1.What is money market? State its characteristics.
Ans :-

• Money market is a market for short term instruments (assets).
• Money market means a market for assets or instruments which are close substitutes for money.
• Financial assets, having high liquidity are traded in money market. It is a market of borrowing money and lending money for a short term.
• It is a market for securities having a maturity period of one year or less than one year.
• There are two parties in money market, one is lender and the other is borrower.
• Reserve bank, commercial banks, co-operative banks, shroffs etc. are mainly included in the group of money lenders; while farmers, traders, state governments, central government are the borrowers of money.
• Money market is not a physical location like stock exchange, but group of various institutions trading or dealing in money.
• Money market is a market for dealing in short term financial assets, having high liquidity with close substitutes of money.

Characteristics:

1. Money market is divided into two parts: Organized moncy market and unorganised money market.
2. It is a market for short term assets or instruments, the maturity period of which is one year or less than one year.
3. Credit worthiness of participants in money market is important.
4. Money market is not a fixed physical location but a collective structure of various institutions like Reserve Bank of India, commercial banks, financial institutions, mutual funds, insurance companies, etc.
5. It is a market of financial instruments which are promptly convertible into cash. E.g. Treasury bills, call money.
6. Sub-branches of money market also develop with economic and technological development, such as call money market, bond market, treasury bills market etc.
7. Most of the financial instruments are debt instrument. Element of risk is less as compared to other financial instruments.
8. The success and operation of money market depends on the banking system and financial institutions.

2.What are the characteristics of stock exchange?
Ans :-
Characteristics of stock exchange (Secondary market):

1. Registered corporate body: Stock exchange is a registered and established corporate body that prepares rules and regulations for the transactions of securities.
2. Approval of government: Stock exchange has to obtain approval of the central government as per the provision of Securities Contracts (Regulation) Act, 1956.
3. Organized market: It is an organized market for dealing in existing listed securities.
4. Membership: Membership of stock exchange must be obtained for dealing transactions in stock exchange.
5. Market of securities: Stock exchange is an approved organized market for buying and selling of securities.
6. Listing of securities: The securities which are listed on stock exchange are transacted in stock exchange.
7. Management: It is administered and managed by board of directors.
8. Strict control over the members: The Board of Directors exercise strict control over the members through their disciplinary powers.
9. Organizational structure: The organizational structure of stock exchange is in the form of public company.
10. Regulation of stock exchange: All the stock’exchanges of India are regulated by Securities and Exchange Board of India (SEBI) and Securities Contracts (Regulation) Act.

3.What are the functions of stock exchange?
Ans :-
Meaning:

• Stock exchange means a place for buying and selling industrial and financial securities like shares and debentures of a company, government securities, and municipal securities.

Functions:

1. Liquidity:

• Stock exchange provides continuous market for purchase and sale of securities.
• Investors can purchase and sale securities whenever they want.
• It is possible because stock exchange provides ready market.
• To accord liquidity to the securities is an important function of the stock exchange.

2. Valuation of the Securities:

•  Valuation of securities is possible on the basis of demand and supply of the securities.
• The investors can know the value of their securities.
• The valuation of securities can also be useful to the government and creditors.
• Other factors like dividend declared by the company, factors affecting money market are also important in determining the valuation of securities.

3. Conversion of Savings into Capital:

• The individuals of the society who have savings and wants to invest in securities can easily purchase securities.
• Their savings are converted into capital.

4 . Intermediary in the Creation of Capital:

• Stock exchange itself does not create capital, but provides the platform for the purchase and sale of securities.
• It plays the role of intermediary.

5. Safety in Transactions:

• The transactions are carried out as per the rules in stock exchange.
• The brokers working in stock exchange perform their role under the regulation of SEBI.
• So, the transactions are carried out safely.
• The stock exchange provides safety to investors as the transactions are carried out in stock exchange as per the rules and regulations of stock exchange.

6. Growth of Capital Market:

• Savings of public can be diverted towards industrial flow due to stock exchange.
• Industries as company form get long term capital which encourages savings of public towards investment in securities.
• So, economic development of the country is possible along with the development of capital market.

