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The SEBI was set up to achieve the following objectives:

i. Regulation of Stock Exchanges: The first objective of SEBI is to regulate stock exchanges so that efficient services may be provided to all the parties operating there.

ii. Protection to the Investors: The capital market is meaningless in the absence of the investors. Therefore, it is important to protect the interests of the investors. The protection of the interests of the investors means protecting them from the wrong information given by the companies in their prospectus, reducing the risk of delivery and payment, etc. Hence, the foremost objective of the SEBI is to provide security to the investors.

iii. Checking the Insider Trading: Insider trading means the buying and selling of securities by those persons (Directors, Promoters, etc.) who have some secret information about the company and who wish to take advantage of this secret information. This hurts the interests of the general investors. It was very essential to check this tendency. Many steps have been taken to check inside trading through the medium of the SEBI.

iv. Control over Brokers: It is important to keep an eye on the activities of the brokers and other middlemen in order to control the capital market. To have a control over them, it was necessary to establish the SEBI.

It is a proof of ownership of securities by an individual.

Difference between Capital Market and Money Market :

Investment in capital markets generally yields a higher return for investors than the money markets.

(i) Providing liquidity and market ability to exchange securities: 

(a) Stock exchange provides a central market where securities can be bought and sold. (b)Stock exchange gives investors the chance to disinvest and reinvest. 

(c) This provides both liquidity and easy marketability to already existing securities in the market. 

(ii) Pricing of securities: 

(a) Prices of securities are determined by the forces of demand and supply for the securities. 

(b) A stock exchange is a mechanism of constant valuation through which the prices of securities are determined. 

(iii) Safety of transactions: 

(a) In stock market only the listed securities are traded and stock exchange authorities include the companies names in the trade list only after verification of soundness of company. 

(b) For listing, companies have to operate within the strict rules and regulations. Even after listing, the company has to operate within the legal framework of stock exchange. This ensures safety of dealing through stock exchange. 

(iv) Contribution to economic growth: 

(a) A stock exchange is a market in which existing securities are resoled or traded. 

(b) Through this process of disinvestment and reinvestment savings get channelized into their most productive investment revenues. This leads to capital formation and economic growth.

Capital Market: 

(i) Participants: Financial institutions, banks, corporate entities, foreign investors and retail investors. 

(ii) Instruments: The main instrument traded are equity shares, debentures, bonds or preference shares etc 

(iii) Investment outlay: Securities do not necessarily require huge financial outlay. 

(iv) Duration: Capital market deals in medium and long term securities i.e. equity shares and deben.

(v) Liquidity: Capital market securities are considered more liquid investments because they are marketable on the stock exchanges. 

(vi) Safety: Capital market instruments are more risky both with respect to returns and principal repayment.

Money Market: 

(i) Participants: Institutional participants such as RBI, commercial banks, financial institutions and finance companies. Individual investors normally do not participate. 

(ii) Instruments: The main instruments traded in the money market are short term debt instruments such as T-bills, trade bills reports, commercial paper and certificates of deposit. 

(iii) Investment outlay: Transactions entail huge sums of money as the instruments are quite expensive. 

(iv) Duration: They have a maximum tenure of one year and may even be issued for single day. 

(v) Liquidity: Money market instruments on the other hand, enjoy a higher degree of liquidity as there is formal agreement for this. 

(vi) Safety: Money market is generally much safer witha minimum risk of default. 

(i) The money market is a market for short term funds which deals in monetary assets whose period of maturity is up to one year. 

(ii) In this market the risk is very less and highly liquid, unsecured and short term debts are traded.

(iii) It does not have any physical location, but it is an activity conducted through the telephone and through internet. 

(iv) Main aim is to provide short term funds for urgent requirement of cash and temporary investment of funds for earning returns. 

(v) The major participants in the market are: Reserve Bank of India(RBI), Commercial Banks, Non-Banking Finance companies, Mutual Funds, State government etc.

Features of money market:

(i) It is a market for short-term funds which deals in monetary assets whose period of maturity is up to one year.

(ii) Money market instruments are highly liquid.

(iii) Money market instruments are less risky.

1. short

2. Trade Bill 

3. certificate of deposit

4. primary

5. one

A Treasury Bill is an instrument of short term borrowing by the Government of India, Maturing in less than one year. They are also known as Zero-Coupon Bonds issued by the RBI on behalf of the Central Government to meet its short term requirement of funds. Treasury Bills are issued in the form of a promissory note.

They are highly liquid and have assured yield and negligible risk of default. They are issued at a price that is lower than their face value and repaid at par. Treasury bills are available for a minimum amount of Rs 25,000.

Treasury Bill(Zero coupon Bonds): 

(i) Meaning: Treasury Bill(or T-bills) is an instrument(in the form of promissory note) of short term borrowing by the government which is issued by the Reserve Bank of India on behalf of the Government of India at discount for maturing in less than one year. 

(ii) Purpose: These are issued to meet short term requirements of funds. 

(iii) Period: These are issued for a period of 14 to 364 days. 

