Secondary market participants

Secondary market has its own functions and participants. 24 Carat Financial

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In the modern structure of secondary markets, clearing corporations

(also known as clearing houses) are set up as independent fully-owned

subsidiaries of stock exchanges. They function as counter-parties for all

trades executed on the exchange they are affiliated with. So all buyers pay

funds to the clearinghouse, and all sellers deliver securities to the

clearinghouse. Specialized intermediaries called clearing members complete

these transactions. The clearinghouse completes the other leg of the

settlement by paying funds sellers and delivering securities to buyers. The

National Securities Clearing Corporation Ltd (NSCCL) is the clearinghouse for

trades done on the NSE; the Indian Clearing Corporation Ltd (ICCL) is the

clearinghouse for BSE and Metropolitan Clearing Corporation of India Ltd.

(MCCIL) is the clearing house for MSEI.

Custodians are institutional intermediaries, who are authorized to hold

funds and securities on behalf of large institutional investors such as banks,

insurance companies, mutual funds, and foreign institutional investors (FIIs)

. They settle the secondary market trades for institutional investors.

Several custodians are also clearing members and clearing banks of the

exchange and manage both funds and security settlements.

Secondary markets are regulated under the provisions of the Securities

Contract Regulations Act, 1956 and SCR (Rules), 1957. SEBI is authorized by

law to implement the provisions of this act and its rules. It has empowered

stock exchanges to administer portions of the regulation pertaining to

trading, membership and listing. All the intermediaries in the secondary

markets are subject to regulatory overview of SEBI and are required to

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