7. Facilities to Perform Activities:

• Stock exchange provide facilities to its members to perform their activities.
• So, the members of the stock exchange can protect the interests of the investors.

8. Necessary Facilities for Speculation:

• Healthy speculation keeps the stock exchange alive.
• Stock exchange provides necessary facilities for the transactions of speculation within the legal structure

9. Information Provider:

• Stock exchange provides that type of information which can be useful to the various parties.
• E.g.: Information about changes in the price of securities, flow of purchase and sale of securities etc. is useful to the investors, companies, government, SEBI.
• All these information are useful to government in formulation of economic policy. Above this, it indicates the economic condition and growth of company and nation. financial policy.
• It is a mirror reflecting the economic condition of the country.
• So, the stock exchange is called the barometer indicating economic condition of the country.

10. Listing of Securities:

• If company desires that the transactions of securities are conducted in the stock exchange, it may get its securities listed on stock exchange.
• Investors have more trust in listed securities.

11. Guidance to Investors:

• Stock exchange discloses the collected information of listed companies.
• On the basis of this information investors can decide which investment in securities of company is to be withdrawn and to be invested in which type of securities of the company.

4.Write a Note :
(a) National Securities Depository Limited
Ans :-
NSDI – National Securities Depository Limited:

• NSDL is a public company formed under the CompaniesAct.
• It was registered with SEBI in 1996.
• NSDL was promoted by National Stock Exchange and with the collaboration of some financial institutions.
• It is managed by Board of Directors as the NSDL is incorporated in the form of public company under Companies Act.
• NSDL performs its functions through depository participants appointed by it.
• Fees is charged from depository participant and from the investor/ customers.
• Investor has not to pay any expense directly to NSDL.
• Depository participant charges some fees from the customer/investor.
• This institution provides online service for dematerialisation, rematerialisation, electronic settlement of transactions, crediting right and bonus shares in customer’s account, freezing customer’s account, etc.

(b) Central Depository Services Limited
Ans :-
CDSL – Central Depository services (India) Limited

• Central Depository services (India) Limited (CDSL) was incorporated in 1999 with collaboration of Bombay Stock Exchange and banks.
• The objective of CDSL is to provide easy and safe services to investors.
• The list of participants registered with it is published time to time on its website.
• CDSL provides online depository service all over India. All over India, all services of depository of CDSL and NSDL are available to investors at door as the depository participants are connected electronically with them.
• The centralized system of NSDL and CDSL keeps an eye on every transactions.

(c) SEBI
Ans :-

• SEBI is known as Securities and Exchange Board of India.
• SEBI has come into existence as a statutory body as on January 30, 1992 under the Securities and Exchange Board of India Act 1992.
• Its head office is in Mumbai.
• While regional officers are at Kolkata, Delhi and Chennai. ->SEBI is a statutory body regulating stock exchanges in India.

Objectives:

1. To protect the interest of investors in securities.
2. To encourages the development of securities market.
3. To regulate the securities market

Function:

1. To Regulate the Business in Stock Exchange:

• SEBI regulates the business in stock exchanges and the operations of the stock exchanges. It monitors whether the specified rules and guidelines are followed or not by share brokers, sub-brokers, merchant bankers. It keeps an effective control on the entire working of the stock exchanges.
• Protection of theInterest of the Investors:

2.Protection of the Interest of the Investors:

• The fundamental function of the SEBI is to protect the interest of the investors. So, it enforces the intermediaries to obey the specified rules and regulations.

3. Registration and Regulation of Intermediaries:

• It registers the intermediaries working in stock exchange like merchant banker, share broker, sub-broker, registrar of securities and monitors their functions. It makes planning for the training of intermediaries.

4. Registration and Regulation of Mutual Funds:

• It registers and monitors mutual funds and regulates their working. For this, SEBI has determined rules and regulations which are followed by mutual funds.

5. To prevent Fraudulent Trade:

• It takes necessary steps to prohibit fraudulent trade in stock exchanges.

6. To Cancel Registration of Brokers:

• It cancels the registration of share brokers who do not follow rules and guidelines determined by SEBI and failed to provide necessary information to SEBI

7. To Regulate the Merger and Take Over of the Companies:

• It regulates merger and takeover of the companies for preserving the interest of investors. SEBI has issued guidelines so that merger and take over do not take place at the risk of small investors.