(iv) Amount: These are issued for a minimum amount of 25,000 and in multiples thereof. 

(v) Issue price: These are issued at a discount and are repaid at par. No interest is payable on these securities. 

(vi) Safety: These are considered as safe because of soundness of issuer i.e. RBI. 

(vii) Liquidity: These are highly liquid. 

(viii) Negotiability: These are negotiable instruments i.e. they are freely transferable by endorsement and delivery. 

(ix) Example: Suppose an investor purchases a 91 days Treasury bill with a face value of Rs.1,00,000 for Rs.94,000.By holding the bill until the maturity date, the investor receives Rs.1,00,000.The difference of Rs.6,000 between the proceeds received at maturity and the amount paid to purchase the bill represents the interest received by him.

Certificate of deposit.

Money market is that market where transactions are made in short term securities. It means those securities where the payment period is upto one year. Since their maturity period is very short, they are also called Near Money. These securities include chiefly Call Money, Treasury Bills, Commercial Bills, Certificate of Deposit, Commercial Paper, etc.

The essential function of primary market is to facilitate new issue of securities.

To facilitate the transfer of investible funds from the savers to entrepreneurs seeking to establish new enterprises or expanding existing ones through the issue of securities for the first time.

Treasury Bill.

Treasury Bills:

• When the central government is in need of funds for short term, it issues treasury bills into the financial market. Anyone willing to buy them such as individuals, firms, etc. can buy these bills.
• Thus, a treasury bill is a short term financial instrument (government security). It is issued by Reserve Bank of India on behalf of Government of India.
• Treasury bill is an important component of money market all over the world.
• Treasury bill is also known as T-Bills’.
• The lock-Mn period or maturity of these bills is 91 days, 182 days or 364 days.
• The minimum amount of a T-bill is ₹ 25,000/- and then in multiples of ₹ 25,000/-.
• Government does not pay any interest to people who buy T-bills, but sells these bills at a discounted rate. Hence, T-bill is also called ‘zero coupon bond’.
• For example, government might sell Treasury bill of ₹ 25,000 at ₹ 23,500 to the investor. The investor would then be paid the actual value i.e. ₹ 25,000 on maturity date. Thus, the difference between the purchase amount and redemption amount becomes the profit for the investor.

Attention value.

The fall in the domestic market as given in the above table, can significantly be attributed to the market sentiments of world market. We can see the world indices and NSE indices are moving in the same direction.

There is direct relation between NSE indices and world market indices. As there is negative trend in world index, it brings negative trend in NSE index also.

Following are the benefits the company can derive from listing at NSE 

a. NSE provides a nationwide trading facility for all types of securities. 

b. The liquidity and best available prices for the securities are ensured by the processing speed of the Exchange. 

c. The NSE network is used to disseminate information and company announcements across the country. 

d. Enabling shorter settlement cycles and book entry settlement.

NSE provides trading in the following two segments:

a. Wholesale debt market segment: This segment provides a trading platform for a wide range of fixed income securities that include Central Government Securities, Treasury Bills, State Development Loans, Bonds issued by Public Sector Undertakings, floating-rate Bonds, zero-coupon Bonds, index Bonds, Commercial Paper, Certificate of Deposit, Corporate Debentures and Mutual Funds.

b. Capital Market Segment: The capital market segment of NSE provides an efficient and transparent platform for trading in equity, preference, debentures, exchange-traded funds as well as retail government securities.

The overall objective of SEBI is to protect the interest of investors, promote the development and regulate the securities in market. 

This may be elaborated as follows.

a. To regulate stock exchanges and the securities industry, to promote their orderly functioning. 

b. To protect the rights and interests of investors, particularly individual investors and to guide and educate them. 

c. To prevent trading malpractices and achieve a balance between self-regulation by the securities and its statutory regulation. 

d. To regulate and develop a code of conduct and fair practices by intermediaries like brokers, merchant bankers, etc with a view to making them competitive and professional.

NSE was set up with the following objectives. 

a. Establishing a nationwide trading facility for all types of securities. 

b. Through an appropriate communication network, ensuring equal access to investors.

c. Through electronic trading system to provide a fair, efficient and transparent security market. 

d. To enable shorter settlement cycles and book entry settlements. 

e. Meeting international benchmarks and standards.

The OTCEI is a company incorporated under the Companies Act, 1956. It was set up to provide email and medium companies access to the capital market for raising finance in a cost-effective manner. It is a fully computerized, transparent, single-window Exchange that commenced trading in 1992. This exchange is established on the lines of NASCAR the OTC exchange in USA. It has been promoted by UTI, ICICI, IOBI, IFCI, LIC, GIC, SBI, capital markets, and Canbank financial services.

It is a negotiated market place that exists anywhere as opposed to the auction market place, represented by the activity on a securities exchange. Thus, in the OTC, exchange, trading takes place when a buyer or seller walks up to an OTCEI counter, taps on the computer screen, find quotes and effects a purchase or sale depending on whether the prices meet their target.

