Capital, Commodity and Money Market

Capital, Commodity and Money Market CS Mohit Shaw Dear Student, Open book examination is all about time management and selecting the right content f...
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Capital, Commodity and Money Market

CS Mohit Shaw

Dear Student, Open book examination is all about time management and selecting the right content from the given study material. Many of our friends commit the mistake of writing (copying) the whole content from the material without considering the valid points which ultimately kills the time. So we need to have patience. At the same time the greed to write more and more encompassing irrelevant points should be curbed. This master index has been prepared with the help of the Institute’s study material (published on July 2015 – printed mat). It is worth noting that the content table of the original mat does not cover the sub divisions of the topic which makes it difficult for a student to trace the exact answer from the book during the examination. Hence in order to reduce the effort and confusion of an aspirant this master index has been framed. Kindly note that certain topics in the index does not containpage numbers. This is because those topics are included in the electronic mat available on the search engines and not been covered under the printed mat of the given published date.So it will be beneficial for you to cover those topics as well (bold or highlighted ones). All the best!! Lesson 1 Economic Framework of Capital Market Particulars Introduction Constituents of the financial system Financial assets Classification of Financial Assets A. (i) Marketable assets (ii) Non-marketable assets B. (i) Money/cash asset (ii) Debt asset (iii) Stock assets Financial intermediaries Financial markets Classification of financial markets  Unorganized Markets  Organized Markets 1) Capital Market a) Industrial Securities Market b) Government Securities Market c) Long-term Loans Market 2) Money Market Features of Money Market Capital market Primary market

The index is as per printed MAT issued by the Institute July 2015/PRN -2981

Page no 2




5 5-6 6 Page 1

Capital, Commodity and Money Market Secondary market What is Transaction Cost? Functions of capital market Role of capital market in resource allocation Capital formation Stages of capital formation

The index is as per printed MAT issued by the Institute July 2015/PRN -2981

CS Mohit Shaw 6-7 7-8 8-9 9 10 10-11 Page 2

Capital, Commodity and Money Market

CS Mohit Shaw

Role of capital market in capital formation Lesson 2 Legal Framework Introduction Department of Economic Affairs (DEA)



 Capital Market Division 1) 2) 3) 4)

Primary Market (PM) Secondary Market (SM) External Markets (EM) External Commercial Borrowings (ECB) 16-20

 Ministry of Corporate Affairs  Company Law Board  National Company Law Tribunal  Reserve Bank of India  Securities and Exchange Board of India (SEBI) Legislations Grievance Redressal Mechanism  Grievance Redressal Mechanism at – 1.Stock Exchange 2.SEBI  Investor Protection Fund  Investor Protection and Education Fund Securities Appellate Tribunal (SAT) Prevention of Money Laundering Act, 2002  Objective  Offence of Money-Laundering  Punishment for Money-Laundering  Obligations of Banking Companies, Financial Institutions Intermediaries of Securities Market  Cash transaction report  Suspicious transaction reports Investigating Agencies in case of PMLA, 2002  Directorate of Enforcement  Central Bureau of Investigation  Financial Intelligence Unit – India (FUI-IND)  Functions of FIU-IND  The Financial Action Task Force (FATF)  FATF recommendations 2012

The index is as per printed MAT issued by the Institute July 2015/PRN -2981






27-31 Page 3

Capital, Commodity and Money Market

CS Mohit Shaw

Lesson 3 Framework of Market Infrastructure Institutions Introduction Securities Contract (Regulation) (Stock Exchanges and Corporations) Regulations, 2012  Recognition of Stock Exchanges and Clearing Corporations  Net worth requirements  Ownership of – 1. Stock Exchanges 2. Clearing Corporations  Governance of Stock Exchanges and Clearing Corporations  Listing of Securities Procedural norms                 

    

Part A: Recognition Part B : Action Plan for achieving Net worth Ownership Part C: Governance The Depositories Act, 1996 Objectives Eligibility condition for Depository Services Eligible Securities required to be in the Depository Mode Fungibility Rights of Depositories and Beneficial Owner Register of beneficial owner Pledge or hypothecation of securities held in a depository Furnishing of information and records by depository and issuer Option to opt out in respect of any security Depositories to indemnify loss in certain cases Enquiry and inspection Power of SEBI Power of SEBI to give directions Penalty Penalty for failure toi) Furnish information/return etc. ii) Enter into agreement iii) Redress investors' grievances iv) Reconcile records v) Comply with directions issued by SEBI Penalty for – 1. Delay in dematerialisation or issue of certificate of securities 2. Contravention where no separate penalty has been provided Power to adjudicate Factors to be taken into account by Adjudicating Officer Settlement of Administrative Civil Proceedings Recovery of amounts

