term debt based on credit worthiness and goodwill of the company.

Debt can be secured or unsecured bonds.

Debt is paid back with interest called COUPON payments.

 

Based on security
Secured	Unsecured
Company’s assets are pledged. Right to sell the assets in cases company defaults to pay interest or principal.	Company’s assets are not pledged. No preferential rights During wounding up of the company settles the unsecured debt also

Based on TENURE
Redeemable	Irredeemable
Re-paid @ end of specified period. Paid in once or instalments basis. Premium or face value of the debt taken is paid.	Paid @ the time of Wounding up of the company.

Based on CONVERTABLITY
Convertible	Non –convertible
Convertible to Equity or any other security over the lapse of time Fully convertible – bond is fully converted into Equity. Partly convertible – Partly is converted into Equity & rest is redeemed by company through BUY BACK options.	Can’t be converted into equity and is redeemed over a time on a specified date at the time of issuing the debentures.

Based on COUPON RATE
Specific coupon rate	Zero coupon rate
Rate of interest are specified in prior irrespective of either the company makes profit or loss.	No interest is paid, bond is sold at discount to the buyers. Issue price – maturity value = interest gained.

Based on Registration
BEARER	REGISTERED
Easy to transfer. No registration doc. negotiable	Non-transfer Registered in company records. non-negotiable

2.1 Terminology of debts

Coupon rate – interest paid on the bond / debt security.

Maturity – Tenure of the bond.

Principal – initial investment made by the investor when issuing the bond by the borrower. On redemption the entire bond amount is refunded.

Redemption of bond – when bond matures the investor redeems the investment amount on the bonds.

HPR (holding period returns) – Return earned during the period of the bond invested.

Current yield - Measures the Expected annual return on bond.

Current yield = annual coupon / current bond price or coupon rate/market price

Ex : The 8.24 GS 2018 is trading at Rs. 104, the current yield would be:

Current Yield = (8.24/104) = 0.07923 = 7.92%

 

YTM (yield to maturity) – more used measure to calculate the return on debt investment. It considers all the future cashflows.

YTM = Annual coupon + (FV- – PV) ÷ Number of Compounding Periods] ÷ [(FV + PV) ÷ 2].

FV – FACE VALUE

PV – PRESENT VALUE

C – COUPON

N – NUMBER OF COMPOUNDING PERIODS

Duration – time duration effects the interest rate of the bonds.

The longer the duration, the more sensitive the bond or portfolio is likely to be to changes in interest rates.

The shorter a bond's duration, the less volatile it is likely to be.

EX: bond with a 1-year duration would only lose 1% in value if rates were to rise by 1%. In Contrast, a bond with a duration of 10 years would lose 10% if rates were to rise by that same 1%.

Discounted cashflows - Discount Factor = 1 / (1 + Discount Rate) ^ Period Number

The discount factor is a value between zero and one that decreases over time as the period number increases. This is because the discount factor assumes that money today will be worth less in the future due to inflation . 

The discount factor is used in financial modelling for a number of purposes, including: Calculating net present value (NPV), Discounted cash flow (DCF) analysis, Making the DCF model easier to audit, and Better illustrating the effect of discounting.

Ex - Amit buys a 5-year bond issued at face value of Rs.100 and redeemable at par. Coupon rate is 10 percent, payable annually. What is the value of the bond if the market yield is 8 percent?

Face value – 100

Coupon rate – 10

discount rate – 8

Tenure – 5 , so end of the year the bond is paid with interest and premium – 10+100 = 110

^ = no of times multiple the numbers

Discount Factor = 1 / (1 + Discount Rate) ^ Period Number                        

Discount Factor = 1 / (1 + Discount Rate) ^ Period Number
years	cashflow	1(1+discount rate) ^periods	Discounted cashflow
1	10	0.93	9.26
2	10	0.86	8.57
3	10	0.79	7.94
4	10	0.74	7.35
5	110	0.68	74.86
total			107.99

 

FOREIGN CURRENCY BONDS

“Foreign currency bonds are bonds issued by a company in a currency that is different from the currency of its home country”.

Euro bonds

Domestic Bonds

Foreign bonds

 

MUTUAL FUNDS – portfolio of stocks, bonds or other securities tradable in the security MKT.

            Pooled investment by professional managers into one fund called as mutual fund.

Ex: Invesco India Contra Fund - Direct Plan - Growth

It consists of below list of funds from different sector making it has one pooled fund.

Advantages Professionally managed Less risk involved. Funds are diversified to mitigate the risk Minimal investment Vast types of investment offerings Liquidity

Disadvantages Less return Long maturity High fees are changed by AMC. Difficulty in comparison Lack of transparency in holdings

Earnings Calculated for Mutual Funds?

1. Dividend/interest income: Mutual funds distribute the dividends on stocks and interest on bonds held in its portfolio. Funds often give investors the choice of either receiving a check for distributions or reinvesting earnings for additional shares in the mutual fund. 
2. Portfolio distributions: If the fund sells securities that have increased in price, the fund realizes a capital gain, which most funds also pass on to investors in a distribution.
3. Capital gains distribution: When the fund's shares increase in price, you can sell your mutual fund shares for a profit in the market.

 

Types of mutual fund

Stock funds - > invest only Equity owned fund sector based on the size and growth level.

Ex ;- ICICI Prudential Blue  chip Fund (90.89 % INVESTED IN STOCKS)

Bond funds -> Consistent & minimum return, such as Govt. bonds, corporate bonds.

Index Mutual funds -> Replicating the performance of a specific index such S&P 500.

Balance funds -> invest in diversified sectors, irrespective of stock, bond, and Money market (banks, CD’s, T-bills)

Money market MF -> investment in money market instruments such as Govt T-bills as risk free and safe returns.

Income funds -> disbursement of income on steady basis, invested often as retirement investing. Bonds hold ’ed for certain maturity and interest is paid on regular streams. 

ETF’S -> basket of securities pooled in and like index fund which tracks on index, but in this fund can be traded on the stock exchanges. 

IDR’S (Indian Depository Receipts)-> a certificate proving ownership of a certain number of shares in a company that trades on a foreign exchange. 

American Depositary Receipts (ADRs): These depositary receipts issued and traded in U.S.A that are issued by a non-US company. 

Global Depositary Receipts (GDRs): These refer to depositary receipts that are allowed to be traded in more than one country.

REITs/InvITs Real Estate Investment Trust -> investment is pool from various investors and invest in revenue generating real estate projects and infrastructure projects, respectively.

Commodities: are basic materials or goods that are largely homogenous in nature. These goods are interchangeable with other goods of the same type. Thus, a bar of gold is a commodity while a jewelry made of the gold is not a commodity. 

Warehouse receipts: is a document that shows proof of ownership of goods that are stored in a warehouse. 

DERIVATIVES – a financial contract those values are derived from the underlying assets (value of the stock prices) such as equity, bonds, commodities, currencies and debentures.

1. 2 or more parties involved.
2. Trade only Exchanges & OTC market.
3. Leverage  the risk to gain more profit.
4. Includes options, futures, swaps and forward’s contract.
5. Hedge the position on holdings.
6.  Speculation of the price movement of underlying assets to leverage the holdings.
7. To use at it maximum advantage
8. Protecting the investment from risk / avoiding.

Participants of Derivative markets

1. Hedgers -> Traders who wish to protect themselves from price movements participate in the derivatives market. 

For example, a farmer may use futures contracts to lock in a selling price for his crops in advance of harvest.

2. Speculators – traders who are willing to take risk by taking future position with the expectation of making profits. Higher the risk higher the profit concept is applied.

3. Margin traders -> trader who take less risk to gain the minimal return on investment

4. Arbitrageurs -> Arbitrageurs seek to profit from price differences between different markets for the same asset.

For example, they may buy a currency at one exchange rate and then sell it immediately at a higher rate in another market.

Type of Derivatives

1. Forward – contractual agreement b/w 2 parties to buy or sell the underlying assets at certain date where the price is pre-determined or decided on the date of contract forming and it’s not traded in the Exchanges& OTC market.

                    “The contract is tailored suit as per the buyer & seller”.

Risk can’t be hedged since the contract can become void since it’s not standardized.

Ex ;- Owner & tenant forms the contract to pay a rent for house every month end.

·        Rent amount.

·        Payment date

·        Form of payment

·        Risk – charges property destruction.

“All the above factors will decide prior forming the contractual agreement between the tenant and owner.”

2. Futures -   standardized exchange traded contracts, where the 2 parties agree to buy and sell shares at pre-determined date as they are traded in Lots determined by the Exchanges. Clearing corporation plays the intermediaries between the buyer and seller assuring the delivery of the contract.

Ex:- A buys the 3months currency contract for 92.00 Rs, which expires on 20-dec-2024. After a month the price goes up by 100 RS and in these cases, “A” can sell the contract to hedge the high risk and earn profits with difference amount into number of lots purchased or he can hold until the contract expires if the value of the contract is going to increases. 

3. SWAPS – Where 2 parties SWAP or exchanges their financial obligations and liabilities to their rate of interest benefiting in the contract and traded only on OTC Market.

 

“The some of cash flow swaps are based on notional principal amount such as loan & bonds.”

Ex: If ABC has issued a 10,000 Rs Bond for 5 years with Variable interest rate of 1.5% PA, and its speculated that the interest rate may go up and its trying to Hege the risk of high interest payment on bond debts. Hence the Management finds the company “JKL” who is looking to Hedge its fixed interest rate of 2 % to Variable interest rate.

 

So, both the companies ABC & JKL form a contract to Swap their interest rate to hedge the risk of paying high interest rate. By ABC will paying to JKL the fixed interest rate to JKL and JKL will pay their variable interest rate as defined in the contract. 

If the interest rate increases ABC will be benefited and Vice versa for JKL.
If the interest rate decreases JKL will be benefited and Vice versa for ABC.