(b) In order to have its securities listed, the companies should have a minimum capital of Rs 3 crores.

National Stock Exchange India

(i) Nation wide coverage 

(ii) Ringless 

(ii) Screen based trading 

(iv) Transparency 

(v) Incorporated entities backed by financial institutions

1. Secondary market:

The secondary market is also known as the stock market or Stock exchange. It is a market for the purchase and sale of existing securities. It also provides liquidity and marketability to existing securities 

2. Functions of a Stock Exchange:

a. Providing Liquidity and Marketability to Existing Securities:

Stock Exchange provides a ready and continuous market for the sale and purchase of securities.

b. Pricing of Securities: 

A stock exchange is a mechanism of constant valuation through which the prices of securities are determined. It is based on the forces of demand and supply.

c. Safety of Transaction:

Stock exchange has its own well defined rules and regulations. This ensures safety and fair dealings to investors.

d. Contributes to Economic Growth:

Stock exchange provides a platform by which savings are channelised into the most productive investment proposals, which leads to capital formation and economic growth.

e. Providing Scope for Speculation:

Stock exchange provides scope within the provisions of Law for speculation in a restricted and controlled manner.

f. Economic barometer:

A stock exchange serves as a barometer of a country’s economic condition. Price trends in stock exchange indicate whether economy is going through boom or depression.

3. Differences between Primary Market and Secondary Market:

1. National Stock Exchange of India (NSE):

NSE is the most modern stock exchange in India. It was incorporated in 1992 and was recognised as a stock exchange in April 1993. It commenced operations in 1994. NSE has set up a nationwide fully automated screen based trading system.

2. Objectives of NSE:

• Establishing a nationwide trading facility for all types of securities.
• Ensuring equal access to investors all over the country.
• Providing a transparent securities market using electronic trading system.
• Enabling shorter settlement cycles and book entry settlements.
• Meeting international benchmarks and standards

Functions of a Stock Exchange: 

1. Providing Liquidity and Marketability to Existing Securities:

Stock Exchange provides a ready and continuous market for the sale and purchase of securities.

2. Pricing of Securities: 

A stock exchange is a mechanism of constant valuation through which the prices of securities are determined. It is based on the forces of demand and supply. 

3. Safety of Transaction: Stock exchange has its own well defined rules and regulations. This ensures safety and fair dealings to investors.

4. Contributes to Economic Growth:

Stock exchange provides a platform by which savings are channelised into the most productive investment proposals, which leads to capital formation and economic growth.

5. Providing Scope for Speculation:

Stock exchange provides scope within the provisions of Law for speculation in a restricted and controlled manner.

6. Economic barometer: 

A stock exchange serves as a barometer of a country’s economic condition. Price trends in stock exchange indicate whether economy is going through boom or depression.

1. Capital market can be divided into organized market and unorganized market.

2. The sub markets are called money market, commercial bill market, treasury bill market, commercial paper market, etc.

This ensures that the investing public gets a safe and fair deal on the market.

Correct option is (D) Both (A) and (B)

1. Over the Counter Exchange of India (OTCEI): 

The OTCEI is a company incorporated under the Companies Act 1956. It was set-up to provide smalt and medium companies an access to the capital market.

It is fully computerised, transparent, single window exchange which provides quicker liquidity to securities at a fixed and fair price, liquidity for less traded securities. It is commenced trading in 1992.

2. Objectives of OTCEI

• Provide a trading platform to smaller and less liquid companies.
• Provide online trading facilities to the investors. 
• Ensure a transparent system of trading. 
• Ensure liquidity to the listed securities. 
• Help the investors to exchange the securities at minimum cost.

1. Dematerialisation 

2. Dematerialisation: 

It is a process by which physical share certificates are converted into an equivalent number of securities to be held in electronic form and credited in the investors’ account. For this, the investor has to open a Demat account with an organisation called a depository.

Benefits of Depository Services and Demat Account: 

• Sale and Purchase of shares and stocks of any company make easy. 
• Saves time.
• No paperwork.
• Lower transaction costs.
• Ease in trading.
• Transparency in transactions.
• No counterfeiting of security certificate.
• Physical presence of investor is not required in stock exchange.

Through Security Exchange Board of India (SEBI) and Security Contract Regulation Act.

Madhya Pradesh Stock Exchange, Indore (Madhya Pradesh) Magadha Stock Exchange, Patna (Bihar)

Cochin Stock Exchange, Cochin (Kerala)

Madras Stock Exchange, Chennai (Tamil Nadu)

Delhi Stock Exchange, (Delhi)

Bangalore Stock Exchange, Bangalore (Karnataka) 

Canara Stock Exchange, Mangalore (Karnataka) 

UP Stock Exchange, Kanpur (Uttar Pradesh) 

Pune Stock Exchange, Pune (Maharashtra) 

Meerut Stock Exchange, Meerut (Uttar Pradesh)

Correct option is (C) Money market

Minimum maturity period is one year and Maximum maturity period is more than one year.

At Discounted price treasury bills are issued.