NISM Series IIA Short Notes – Part 7 (Final): Secondary Market, Stock Markets & SEBI LODR Regulations
Welcome to the final part of our 7-part NISM Series IIA short notes series on PassNISM.in. In this concluding part, we cover:
- Chapter XIV – Secondary Market Transactions
- Stock Markets – Structure, Participants, Listing Requirements
- SEBI (LODR) Regulations, 2015 – Listing Obligations and Disclosure Requirements
After reading all 7 parts, you will have covered the entire syllabus of the NISM Series IIA Certification Exam. Head over to our NISM IIA Mock Test page to test your knowledge.
Series Navigation: ← Part 6: Depository Processes & Investor Interface | Practice Mock Test → Chapter XIV – Secondary Market Transactions What is the Secondary Market?
Once shares are issued in the primary market, they are subsequently bought and sold among investors in the secondary market. In this market:
- Securities are purchased from other investors, not from the issuing company
- The proceeds of any transaction go to the selling investor, not to the company
- The company's share capital does not change in secondary market transactions
Why is the Secondary Market Important?
| Function | Explanation |
|---|---|
| Price Discovery | When many investors buy and sell based on their valuation of a stock, the market arrives at a fair price reflecting all available information about the company. |
| Information Dissemination | An efficient secondary market ensures that relevant, timely, and periodic information reaches investors to help them make informed decisions. |
| Liquidity | Provides investors who want to exit their investments with a mechanism to find buyers at fair market prices. |
Stock Markets in India
The organised secondary market for securities is called a Stock Market or Stock Exchange. India's principal stock exchanges are:
- NSE – National Stock Exchange
- BSE – The Stock Exchange, Mumbai (Bombay Stock Exchange)
Features of a Stock Market
- Regulated by the capital markets regulator (SEBI)
- Provides a platform for trading, clearing, and settlement
- Enrolls and regulates members through bye-laws covering membership, capital requirements, and conduct
Trading Platform
- Modern Indian stock exchanges facilitate screen-based (electronic) trading from member offices across the country
- Trades are executed with anonymous counterparties
- A price-time priority system is used — trades are executed at the best available price at a given time
- Best price = lowest price for buyers | highest price for sellers
- Investors can specify validity period and execution instructions for their orders
Participants in Stock Markets 1. Investors
- SEBI permits: Resident individuals, Non-Resident Indians (NRIs), corporate bodies, trusts, and SEBI-registered FIIs to invest
- Overseas Corporate Bodies (OCBs) are prohibited from investing in Indian securities markets
- Investors cannot trade directly on stock exchanges — they must go through registered brokers
- Investors must open a trading account with a broker and comply with KYC (Know Your Customer) norms
2. Brokers
- Intermediaries registered with SEBI and as members of a stock exchange
- Only authorised entities to execute trades on the stock exchange
- May be individuals or institutions meeting stock exchange eligibility criteria
3. Depository Participants (DPs)
- Investors hold their demat (beneficiary) accounts with DPs
- DPs execute the investor's instructions for delivery and receipt of shares to settle secondary market trades
Listing of Securities
Companies list their shares on stock exchanges so that investors can buy and sell them. A company must meet eligibility criteria to be listed:
| Criterion | Requirement |
|---|---|
| Minimum Public Holding | At least 25% of total issued shares of every class of listed security must be with the public. Exception: For companies where post-issue capital at offer price is more than ₹4,000 Crore, public holding can be 10%. |
| Minimum Pre-tax Operating Profit | Minimum average pre-tax operating profit of ₹15 Crore |
| MOA & AOA Approval | The Memorandum of Association and Articles of Association must be approved by the stock exchange and contain provisions required by the SCRA (Securities Contracts Regulation Act) |
After meeting eligibility criteria, the company signs a Listing Agreement with the stock exchange, which defines its obligations to investors.
