Secondary Market Reforms

Setting up of National Stock Exchange (NSE):

  • NSE was set up in November 1992 and started its operations in 1994; which has now developed into a sophisticated, electronic market, which ranked fourth in the world by equity trading volume

Over the Counter Exchange of India (OTCEI)

  • It was set in 1992. It was promoted by a consortium of leading financial institutions of India including UTI, ICICI, IDBI, IFCI, LIC and others.
  • It is an electronic national stock exchange listing an entirely new set of companies which will not be listed on other stock exchanges

Disclosure and Investor Protection (DIP) Guidelines for New Issues

  • In order to remove inadequacies and systematic deficiencies, to protect the interests of investors and for the orderly growth and development of the securities market, the SEBI has put in place DIP guidelines to govern the new issue activities.
  • Companies issuing capital in the primary market are now required to disclose all material facts and specify risk factors with their projects

Depository System

  • A major reform in the Indian Stock Market has been the introduction of depository system and scrip less trading mechanism since 1996.
  • Before this, the trading system was based on physical transfer of securities.
  • A depository is an organization which holds the securities of shareholders in electronic form, transfers securities between account holders, facilitates transfer of ownership without handling securities and facilitates their safekeeping

The National Securities Clearing Corporation Ltd. (NSCL)

  • The NSCL was set up in 1996. It has started guaranteeing all trades in NSE since July 1996.
  • The NSCL is responsible for post-trade activities of the NSE. Clearing and settlement of trades and risk management are its central functions

Trading in Central Government Securities

  • In order to encourage wider participation of all classes of investors, including retail investors, across the country, trading in government securities has been introduced from January 2003.
  • Trading in government securities can be carried out through a nationwide, anonymous, order-driver, screen-based trading system of stock exchanges in the same way in which trading takes place in equities

Mutual Funds

  • Emergence of diversified mutual funds is one of the most important development of Indian capital market.
  • Their main function is to mobilize the savings of general public and invest them in stock market securities.
  • Mutual funds are an important avenue through which households participate in the securities market.