The index is as per printed MAT issued by the Institute July 2015/PRN -2981

36 Clearing





44-47 Page 4

Capital, Commodity and Money Market

CS Mohit Shaw

 Crediting of penalties to Consolidated Fund of India Offences  Offences by companies  Cognizance of offences by Courts  Composition of certain offences  Power to grant immunity Special court  Establishment of Special Courts  Offences Tribal by Special Courts  Appeal and Revision  Application of Code to proceedings before Special Court  Transitional provisions Appeals  Appeal to Securities Appellate Tribunal  Procedure and powers of Securities Appellate Tribunal  Appeal to Supreme Court  Right to legal representation  Civil court not to have jurisdiction  Areas on which rules may be framed by the Central Government Securities Contracts (Regulation) Act, 1956  Application for recognition of stock exchanges  Grant of recognition to stock exchanges  Withdrawal of recognition  Power of Central Government to call for periodical returns or direct inquiries to be made  Annual reports to be furnished to Central Government by stock exchanges  Power of recognised stock exchange to make rules restricting voting rights, etc  Power of Central Government to direct rules to be made or to make rules  Clearing Corporation  Power of SEBI to make or amend bye-laws of recognised stock exchanges  Power of Central Government to supersede governing body of a recognised stock exchange  Power to suspend business of recognised stock exchanges  Penalty Lesson 4 Financial Intermediaries Framework Introduction Primary market intermediaries Merchant banker

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60 Page 5

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CS Mohit Shaw

SEBI (Merchant Bankers) Regulations, 1992  Capital adequacy  General Obligations and Responsibilities of Merchant Banker  Code of conduct for merchant bankers  Responsibilities of Lead Manager  Merchant Banker not to Act as such for an Associate  Minimum underwriting obligation  Prohibition to Acquire Shares  Disclosure to SEBI  Appointment of Compliance Officer  Procedure for Inspection  Procedure for Action against Merchant Banker in case of Default Registrars to an issue and share transfer agents



SEBI (Registrars to an Issue and Share Transfer Agents) Regulations, 1993

 Criteria for Registration  General Obligations and Responsibilities  Code of conduct  Procedure for Inspection  Liability for Action in case of default Underwriters    

SEBI (Underwriters) Regulations, 1993 Obligations and Responsibilities of Underwriters Appointment of Compliance Officer Inspection and Disciplinary Proceedings Procedure for Action in Case of Default

Banker to an Issue SEBI (Banker to an Issue) Regulation, 1994  Consideration of Application  Procedure for Registration  General Obligations and Responsibilities  Code of Conduct  Compliance Officer  Procedure for Inspection  Action on Inspection or Investigation Report  Procedure for Action in Case of Default Debenture Trustees SEBI (Debenture Trustees) Regulations, 1993  Responsibilities and Obligations of Debenture Trustees  Duties of Debenture Trustees  Maintenance of Records  Appointment of Compliance Officer  Information to SEBI  Action on Inspection or Investigation Report  Procedure for Action in Case of Default Secondary market intermediaries Stock brokers and sub-broker

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76 Page 6

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CS Mohit Shaw

SEBI (Stock Brokers & Sub-Brokers) Regulations, 1992  Rejection of Application of Brokers  Registration of1. Sub-brokers 2. Trading and Clearing Members (Chapter IIIA…..)  Registration Procedure for Trading and Clearing Member (Regulation 16I…)  Registration of Trading and Clearing Members of Currency Derivatives Segment  Registration Procedure  General Obligations and Responsibilities  Compliance officer  Procedure for Inspection of Stock Brokers’ Offices  Obligations of Stock Broker on Inspection by SEBI  Procedure for Action in Case of Default  Liability for1. Monetary Penalty 2. Action under the Enquiry Proceeding 3. Prosecution A Case Study on Fraudulent Dealings  BishwanathMurlidharJhunjhunwala v. SEBI Submission of Annual Returns Certification by Practicing Company Secretary Portfolio Manager SEBI (Portfolio Managers) Regulations, 1993  Norms for Registration as Portfolio Managers  Capital adequacy requirement  Renewal of Certificate  Conditions of Registration  Period of Validity of Certificate  Procedure where Registration is not granted  Contract with Clients and Disclosures  Responsibilities of a Portfolio Manager  Investment of Clients Money  Accounting by Portfolio Managers  Reports by Portfolio Manager to the Client  Action on Auditor’s Report and Disclosure to SEBI  Compliance Officer  Inspection and Disciplinary Proceedings  Notice before Inspection  Obligations of Portfolio Manager  Appointment of Auditor  Liability for Action in Case of Default Internal Audit of Portfolio Manager Custodian of securities

