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what is exchange board || what is sebi 2022

What is exchange board or
What is SEBI

 Surely you have read definition of stock exchange but let's cut it in simple terminology

You must have seen auctions of some items or goods market and vegetable market known as ' Sabji mandi ' and 'Anaaj mandi '.So let's understand what happens in vegetable market, it is platform where buyer and sellers meets, fundamentally it's a more b2b deal there but that is fixed place to meet buyer and sellers under a regulating authority like state government . Sellers sell there goods and buyers pay a price to sellers ,Whereas buyers and sellers both have to pay a small amount of commission to regulating authority . Here a doubt arises ,why buyer and seller doesn't trade freely instead of trading under regulating authority as both of them are having loss of commission money.


Why regulating authorities are needed ?


They make quality standards of goods and services for sellers .

They make fair pricing policies so that  prices does not cross their values

They are responsible to create minimum monopoly system

Solve disputes of buyers and sellers

Transection done under regulative authority are secure

Prevention of frauds

Making business rules and regulations for fair and free trade


Similarly in auctions , an exchange is working ie. Auction organizer between buyer and product and it's seller . Organizer is responsible for making fair price policies and fair business including monetary transactions,  so as we understood by examples


What is exchange


Exchange (word) = giving value in return of something valuable


Exchange is platform or marketplace where any financial instruments or something which holds a price is traded. As explained above the main responsibility of an exchange is to ensure fair and orderly trading . They provide trading opportunities by centralizing the buying and selling of anything which holds a value (ie. price). Exchanges give a platform to trade , important points like price ,trade time , rules are decided by exchanges


What is stock exchange 

Stock exchange is a place where shares of companies, securities, bonds , derivatives etc. are being traded by stock brokers and traders, stock exchange also provide facilities to issue and redemption of such securities and financial instruments . Generally it facilities smooth and fair transaction of buyers and sellers. Continuous auction process takes place between shareholders or buyers and sellers. Stock exchange adheres to make regulations and guidelines for fair trade . They are directed by stock exchange board of that country . So stock exchange is a platform where buyer and sellers meet together to trade shares of companies, bonds, derivatives like soybean, aluminum, cotton and other such financial instruments. Stock exchanges sets specific time and days for trades. In India there are five working day for retail trading in general .

Monday

Tuesday

Wednesday

Thursday

Friday

There are few exceptions like Diwali etc.

Timing is 9:15 to 3:30


EXCHANGE BOARD OF INDIA - SEBI (Securities and exchange boards of India)



It is that regulatory body which was mentioned above.

Controller of capital issues was the regulatory authority before SEBI came into regulatory board 

Controller of capital issues have so much loopholes and monopolistic power which helped in happening Harshad Mehta's scam


Till 1992 controller of capital issues was not in that much power to regulate market to its extent that's why lots of scams and frauds had taken in Bombay and other exchange of that time .Harshad Mehta was just a bigger face of that scams. There was hundred of scammers  never got caught .There was need of controller of capital issues to be in more regulative power but everyone was earning along with controller Board members ,so who cares !!

scam made policy maker to think beyond market manipulators. Harshad Mehta managed to get money from banks and other sources and used it to heavily pump stock market shares in short span. Scam was headlines of front page for all newspapers for over two months. Retails ,newbie investors was in heavy losses. A board that  have wide control and authority over securities and financial instruments is requirement of time.

SEBI = securities and exchange Board of India is the regulatory body for securities and commodity market in India. It is part of government body it is formed in 12 April 1988 but government power is given after Harshad Mehta scam dated on 13 January 1992 after passing the SEBI Act 1992  in year 1992 in Indian Parliament. As SEBI is responsible to protect investor interest of various capital market . India have various markets and investment instruments , so SEBI is structured as corporate framework and various departments are made for proper regulation. here are names of departments below

  • Commodity Derivatives Market Regulation Department (CDMRD)
  • Corporation Finance Department (CFD)
  • Department of Economic and Policy Analysis (DEPA)
  • Department of Debt and Hybrid Securities (DDHS)
  • Enforcement Department – 1 (EFD1)
  • Enforcement Department – 2 (EFD2)
  • Enquiries and Adjudication Department (EAD)
  • General Services Department (GSD)
  • Human Resources Department (HRDM)
  • Information Technology Department (ITD)
  • Integrated Surveillance Department (ISD)
  • Investigations Department (IVD)
  • Investment Management Department (IMD)
  • Legal Affairs Department (LAD)
  • Market Intermediaries Regulation and Supervision Department (MIRSD)
  • Market Regulation Department (MRD)
  • Office of International Affairs (OIA)
  • Office of Investor Assistance and Education (OIAE)
  • Office of the chairman (OCH)
  • Regional offices (ROs).

 There are multiple divisions for security market also like divisions of risk management, divisions of inspection , divisions of complaint and so on.


How SEBI chairman is assigned ?

Chairmen of SEBI is nominated by union government. They choose people who have more than 25 years of experience in law, finance, economics, accounting , administration and must have age more than 50 years .

So in conclusion exchanges provides a base for proper trading of securities and Indian exchanges are regulated by SEBI .

Comments

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