8. Guidelines with Reference to Public Issues:

• It has issued different guidelines for both, first time capital issue by new company and capital issue by existing company coming in market for capital.

9. Self-Regulation:

• SEBI is active for the self-regulation followed by intermediaries of stock exchange. It encourages the intermediaries to promote their professional unions.

10. Maintaining Stock Exchange as an Efficient Market:

• It maintains stability and efficiency of stock exchanges through regulations, restrictions and guidelines.

11. Inspection of Books:

• If necessary, it inspects the books of securities issuer Company, depository participant and beneficiary owner.

12. Monitoring and Inspection of Stock Exchange:

• SEBI can monitor and inspect whether regulations laid down for stock exchange are followed or not, whether stock exchange organisation system and its working is followed as per SEBI Act or not. If necessary, it conducts inquiry, inspection and audit of the accounts of the intermediaries.

13. Guidelines:

• SEBI has issued guidelines time to time for share broker, and sub broker, merchant banker, trustees of debenture, buy back securities by company etc.

14. To Obtain Annual and Periodical Reports:

• It receives report in form of various statements for obtaining information about working and activities of stock exchanges.

15. Research Work:

• SEBI undertakes the research work so that, all the above functions can be done effectively.

5.Explain the purchase-sale procedure of securities in stock exchange.
Ans :-

The procedure of purchase and sales of securities online is as follows:

1. Opening demat account:

• First of all the investor needs to approach any depository participant (DP) and open a demat account with it.The DP opens this account under NSDL or CDSL.
• The investor can purchase/sell/hold their shares in the demat account.

2. Order to buy-sell:

• Once the demat account is active, the investor can trade online.
• Investor who wants to sell securities needs to place an online order with the broker.
• While purchasing/selling, the investor need to carefully mention the details such as name of the share, price at which the investor wants to purchase or sell, etc.
  There are two types of order in purchase and sale of securities. They are:
  (a) Limited order:
• When an investor selects the option of ‘limited order’, it means that he will set the price at which he needs to purchase or sell the shares. Thus, in this case, the price of purchase and sale is pre-determined.
• Retail investors and fund houses generally trade by placing order in this format.

(b) Market order:

• When an investor wants to trade at the prices existing in the market, he selects ‘market order’. Here, the buying/selling iakes place at the latest quoted market price that appeared on the trading screen order was made.

3. Execution of order:

• When the investor places the online order with the broker, the broker further executes the order. The broker places the order in stock exchange.
• The broker on behalf of his customer (investor) can conduct transaction from his office through online trading.

4. Contract note:

• Once the broker further places the order received from the investor, he prepares a contract note for the investor.
• Contract note is a confirmation of the day on which transaction took place.
• Generally, the broker sends contract note to the customer within 24 hours after transaction takes place.
• The contract note contains details such as name of the security traded, quantity, total amount of transaction, order number, brokerage, taxes applicable, etc. Thus, contract note is a summary as well as agreement about the traded securities.

5. Settlement of transaction:

• The settlement houses settle the transactions.
• The settlement house of Bombay settles the transactions done under Bombay Stock Exchange.
• NSCCL-National Securities Clearing Corporation Limited performs the settlement of transaction done in National Stock Exchange.
• Settlement of transaction occurs after a day of transaction or trade.

6. Payment of amount and delivery of security:

• If the investor has purchased the shares, he has to make the payment prior to the pay-in day. The delivery is done to the investor on pay-out day.
• If the investor has sold the shares, delivery of shares is to be done prior to the pay-in day. 
• Customer receives money on pay-out day.
• Pay-in day is the day when the brokers shall make payment or delivery of securities to the exchange. Pay-out day is the day when the exchange makes payment or delivery of securities to the broker.

7. Inform customer about settlement of transactions:

• If the investor has sold the securities, the broker will make the payment to the customer through bank.
  In case if the investor has purchased the securities, the broker will make payment directly from the investor’s bank account.
• Settlement of transaction is informed to the customer through demat account.