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94 94-95 Page 7

Capital, Commodity and Money Market

CS Mohit Shaw

SEBI (Custodian Of Securities) Regulations, 1996  Application for Grant of Certificate  Application to Conform to Requirements  Furnishing of Information  Consideration of Application for Grant of Certificate  Capital requirement  Procedure and Grant of Certificate  Conditions of Certificate  Period of Validity  Renewal of Certificate  Procedure where Certificate is not Granted  Effect of Refusal to Grant Certificate  Segregation of Activities  Mechanism for Monitoring Review  Prohibition of Assignment  Separate Custody Account  Agreement with the Client  Internal Controls  Maintenance of Records and Documents  Appointment of Compliance Officer  Information to SEBI  Inspection and Audit  Notice before inspection  Obligations of Custodian  Submission of Report to SEBI  Liability for Action in Case of Default Foreign institutional investor SEBI (foreign institutional investors) Regulations, 1995 Consideration of Application Procedure for Grant of Certificate Validity of Certificate Grant of Certificate Procedure where Certificate is not Granted Application for Registration of Sub-accounts Procedure and Grant of Registration of Sub-accounts Responsibility of FIIS Investment Conditions and Restrictions Conditions for Issuance of Offshore Derivative Instruments General Obligations and Responsibilities Maintenance of Proper Books of Accounts, Records, Etc. Appointment of Compliance Officer Information to SEBI Procedure for Action in Case of Default Qualified foreign investors (QFIS) Qualified foreign investors Permissible transactions allowed for QFI’s investing into Indian securities Investment adviser

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100 Page 8

Capital, Commodity and Money Market

                                   

CS Mohit Shaw

SEBI (Investment Advisers) Regulations, 2013 Registration of Investment Advisers Exemption from registration Qualification & certification Capital adequacy Registration General Obligations and Responsibilities Code of Conduct for Investment Adviser Maintenance of records Liability for action in case of default Audit investment adviser SEBI (Credit Rating Agencies) Regulations, 1999 Registration of Credit Rating Agencies Promoter of Credit Rating Agency Eligibility criteria Application to Conform to the Requirements Furnishing of Information, Clarification and Personal Representation Grant of Certificate Conditions of Certificate Procedure where Certificate is not granted Effect of Refusal to grant Certificate Code of Conduct Agreement with the Client Monitoring of Ratings Procedure for Review of Rating Internal Procedures to be Framed Disclosure of Rating Definitions Submission of Information Appointment of Compliance Officer Maintenance of Books of Accounts Records, etc. Steps on Auditor’s Report Confidentiality Rating process Restrictions on Rating of Securities Issued by Promoter and Certain Entities, Connected with A Promoter, or Rating Agency Procedure for Inspection and Investigation Notice of Inspection or Investigation Obligations of Credit Rating Agency Action in case of Default

The index is as per printed MAT issued by the Institute July 2015/PRN -2981


103-110 Page 9

Capital, Commodity and Money Market Market Maker  Guidelines for market maker  Registration of the Market Maker  The Obligations and Responsibilities of Market Makers  Dissemination of Information  Number of Shares per Market Maker  Risk Containment Measures and Monitoring for Market Makers  Capital adequacy  Monitoring  Price Band and Spreads SEBI (depositories and participants) Regulations, 1996 Rights and Obligations of Depositories and its Constituents Governance of Depository  Governing Board, Disclosures and Corporate Governance  Investor Protection Fund Audit under SEBI (Depositories And Participants) Regulations, 1996 Internal Audit of operations of Depository Participants Concurrent audit  Issuance of DIS  Verification of DIS  Designated Depository Participant (DDP)  Eligibility criteria for DDP Qualified Depository Participants Role and responsibilities of QDP Responsibilities on the QDP with respect to the regulator Concern need to be taken by QDP while registering a QFI Undertakings that the QDP's need to obtain from the QFI's Lesson 5 Primary Market Introduction Types of Issue Offer for sale OFS process Difference between Offer for Sale (OFS) process and IPOs/FPOs

