SEBI & Stock Exchanges

Indian Equity markets have had the history of various scams and malpractices of the brokers and other agencies requiring a strong and effective regulatory body. The unfair treatment to the investor’s community and therefore the lack of confidence in the markets made the government to establish SEBI, an autonomous body. Securities and Exchange Board of India (SEBI), was established in 1988 by the Government of India for the smooth functioning of the capital markets. SEBI being an autonomous board has independent powers to regulate the financial markets and make guidelines for investor’s protection. 

The primary objective of SEBI is to safeguard the interest of investors. Keeping this objective in consideration, it has introduced comprehensive regulatory measures in order to promote the development of the securities market and regulate the securities market. 

SEBI has prescribed the registration norms, code of obligations for various intermediaries. It has framed rules related to risk management systems. 

Role/ Functions of SEBI are as follows: 

  • SEBI has issued guidelines for investors and educates them through various investor’s awareness programs. SEBI also looks after the complaints received from investors for fair settlement.  
  • To regulate and control the day to day business on stock exchanges, SEBI has made registration of brokers compulsory and made certain rules for them.  
  • SEBI has made rules and regulations for effective supervision of operations & avoiding unfair and anti-investor activities by various financial intermediaries.  
  • SEBI has encouraged various intermediaries to form their professional associations and control undesirable activities of their members.  
  • SEBI has issued suitable guidelines to regulate mergers, takeovers and acquisitions in order to protect investor’s interest.  
  • SEBI conducts inspection, inquiries and audits of stock exchanges & intermediaries for their orderly working.  
  • In order to restrict insider trading activity, SEBI has made certain rules related to disclosure and taken strict action to minimize undesirable activities of brokers and securities scams.  
  • In order to restrict insider trading activity, SEBI has made certain rules related to disclosure and taken strict action to minimize undesirable activities of brokers and securities scams.  

Role of stock exchange:

Under the overall supervision of the regulatory authority, the Securities and Exchange Board of India (SEBI), the stock exchanges provide a trading platform, where buyers and sellers can meet to transact in securities. Now the screen based trading has substituted the traditional system of floor based open outcry system of trading. SEBI has been empowered to regulate all the entities connected with the markets like brokers, custodians, companies, merchant bankers etc. 

Two exchanges are the most active stock exchanges National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Apart from them, there are 19 more stock exchanges in Ahmedabad, Bangalore, Bhubaneswar, Kochi, Delhi, Guwahati, Hyderabad, Jaipur, Calcutta, Chennai, Ludhiana, Pune. The state level exchanges are not operational because of the excellent trading platform at national level. The transparency and technology of the BSE and NSE at the nationwide network of the stock market trading has made the investors and brokers move away from the state level exchanges to these national level exchanges.