Class 12 FMM Chapter 1 notes | Part -2 | Capital market module | Class 12 Financial Markets Management

 Stock broker

Arranges to buy and sell securities on behalf of clients.

Acc. to SEBI (Stock Brokers and Sub Brokers) Regulations,1992

Stock Broker is 

Member of stock exchange

Requires to hold a certificate of registration from SEBI

To whom SEBI will grant certificate of registration?

Should hold the membership of any Stock Exchange

Should abide by the rules and regulations

Should obtain prior permission of SEBI in case of any change in status and  constitution.

Should pay the amount of fees for registration.

Should take adequate steps for redressal of grievances of investors.

For more explanation you can watch this video 

If it is an entity ?

Should be eligible to be a member of stock exchange.

Should have necessary infrastructure like office space

Should have past experience.

Should not be subjected to any disciplinary proceedings.

NSE membership

Anybody can become a member of NSE.

The trading members of NSE have certain benefits

Access to nationwide trading facility.

He has the ability to provide a fair, efficient and transparent securities market .

Can use NEAT systems.

Write the full form of NEAT in comment section. 

can trade with the top international exchanges.

New membership

The persons eligible to become trading members.

Individuals

Partnership firms

Institutions

Banks for currency derivatives segments

Body corporates

Membership for different segments at NSE

WDM Segment

CM segment

CM + WDM segment

CM + F&O segment

CM + F&O + WDM segment

CD segment

Clearing membership at NSCCL

F&O segment gives 2 types of clearing membership.

Clearing members.

Self clearing members.

For full playlist : you can click here

Eligibility criteria for membership at NSE

Corporate structure

Capital adequacy

Net worth

Interest free security deposit

Collateral security deposit

Track record

Education

Experience

For latest notes : click here 

Corporate Structure 

Risk containment tool is the concept of 'Dominant Promoter/Shareholder Group' -  unique for applicants acquiring membership on the NSE. 

Dominant Promoter Norms Categories

Unlisted corporate trading member: 

If a person holds 51% of shares in the trading member corporate on his own or together with 

His relatives as defined under Companies Act 2013.

Listed corporate trading member

Promoter in offer document / offer of securities to the public, whichever is later, would be eligible to constitute dominant promoter group.

Corporate shareholders to be identified as dominant shareholders. 

Banks, central or state government owned finance and/or development institutions. 

Entities (dominant shareholders) should have a net worth of at least ₹ 50 crore. 

Scheduled banks. 

Central or State Government owned Finance and/ or development institutions. 

Any financial institution authorised by RBI, SEBI and IRDA. 

Any other entity that is fit to be identified as dominant shareholder

Foreign entities

Allowed to take trading membership of the exchange through their Indian subsidiary under automatic approval route permitted by government.

The promoting foreign entity or its subsidiary should be either a bank or insurance organisation regulated by Central Bank.

Foreign entity shall hold 51% of controlling stake in the applicant company. 

Net worth of foreign entity should be at least ₹ 50 crores.

Net worth and deposit requirements

Capital + free reserves - non allowable assets

Non allowable assets:

Fixed asset, bad deliveries, doubtful debts and advances, prepaid expenses etc. 

Two types of deposit requirements 

Interest Free Security Deposit (IFSD) 

Has to be in liquid cash 

Collateral Security Deposit (CSD) 

Can be in cash or non cash form. 

Cash components :

Cash 

Bank guarantee

Fixed deposit receipts 

Non cash components :

Deposit of approved list of demat securities . 

Units of the other mutual funds. 

Thank you guys for reading these notes. 

You can subscribe my YouTube channel (Be the topper) for more explanation of this capital market module. 

You can also join my telegram channel for more notes.