The index is as per printed MAT issued by the Institute July 2015/PRN -2981

CS Mohit Shaw


112-113 114 114 114-115


120-121 121 121-122 Page 10

Capital, Commodity and Money Market

CS Mohit Shaw

SEBI guidelines on Offer For Sale (OFS) of shares by promoters through the Stock Exchange mechanism  Eligibility  Definitions  Size of Offer for sale of shares  Advertisement and Offer Expenses  Operational Requirements  Risk Management  Allocation  Settlement  Handling of default in pay-in  Issuance of Contract Notes  Withdrawal of offer  Cancellation of offer Understanding the guideline step wise Different form of Prospectus  Offer Document  Draft Offer Document  Red Herring Prospectus  Shelf Prospectus




 Filing of Offer Document Lead Manager  Pre-issue Management  Post-issue Management  Co-ordination with Intermediaries



   

Due Diligence Due Diligence in IPO/FPO Pre-issue-Due Diligence Certificates Post issue diligence Basis of allotment Example-Allocation to Retail Investor Book Building  Book Building process through a Flowchart  Additional disclosures in case of Book Building  Procedure for Bidding  Alternate Method of Book Building Green Shoe Option Facility  Pre-issue activities  Rights issue  Steps involved in issue of rights shares Bonus issue  Advantages of Issuing Bonus Shares  SEBI Regulations Pertaining to Bonus Issue  Steps involved in Issue of Bonus Shares

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153-156 Page 11

Capital, Commodity and Money Market

CS Mohit Shaw

Preferential issue  SEBI ICDR Regulations, 2009 Pertaining to Preferential Issue  Non-Applicability Qualified Institutions Placement  Qualified Institutional Buyer  Conditions for making QIP  Intermediaries involved in QIP and their roles  Placement document  Pricing  Issue of partly paid-up securities  Restrictions on allotment  Minimum numbers of Allotters  Validity of the special resolution  Restriction on amount raised  Tenure  Transferability of Securities


160 -165

Institutional Placement Programme         

Conditions for Institutional Placement Programme Appointment of Merchant Banker Offer document Pricing and Allocation/Allotment Restrictions Restrictions on size of the offer Period of Subscription and display of demand Withdrawal of offer Transferability of eligible securities Listing agreement  Benefits of listing  Listing agreement  Laws governing Listing  Event based and time based Compliance under Listing Agreement Lesson 6 Secondary Market Introduction Corporate actions Requirement under listing agreement for corporate action Continuous listing  Rule 19(2)(b)  Rule 19A  Clause 40A of Listing Agreement  40B – Take Over offer Material events under listing agreement Price sensitive information (PSI) Submission of interim and annual financial results under listing agreement

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179-181 181-182 Page 12

Capital, Commodity and Money Market

CS Mohit Shaw

Disclosures under listing agreement  Disclosure relating to shareholding pattern (clause 35)  Disclosure under clause 41  Disclosure regarding agreements with media companies (clause 53) Corporate Governance Regulatory framework of Corporate Governance in India Corporate Governance -Voluntary Guidelines 2009 Guidelines on Corporate Governance for Central Public Sector Enterprises  Applicability  CPSEs listed on Stock Exchanges:  Non-listed CPSEs National Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Business, 2011 Companies Bill, 2012 Evolution of clause 49 of listing agreement Highlights of Clause 49  Composition of Board of Directors  Definition of Independent Director  Limit on number of Directorships  Maximum tenure of Independent Directors  Formal letter of appointment to Independent Directors  Performance evaluation of Independent Directors  Separate meetings of Independent Directors  Training of Independent Directors  Nominee Directors to be treated as Independent Director  Non Executive Directors’ Compensation and Disclosures Disclosures on Remuneration of Directors Code of Conduct Board of Meetings  Limit on membership of committees  Other provisions as to Board and Committees  Code of Conduct  Whistle Blower Policy Audit committee  Quorum  Powers  Meetings and Role  Review of Information by Audit Committee  Nomination and Remuneration Committee Subsidiary company  Shareholders/Investors Grievance Committee  Risk Management  Related Party Transaction Disclosures CEO/CFO certification