SEBI (LODR) Regulations, 2015 – Listing Obligations and Disclosure Requirements
SEBI notified the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, which became effective from 1st December, 2015. These regulations replaced the earlier equity listing agreement.
Who Does SEBI LODR Apply To?
The regulations apply to all listed entities that have listed any designated securities on recognised stock exchanges — including equity shares, debt securities, and other specified instruments.
Key Areas Covered Under SEBI LODR
| Area | Description |
|---|---|
| Applicability | Scope and entities covered by the regulations |
| Common Obligations | Duties for all listed entities — KMPs, Directors, and Promoters must comply |
| Quarterly Compliances | Financial results, shareholding patterns — timelines specified |
| Events Requiring Prior Intimation | Board meetings, dividend declarations, rights/bonus issue, etc. |
| Events Requiring 24-Hour Intimation | Material developments, resignations, change in management, legal proceedings, etc. |
| Board Composition | Requirements for independent directors and committee composition |
| Related Party Transactions | Disclosure and approval requirements for transactions with related parties |
| Board Meeting Agendas | Items that must be placed before the Board as per regulations |
| Audit Committee Agendas | Items that must be reviewed by the Audit Committee |
| General Meeting Agendas | Matters to be placed at the Annual/Extraordinary General Meeting |
Common Obligations Under SEBI LODR
- A responsibility is placed on Key Managerial Personnel (KMPs), Directors, and Promoters to comply with obligations under the regulations
- All listed entities must maintain continuous and transparent communication with investors and stock exchanges
- Timely disclosures form the backbone of investor protection under these regulations
Complete Chapter-wise Summary – NISM Series IIA
Here is a quick recap of all 7 parts of our NISM Series IIA short notes series:
| Part | Chapters Covered | Key Topics |
|---|---|---|
| Part 1 | I & II | Equity, Debt, Preference Shares, Dividends, Rights Issue, Types of Investors |
| Part 2 | III & IV | Warrants, Convertible Debentures, DRs, FCCBs, Debt Securities, Bond Types, Credit Rating |
| Part 3 | V & VI | Mutual Funds, NAV, AUM, SEBI, IEPF, Key SEBI Regulations |
| Part 4 | VII & VIII | IPO, FPO, Book Building, Investor Categories, ASBA, QIP, Buyback |
| Part 5 | IX & X & XI | Pre/Post Issue Work, R&T Agent Role, Depository Services, Dematerialisation, DPs |
| Part 6 | XII & XIII | Trading & Settlement, Corporate Actions, Transfer, Transmission, Stop Transfer, E-Voting |
| Part 7 (This Page) | XIV | Secondary Market, Stock Markets, Listing, SEBI LODR 2015 |
Master Revision Table – All Critical Numbers for NISM IIA Exam
| Topic | Key Figure / Fact |
|---|---|
| SEBI established | April 12, 1992 |
| SEBI (LODR) effective from | December 1, 2015 |
| ASBA mandatory from | January 1, 2016 |
| Net worth – R&T Agent Category I | ₹50 Lakh |
| Net worth – R&T Agent Category II | ₹25 Lakh |
| Minimum net tangible assets for IPO | ₹3 Crore in each of preceding 3 years |
| Minimum pre-tax operating profit for IPO | ₹15 Crore (avg. of 3 best years in last 5) |
| Minimum net worth for IPO | ₹1 Crore in each of preceding 3 years |
| Maximum issue size vs net worth | Not more than 5 times pre-issue net worth |
| Minimum subscription for public issue | 90% of net offer |
| Green Shoe Option limit | Up to 15% of issue size |
| Anchor Investor application minimum | ₹10 Crore |
| Retail Investor ceiling | Less than ₹2,00,000 |
| NII/HNI minimum | ₹2,00,000 or more |
| Issue open duration | Min 3 days – Max 10 working days |
| Dematerialisation completion | 15 days from physical request |
| Rematerialisation completion | 30 days from RRF receipt |
| RRF storage | Minimum 5 years |
| