Page 116 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Unit 6: Secondary Market

2. Doing so, however, magnifies the downside risk. Suppose the stock actually goes down Notes
by 30%: his 200 shares of stock are worth ` 14,000 now. After paying off ` 10,900 he is left
with only ` 3,100. The result is a disastrous rate of return of 69%.
3. If there is no change in the stock price, he will lose 9% on the cost of the loan.

Self Assessment

Fill in the blanks:
6. Percentage margin is the ratio of the………………… of the account to the market value of
the securities.
7. If the percentage margin falls below the maintenance margin, the broker issues a
…………………….

8. ………………………….is the required proportion of your equity to the total value of the
stock. It protects the broker if the stock price declines.
9. …………………mainly acts as a jobber and takes the risks inherent in ready purchase and
sale of securities.
10. Margin trading occur when investors who purchase stocks on margin borrow part of the
……………………..price of the stock from their brokers, and leave purchased stocks with
the brokerage firm

6.7 Role of NSCCL

National Securities Clearing Corporation Ltd. (NSCCL) is a wholly owned subsidiary of NSE
and was incorporated in August 1995. It was the first clearing corporation to be established in
the country and also the first clearing corporation in the country to introduce settlement guarantee.
It was set up with the following objectives:
1. to bring and sustain confidence in clearing and settlement of securities;

2. to promote and maintain, short and consistent settlement cycles;
3. to provide counter-party risk guarantee; and
4. to operate a tight risk containment system. The NSE (National Stock Exchange) is a Mumbai-
based stock exchange.
NSE (National Stock Exchange) is the largest stock exchange in India and the third largest in the
world in terms of volume of transactions. The NSE (National Stock Exchange) is mutually-
owned by a set of leading financial institutions, banks, insurance companies and other financial
intermediaries in India but its ownership and management operate as separate entities. The NSE
has remained a lead player in the modernization of India's capital and financial markets. Towards
this end the NSE (National Stock Exchange) set up the first clearing corporation in India - the
NSCCL (National Securities Clearing Corporation Ltd). The NSCCL was a landmark in providing
novation on all the spot equity market (and later, derivatives market) trades in India.

Part of the NSE Group (National Stock Exchange Group)

The National Securities Clearing Corporation Ltd. (NSCCL) is part of the NSE (National Stock
Exchange) group and is a wholly-owned subsidiary of the NSE. It was incorporated in August
1995 and started clearing operations in April 1996. It was formed to build confidence in clearing

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