The index is as per printed MAT issued by the Institute July 2015/PRN -2981


184 184-185


185 186-187




194-196 196 196-197 Page 13

Capital, Commodity and Money Market

CS Mohit Shaw

Report on Corporate Governance Compliance Certificate Non-mandatory Requirements Comparison between revised Clause 49 and Companies Act, 2013 Audit qualifications Training of Board Members Mechanism for evaluating non-executive Board Members Whistle blower policy Stock exchange mechanism Arbitration Mechanism  Kinds of disputes covered under Exchange Arbitration Mechanism  Legal framework for Arbitration Mechanism provided by Exchange  Arbitration Mechanism at Stock exchanges  Maintenance of a Panel of Arbitrators  Code of Conduct for Arbitrators  Arbitration  Appellate Arbitration  Arbitration fees  Place of Arbitration  Implementation of Arbitral Award in favour of Clients  Record and Disclosures Margining  Initial Margin  Maintenance Margin Types of margins in cash and derivative segment  Value at Risk (VAR) margin Example  Extreme loss margin Example  Mark-to-Market (MTM) margin Example Derivatives segment  Initial margin  Exposure margin  Premium margin Trading of securities  Order placing  Order execution  Contract note preparation  Delivery and Clearing  Share transfer Settlement system Clearing and settlement Clearing & settlement process Trade Guarantee Fund Trading Software Stock Market Indices The index is as per printed MAT issued by the Institute July 2015/PRN -2981

197 198-211







221 221-222 222-223 223 Page 14

Capital, Commodity and Money Market

CS Mohit Shaw

Types of indices  BSE indices  NSE indices

224 BSE indices

   

Sensex Sensex - Scrip Selection Criteria S & P BSE Sensex Calculation Methodology Free-float 1. Definition 2. Example 3. Major Advantages 4. Determining Free-float Factors of Companies 5. Free-float Bands  Formula for Calculation of Index a) Example b) Index closure algorithm c) Maintenance of BSE Indices d) On - Line Computation of the Index e) Adjustment for Bonus, Rights and Newly Issued Capital f) Base Market Capitalization Adjustment CNX nifty  Selection Criteria for CNX Nifty  Price Index Calculations Formula Investible weight factors (IWFS)  Example Lesson 7 Capital Market Investment Institutions Introduction  National Level Institutions 1. All-India Development Banks (AIDBs) 2. Specialised Financial Institutions (SFIs) 3. Investment Institutions  State Level Institutions 1. State Financial Corporations (SFCs) 2. State Industrial Development Corporations (SIDCs) Qualified Institutional Buyers Anchor investor Private Equity  Types of private equity 1. Leveraged Buyout (LBO) 2. Venture capital 3. Growth capital Venture capital Areas of investment Stages Of Investment Financing  Early stage financing  Later stage financing

The index is as per printed MAT issued by the Institute July 2015/PRN -2981


230-231 231-232




240 240-241 Page 15

Capital, Commodity and Money Market

CS Mohit Shaw

Angel fund


Types of angel investors Core angels High-tech angels Return on investment (ROI) angels Enthusiast angels Micromanagement angels Professional angels Pension fund  Formal sector pensions  Pension fund management Foreign Portfolio Investor  Categories of FPI  Investment conditions and restrictions Foreign Institutional Investor(FII) Why FIIs required? Investment by FIIs Investment by FIIs under portfolio investment scheme Qualified foreign investor Mutual fund  Types of mutual fund schemes  Fixed maturity plans  Exchange traded funds (ETFs)  Capital protection oriented schemes  Gold exchange traded funds (GETFs)  Quantitative funds  Funds investing abroad  Fund of funds (FOFs) Alternative investment funds  Types of AIFs  Where an AIF can invest  Category wise investment condition  Conditions for – 1. Category II AIFs 2. Category III AIFs Hedge funds  Domestic hedge fund  Offshore hedge fund  A taxonomy of hedge fund strategies  Market benefits of hedge funds Lesson 8 Capital Market Instruments Introduction Equity Shares-Characteristics Shares with Differential Voting Rights+ Example (Pantaloons Retail India Ltd, Tata Motors) Pre-conditions for issue of DVRs      

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254 254-255 255-256 Page 16

Capital, Commodity and Money Market

CS Mohit Shaw

Prohibition on Superior Rights – Clause 28 A  AnandJaiswal v. Jagatjit Industries Limited- Case Law  Ruling by company law board  Reform by SEBI Preference shares  Cumulative preference shares  Non-cumulative preference shares  Convertible preference shares  Redeemable preference shares  Participating preference shares  Non-participating preference shares  Fully convertible cumulative preference share (EQUIPREF) Debentures  Features  Types  Classification based upon convertibility  Basic features of Convertible Debentures  Advantages to the investor  Fully Convertible Debentures with interest (optional) Non-convertible debentures (NCDs) with Put and Call Options  Put options  Call option 1. Example Bonds  Characteristics  Types Warrant Sweat equity shares Share warrant Position of the holder of a share warrant Conditions for the issue of a share warrant Secured premium notes (SPN) Example Equity shares with detachable warrants Foreign Currency – 1. Convertible Bonds (FCCBS) 2. Exchangeable Bonds (FCEBS) ADR and itsAdvantages GDR  Advantages to (I) Issuing company (II) Investor  Difference between American Depository Receipts (ADR) and Global Depository Receipts (GDR) Indian Depository Receipts (IDRs) Benefits

