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Unit 2: Securities Market: An Overview

individual securities commenced on July 2, 2001. Single stock futures were launched on Notes
November 9, 2001. Due to rapid changes in volatility in the securities market from time to time,
there was a need felt for a measure of market volatility in the form of an index that would help
the market participants. NSE launched the India VIX, a volatility index based on the S&P CNX
Nifty Index Option prices. Volatility Index is a measure of market’s expectation of volatility
over the near term.
The Indian stock market regulator, Securities & Exchange Board of India (SEBI) allowed the
Direct Market Access (DMA) facility to investors in India on April 3, 2008.
To begin with, DMA was extended to the institutional investors. In addition to the DMA facility,
SEBI also decided to permit all classes of investors to short sell and the facility for securities
lending and borrowing scheme was operationalised on April 21, 2008.
The Debt markets in India have also witnessed a series of reforms, beginning in the year
2001-02 which was quite eventful for debt markets in India, with implementation of several
important decisions like setting up of a clearing corporation for government securities, a
negotiated dealing system to facilitate transparent electronic bidding in auctions and secondary
market transactions on a real time basis and dematerialisation of debt instruments. Further,
there was adoption of modified Delivery-versus-Payment mode of settlement (DvP III in March
2004). The settlement system for transaction in government securities was standardized to T+1
cycle on May 11, 2005. To provide banks and other institutions with a more advanced and more
efficient trading platform, an anonymous order matching trading platform (NDS-OM) was
introduced in August 2005. Short sale was permitted in G-secs in 2006 to provide an opportunity to
market participants to manage their interest rate risk more effectively and to improve liquidity in
the market. ‘When issued’ (WI) trading in Central Government Securities was introduced in 2006.

Did u know? As a result of the gradual reform process undertaken over the years, the
Indian G-Sec market has become increasingly broad-based and characterized by an efficient
auction process, an active secondary market, electronic trading and settlement technology
that ensure safe settlement with Straight Through Processing (STP).

This unit, however, takes a review of the stock market developments since 1990. These
developments in the securities market, which support corporate initiatives, finance the
exploitation of new ideas and facilitate management of financial risks, hold out necessary impetus
for growth, development and strength of the emerging market economy of India.

Task Go to website https://www.ccilindia.com/.../NDSOMTradeAnalysisReport.aspx -
and collect information on Trade analysis.

2.1 Products, Participants and Functions

Transfer of resources from those with idle resources to others who have a productive need for
them is perhaps most efficiently achieved through the securities markets. Stated formally,
securities markets provide channels for reallocation of savings to investments and
entrepreneurship and thereby decouple these two activities. As a result, the savers and investors
are not constrained by their individual abilities, but by the economy’s abilities to invest and
save respectively, which inevitably enhances savings and investment in the economy.
Savings are linked to investments by a variety of intermediaries through a range of complex
financial products called “securities” which is defined in the Securities Contracts (Regulation)

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