SEBI has announced several far-reaching reforms to promote the capital market and protect investors’ interests. In this article, you will know the recent reforms of capital market. Reforms in the secondary market have focused on three main areas struck line and functioning of stock exchange automation of reading and post-trade system and the beginning of surveillance and monitoring system. Computerized online trading of securities, setting up of clearing houses, or resolution guarantee funds are made compulsory for the stock exchange.
Trading is much more transparent and faster than in the past. The stock exchange can expand its trading to locations outside its jurisdiction through computer terminals. Online leading systems have been started in almost all stock exchanges.
Top 6 Reforms of Capital Market
General reforms introduced in stock exchange administration, security trading settlement, delivery v/s payment, security transfer, trading is derivatives, investor protection fund etc., are:-
1. Stock Exchange Membership
Membership of governing boards of the stock exchange was changed to include 50% outside (non-broker) representations. It is one of the reforms of capital market. SEBI has constituted a group to review and examine the present structure of the stock exchange and the legal and functional issues involved in demutualizing the stock exchange.
2. Demilitarization
Power was generated to SEBI to register and regulate depositories and custodians through an amendment to SEBI Act in 1995. There has been substantial progress in demilitarization. The number of companies available for demotion with NSDL has increased from 23 in 1997 to 172 in 2002.
3. Institutionalization
Individual investors dominated the Indian capital market. Like the early part of the 1990’s earlier institutionalization investor like LIC, GIC, DFI’s banks etc., used to take the minor roles. SEBI permitted private funds, nonresident Indians, NBFC and overseas corporate bodies to trade securities of the three classes mentioned above of investors are very active individual mutual funds and FIIS.
4. Development of Financial Infrastructure
SEBI inflated the development of financial infrastructure. It involves the development of an informed investors class, regulatory environment, institutional investors, world-class security leading and payment and settlement systems. It also includes promoting investor associations and self-regulatory organizations (SROS). Setting up of the depository’s surveillance system.
5. Derivatives
SEBI introduced new financial investments known as designative. These are vital in promoting market efficiency through better piece discovery and risk transfer. SEBI approved NSE and BSE to lead its index futures contract in April 2000 and May 2000, respectively. SEBI also approved the proposal of NSE and BSE to start trading in index options contracts in June 2001. Interest rate futures were introduced in June 2003.
6. Corporate Governance
SEBI has introduced the corporate governance code for listed companies. For companies that enter the market now have enough listing agreements, ICAI has also issued standards for a confederation of their account.
Conclusion
In conclusion, capital market reforms are crucial in promoting transparency, efficiency, and balance inside the monetary device. These reforms goal to deal with various challenges and improve the functioning of capital markets for the advantage of buyers, agencies, and the overall economy. Capital market reforms are vital for growing an honest, green, and resilient financial gadget. Through regulatory improvements, technological improvements, investor schooling, and advanced corporate governance, these reforms intend to foster consideration, balance, and sustainable increase within the capital marketplace, benefiting all stakeholders concerned.