What is Security & Security Market:
Security is a type of financial instrument that’s a kind of asset that can be traded. The nature of what can or can't be called security mainly depends upon the jurisdiction during which the assets are included. Mainly there are three primary categories of securities. The Equity securities, The Debt securities and, The Derivatives.
● Equity Securities - Stocks
● Debt Securities - Banknotes, Bonds, etc.
● Derivatives - Options [Calls & Puts] and Future Contracts
The security market is a very bigger part of the financial market, where securities are bought and traded between the subjects of the economy, based on demand and supply. The security market consists of a Stock market, the Derivatives market, and the Bond market. It is the place where prices can be determined and the participants both professional and non-professional can meet and have business with each other.
The security market is divided into two, firstly The Primary Markets and secondly The Secondary Markets. Primary markets are where the new securities are issued and The Secondary Market is where the existing securities are bought and sold. A secondary market can be further divided into “organized exchanges”, it is a place where individual parties come together and buy or sell securities directly.
The supply of new securities in the capital markets is done by the primary market. Public Institutions, governments, and companies obtain funding through the sale of new stocks or Bonds issued. When a company issues new stocks in the market for sale, then those stocks are known as “Public Offering”. This transaction is done by a securities dealer, the dealer gets a commission on the sale of these securities transactions.
Regulation of Securities in India
The securities market in India is being regulated and monitored by the Ministry of Finance, The Securities and Exchange Board of India, and The Reserve Bank of India.
The laws which govern the administration and legislation of securities are as under:
● Depositories Act, 1996
● Securities Contracts (Regulation) Act, 1956
● Securities and Exchange Board of India Act, 1992
The Ministry of Finance regulates the secondary market through their “Economic Affairs” department, which deals with the capital market. The main motive of the Finance Ministry is to maintain security and protect the rights of the interest of the investors. The ministry of finance, Initiate Institutional reforms, build Regulatory Institutions for strengthening The Investors Protection and provide an effective Legislation Framework for the security market.
The RBI [Reserve Bank of India] is responsible for implementing monetary policies, being a Banker to the Government, regulating the banking system, issues currency notes, and manage foreign exchange. RBI is governed by The Reserve Bank of India Act, 1934. The Reserve Bank of India regulates the financial markets and Systems and maintains a corrupt-free environment in India. The RBI keeps an eye on the fraudulent transactions being done in the securities market it also monitors any default which is made in the market.
The SEBI [Securities and Exchange Board of India] regulates the dealing in the stock market. The securities and exchange board of India was established under the SEBI Act 1992 and it is the principal regulator of the stock exchange of India. The basic and primary function of the SEBI is to protect the consumer's interest i.e. The investors and promote the Indian securities market.
The NSE [National Stock Exchange] is a very vital part of the securities exchange in India. NSE sets out and implements rules and regulations that govern the security market. The National Stock Exchange is regulated by SEBI and it often undergoes inspections to ensure compliance with the work. the NSE set off rules and regulations which are specifically applicable to each of which trading segments such as securities listing monitoring transactions and registrations of members, etc.
The Role of SEBI in regulating the Stock Market:
The Securities and Exchange Board of India [SEBI] is the regulatory body for India’s securities and commodity market. The SEBI comes under the jurisdiction of the Ministry of Finance. It was established on 12 April 1988 was given the started its powers on 30th January 1992 through the SEBI Act 1992.
The Preamble of The Securities and Exchange Board of India describes its basic function which is that it must protect the interest of investors in securities and it should also promote the development of the market and also regulate it.
Protecting the interest of investors: most of the investors buy and sell shares in the stock market of India if anything wrong happens with any of such individuals, the investors can file a complaint with SEBI. The SEBI will look into the problem and ensure that it protects its investors’ interests by clearing their complaints or grievances.
Stopping insider trading: Insider trading means illegal trading in public companies' stock. It happens when someone knows about the insider working of the company. And if these secrets are passed, the other people are making more profit than the rest of others. Hence, it is very essential to stop such insider trading.
Prohibiting unethical trading in Stock Market: Any company in the stock market practices unethical business law unethical sales of shares of their company which are against the guidelines of SEBI, then strict actions are taken against those companies.
Every aspect of stock Market Under SEBI: Every aspect of the stock market comes under SEBI, such as the firms, investors, and corporate brokers, etc these all are subject to SEBI and fall under the rules and regulations. hence the entire stock market follows the rules and regulations made by SEBI.
In conclusion, we can assume that the SEBI is responsible for all the operations done in the stock market. the primary objective of SEBI is to stop all the issues faced by investors or any other individual in the stock market, it should maintain a study flow in the market by technological improvements, new rules and guidelines, and solving grievances of the individuals.