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262-263 263 263-264

264 264 265-266 266


267 Page 17

Capital, Commodity and Money Market

CS Mohit Shaw

Derivatives Futures Options& its Example Index futures & options Currency futures Interest Rate Futures (IRFs) Stock futures and stock options Pricing of stock futures Exchange traded funds (ETFs)

267 267-268 268-269 269 270

Lesson 9 Resource Mobilization through International Markets Introduction


American Depository Receipt(ADR)  Examples  ADR Ratio  Types of ADRs Global Depository Receipts (GDRs) Advantage of ADRs and GDRs to –  Investor  Issuer Process involved in issue of ADR/GDR Sponsored ADR/GDR issue Two-way fungibility scheme Issuance of shares under ADR/GDR  Provision of Companies Act 2013 relating to issue of GDR  Companies(Issue of Global Depositary Receipts) Rules, 2014  Condition for the issue of depository receipts  Manner and form of depository receipts  Voting rights  Proceeds of issue  Non applicability of certain provisions of act  Statutory approvals required for issue of GDR/ADR  Agencies involved in ADR/GDR issue  Agreements and related documents 1. Subscription Agreement 2. Depository Agreement 3. Custodian Agreement 4. Escrow Agreement 5. Offering Circular Procedural requirements Roadshows Stepwise procedure for issue of ADR/GDR Reporting of ADR/GDR issues FCCB and ordinary shares (through depository receipt mechanism) scheme,1993  Eligibility  Transfer and redemption

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274-275 275-276 276 277 278


286-287 287-288 288-289 289-290 290 Page 18

Capital, Commodity and Money Market

CS Mohit Shaw

Taxation on shares issued under global depository receipt mechanism Listing of GDR London Stock Exchange


Different ways in which a company can list in London Listing on the main market  Sponsor  FSA’s requirements for a company to receive listed status 1. Company’s incorporation status 2. GDR requirements 3. Continuing obligations  Prospectus  Block Listing  Documents required to be provided –  To FSA  On the day of listing  After Listing 4. Continuing obligations on the main market Listing on professional security market  Requirement of prospectus  Key eligibility criteria  Admission process  Trading  Key continuing obligations Listing on AIM  Admissions Criteria  Nominated Advisers (Nomads)  Admission Process  Key continuing obligations Luxembourg Stock Exchange  Listing Requirements  Continuing obligations Listing of ADR NASDAQ The NASDAQ global select market (NGSM)  NGSM quantitative listing and maintenance standards 1. Quantitative initial listing standards  Liquidity Requirements  Financial Requirements 2. Quantitative maintenance requirements The NASDAQ Capital Market (NCM) NCM Quantitative Listing and Maintenance Standards The NASDAQ Global Market (NGM) NGM Quantitative Listing and Maintenance Standards NEWYORK Stock Exchange (NYSE) NYSE Quantitative Listing and Maintenance Standards

The index is as per printed MAT issued by the Institute July 2015/PRN -2981




296 296-297 297


299-300 301-303 303-306 Page 19

Capital, Commodity and Money Market

Chapter 10 Economics of Commodities Marketing Introduction (what is commodity?) Types of commodities Commodity markets Marketing of Agricultural Commodities  Direct marketing  Indirect Marketing  Contract Farming

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CS Mohit Shaw

310 310-311 311-312 Page 20

Capital, Commodity and Money Market Storage Types of storage 1. Underground Storage Structures& Their Advantages 2. Surface Storage Structures Warehousing  Importance & working of warehouses  Types of warehouse 1. On the basis of(a) Ownership (b) Commodities Stored  Warehousing in India 1.Central Warehousing Corporation(CWC) 2.State Warehousing Corporation(SWC) 3.Food Corporation of India (FCI) Variance in commodity market  Weather derivatives  Freight derivatives  Electricity derivatives  Catastrophe derivatives  Carbon derivatives  Hedging  Hedging risks Understanding Basis Risk Chapter 11 Commodities Market Operations Introduction Role of commodity exchanges Evolution of commodity exchanges Origin of Commodity Market in India Regulatory framework Three-tier regulatory system  Central Government  Forward Market Commission  Exchanges Forward Market Commission Of India  Functions  Powers Commodity exchanges in India  Categories  Features: National and Regional exchanges Participants/Players  Hedgers  Speculator 1. Need 2. Difference between a speculator and gambler  Arbitrageurs