 Different kinds of SWAP

Interest rate SWAP – Loan Principal amount is not exchanged, it’s just that the interest rate of the loan is exchanged.

Commodity SWAP – Trade based on commodity products such oil and livestock.

Currency SWAPS – Trade based on the Swapping the different currency on the OTC market.

CDS – credit default swaps – Agreement signed by one party to pay the lost principal & interest of loan taken if the borrower defaults or fails to pay back the loan.

Total return SWAPs – Fixed interest rate is paid, event thou the stock might have outperformed, or capital is depreciated, the party should be paying the agreed Fixed interest rate on the time on contract exposure.

 

4. OPTIONS -> Where its gives the Buyer the right and not the obligations to buy or sell a underlying asset at an agreed price on or before the specific date.

holder of the option - The party taking a long position i.e. buying the option

writer of the option - the party taking a short position i.e. selling the option

types of options

1. Call options -> which gives buyer a right to buy the underlying asset
2. Put Options -> which gives buyer a right to sell the underlying asset

4.3 Trading and settlement process

Future Contract specification Expiry date Trading cycle Trading lot Base prices Trading Orders Corporate actions adjustments Settlement of traded contracts Daily settlement (MTM) Final settlement Clearing bank

Options option type Strike price expiry date daily settlement final settlement clearing bank

Dematerialization and Rematerialization of securities

1. Dematerialization – converting the physical security papers into electronic form.
2. Rematerialization – Reverse concept of De-mat, converting the electronic form into Paper form.

 

Assets allocation and diversification

An investor will have different requirements from their portfolio depending upon the goals they are saving for. They may need growth for long-term goals, liquidity for immediate needs and regular pay-outs to meet recurring expense. No one investment can meet all the requirements for growth, liquidity, regular income, capital protection and adequate return. The investor will have to create a portfolio of securities that has exposure to different assets which will cater to these diverse needs.

 

Investment Objective	Suitable Investment
Growth and appreciation in value	Equity shares and equity funds, Real estate, Gold
Regular income	Deposits, Debt instruments and debt funds, Real estate
Liquidity	Cash, Bank deposits, Short-term mutual fund schemes
Capital preservation	Cash, bank deposits, Ultra-short-term funds

 

INSTITUTIONAL PARTICIPANTS

Foreign Portfolio investor (FPI) is an entity established or incorporated outside India that proposes to make investments in India.

Participatory Notes (P-Notes or PNs) are instruments issued by SEBI registered foreign portfolio investors to overseas investors, who wish to invest in the Indian stock markets.

Insurance Companies - Insurance companies' core business is to ensure assets. Depending on the type of assets that are insured, there are various insurance companies like life insurance and general insurance etc. These companies have huge corpus, and they are one of the most important investors in the Indian economy by investing in equity investments, government securities and other bonds.

Pension Funds - A fund established to facilitate and organize the investment of the retirement funds contributed by the employees and employers or even only the employees in some cases.

Venture Capital Funds - refers a invest money in emerging or new enterprises that are in the early stage of development but with the potential of long-term growth.  Venture capitalists bring managerial and technical expertise as well along with Capital to their investee companies.

Private equity firm is an investment management company that provides financial backing and makes investments in the private equity of startup companies increases the investment option, tax advantages since money is invested for long term more than 5 years , risk diversification and liquidity.

Hedge Funds - investment that pools capital from a number of investors and invests that across the assets, across the products and across the geographies. Fund manager manages to generate return on the invested capital. They hunt for opportunities to make money for their investors wherever possible.

Alternative investment funds - typically include all other assets excluding listed equities, fixed income instruments, fixed deposits or collective investment scheme or investment platforms such as mutual funds, NPS, insurance plan that invests in these assets.

 

MARKET PARTICIPANTS

STOCK EXCHANGES – trading platform to trade NSE, BSE stocks.

DEPOSITORIES - institutions that hold securities of investors in electronic form.

1. CDSL
2. NSDL

DP’S - enable investors to hold and transact in securities in de-materialized form.

Trading Members - Stock Brokers are registered members of a Stock Exchange. They facilitate buy and sell transactions of investors on stock exchanges.

Custodians - A Custodian is an entity that is charged with the responsibility of holding funds and securities of its large clients, typically institutions such as banks, insurance companies and foreign portfolio investors.

Clearing Corporation - Clearing Corporations play an important role in safeguarding the interest of investors in the Securities Market. Clearing agencies ensure that members on the Stock Exchange meet their obligations to deliver funds or securities.

Clearing Banks - Acts as an important intermediary between clearing members and the clearing corporation, responsibility to make sure that the funds are available in its account to meet the obligations.

Merchant bank - conducts underwriting, loan services, financial advising, and fundraising services for large corporations and high-net-worth individuals.

Underwriters - They serve an important function in the primary market, providing the issuer the comfort that if the securities being offered to public do not elicit the desired demand from investors, they (underwriters) will step in and buy the securities.