Unit 2: Financial regulation & markets

The primary market issues new securities. Methods: public issue (IPO — first issue; FPO — further issue), rights issue, private placement, preferential allotment and qualified institutions placement (QIP). SEBI's ICDR Regulations set eligibility, disclosure in the offer document, minimum promoter contribution and lock-in, and allocation among investor categories (qualified institutional buyers, non-institutional and retail investors).

• Book building discovers the issue price through bids within a price band; the final price is set at the level where demand is strongest (the cut-off price).
• Online IPOs use the stock exchanges' electronic systems; investors apply through ASBA (Application Supported by Blocked Amount) or UPI, and the money is blocked, not debited, until allotment. Listing now happens within T+3 days of the issue closing.
• Green-shoe option (over-allotment option): allows the issuer to allot extra shares (up to 15%) to stabilise the post-listing price.

The secondary market trades existing securities on stock exchanges — NSE and BSE.

Listing is admitting a security for trading on an exchange, under the SEBI LODR Regulations (listing obligations and disclosure requirements).

A derivative is a contract whose value depends on an underlying asset (shares, indices, currency, commodities). Types: forwards, futures, options and swaps. Uses: hedging risk, speculation and arbitrage. NSE is among the world's largest derivatives exchanges by number of contracts.