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CS Mohit Shaw





326 326-327 327-328 328



330-332 Page 21

Capital, Commodity and Money Market

CS Mohit Shaw

Commodity Producers/Consumers Commodity Processors Commodity Traders Financial Institutional/Dealers Investors Trading in Commodity Market a) Margin money b) Different types of margin money payable on futures  Initial/Ordinary Margin  Mark to Market (M2M or MTM)  Special/Additional Margin  Maintenance Margin  Delivery Period Margin Order types- Time, Price & Other Conditions Electronic Spot Exchanges Exchange Membership Clearing and Settlement Clearing  Clearing Mechanism  Clearing Banks  Depository Participants Settlement–Settlement Mechanism(Daily Mark to Market and Final settlement) Settlement Methods a) Physical Delivery of the Underlying Asset 1) Compulsory Delivery Contract 2) Sellers Right Contract 3) Intention Matching Contract b) Closing out offsetting positions c) Cash Settlement Entities Involved In Physical Settlement  Accredited Warehouse  Approved Registrar and Transfer agents (R&T agents)  Approved Assayer Instruments available for trading (Forward Contract & its limitation) Futures Distinction between Futures & Forward Contracts Futures Terminology a) Spot Price b) Future Price c) Contract Cycle d) Expiry Date e) Delivery Unit f) Basis g) Cost of Carry h) Initial margin i) Marking to Market (MTM) j) Maintenance Margin Options a) b) c) d)

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334-335 335-336 336

336-337 337-338


341-342 342-343 343


344 Page 22

Capital, Commodity and Money Market

CS Mohit Shaw

Options Terminology a) Commodity options b) Stock options c) Buyer of an option d) Writer of an option e) Option price f) Expiration price g) Strike price h) American Options i) European Options j) In the money options k) At the money options l) Out of the money options m) Intrinsic value of an option n) Time value of an option Using Commodity Exchanges for Hedging, Speculation and Arbitrage Hedging  Basic Principle  Short Hedge  Long Hedge  Advantages Speculation  Bullish, Buy Futures  Bearish Commodity, Sell Futures Arbitrage  Overpriced Commodity Futures : Buy Spot, Sell Futures  Underpriced Commodity Futures : Buy Future, Sell Spot Chapter 12 Money Market Introduction Features of money market Money market vs. Capital market Growth of money market Structure and Institutional Development Money Market Instruments Government Securities Gilt-Edged(Government) Securities Call Money and Notice Money Term Money Bill discounting  Procedures  Factors influencing discount rates Bill Rediscounting Scheme (BRD) Repurchase agreements Banker’s acceptance

The index is as per printed MAT issued by the Institute July 2015/PRN -2981






354 354-355 355 355-356 356-357 357 357-358 358 358-359 359 359-360 361 361 362 Page 23

Capital, Commodity and Money Market Treasury bills Benefits of investing in T bills Features of T-Bills Primary Market - issuance of T bills [Auction Technique] Secondary market Types of auction for T bills (2 types)  Multiple Price based or French Auction  Uniform Price based or Dutch Auction Certificates of deposits  Eligibility  Aggregate Amount  Minimum size of issuance and denominations  Maturity  Discount/Coupon rate  Reserve Requirements  Transferability  Trades in CDs  Format of CDs  Security aspects  Payment of certificate  Issue of Duplicate Certificates  Accounting Inter-corporate deposits Commercial Bills Commercial Paper (CP) a) Eligible issuers b) Rating requirements c) Maturity d) Denomination e) Limits and the amount of issue of CP f) Issuing & Payment agent (IPA) g) Investment in CP h) Trading in CP i) Mode of issuance j) Preference for Dematerialisation k) Payment of CP l) Procedure for Issuance Money Market Mutual Funds (MMFS) Factoring  Definition  Parties in factoring  Steps for factoring  Advantages to seller  Types of factoring Letter of credit (reasons for using LC) Basic forms of LCS Working mechanism for Letter of Credit transaction Bill of exchange a) b) c) d) e)

The index is as per printed MAT issued by the Institute July 2015/PRN -2981

CS Mohit Shaw



368 368




374-375 375 375-376 377 Page 24

Capital, Commodity and Money Market FIMMDA Foreign Exchange Dealer’s Association of India

CS Mohit Shaw 378 378

Chapter 13 Insider Trading Introduction Provision Relating to Trading in Companies Act, 2013 (Section 195) SEBI (Prohibition of Insider Trading) Regulations, 1992

The index is as per printed MAT issued by the Institute July 2015/PRN -2981

382 383 Page 25

Capital, Commodity and Money Market

CS Mohit Shaw

Important Definition a) Insider b) Connected Person c) Person deemed to be a Connected Person d) Price Sensitive Information e) Unpublished Prohibition on dealing communication or counselling on matters relating to Insider Trading Non applicability of Regulation 3A in certain case Code of internal procedures and conduct for listed companies and other Entities Disclosures a) Disclosure of interest or holding in a listed companies by certain persons  Initial disclosure [Regulation 13(1), 13(2), 13(2A)]  Continual Disclosure[Regulation 13(3), 13(4), 13(4A)] b) Disclosure by company of stock exchange c) Disclosure Through e filing Model code of conduct for prevention of insider trading for listed Companies  Compliance officer, need to know, prevention of misuse etc.  Prevention and misuse – Trading window & its norms  Preclearance of trading  Other restrictions Reporting requirements for transaction in securities Penalty for contravention of code of conduct Model code of conduct for prevention of insider trading for other entities  Chinese wall  Restricted/GreyList  Other restrictions Code of corporate disclosure practices for prevention of insider trading Corporate Disclosure Policy (to be followed by listed companies) Investigation by SEBI (Power, Right & Obligation on insider, Directions by SEBI) Penalty provisions for violations of the Regulations  Penalty under Section 15G of the SEBI Act 1992  Appeal to Securities Appellate Tribunal Role of company secretary in compliance requirements (external reporting by CS as well) SEBI’s view on the role of the compliance officer in case of insider trading [Mr. G Jayaraman in the matter of Satyam Computer Services Ltd]


385 386





391 392-393 394 395-397 397-398

Chapter 14 Substantial Acquisition of Shares and Takeovers Introduction

The index is as per printed MAT issued by the Institute July 2015/PRN -2981

402 Page 26

Capital, Commodity and Money Market

a) b) c) d) e) f) g) h) i) j) k) l) a) b) a) b) c) a) b) c)

CS Mohit Shaw

Important definitions Acquirer Acquisition Control Enterprise value Frequently traded shares Identified date Offer period Persons acting in concert Target company Tendering period Volume weighted average market price Volume weighted average price Trigger point for making an open offer by an acquirer 25% shares or voting rights Creeping acquisition limit Open offer Mandatory offer Voluntary open offer Conditional offer Open offer process Pre-open offer During the offer Post open offer




408-410  Activity Chart (An activity chart for calculation of prescribed time period for open offer execution.This is the minimum timeline as prescribed under SEBI takeover Regulations, 2011) Public Announcement a) Submission of Public Announcement(PA) b) Publication & Submission of Detailed Public Statement(DPS)  Contents of PA & DPS c) Procedure of filing PA & DPS Offer price Provision of Escrow Mode of payment Disclosures[Regulations 29(1), 29(2), 30(1), 30(2), 31(1), 31(2)] Exemptions Regulation 10 - Automatic Exemptions Regulation 11 - Exemption by SEBI Procedure for filing the application under Regulation 11 Case Study Beyond Chapters mentioned in the index Report of the Committee on Capital market Report of the financial sector legislative reform commission The draft Indian Financial code

The index is as per printed MAT issued by the Institute July 2015/PRN -2981


412-413 413 413-414 414-415 415 415-418 419 420 420-421

423 423 Page 27

Capital, Commodity and Money Market

CS Mohit Shaw

Regulators (there is a table given for easy understanding) Report of the takeover Regulation – Mr. C Achuthan (Chairman)


Others – Summary of key recommendation (a simplified table is given from page 426) Dhanuka committee Report on Securities law Executive Summary on Principle recommendations  Pertaining to Draft securities Bill and draft depositories (amendment) Act, 1998 (Part IA)  Dematerialisation/depositories Act, 1996 – Amendments (Part IB)  Pertaining to working draft of Companies Bill, 1997 (Part II)  Recommendation for issue of an ordinance for moving of an urgent bill to curb the growing evil emanating from collective investment schemes

The index is as per printed MAT issued by the Institute July 2015/PRN -2981

425-439 439

440-444 Page 28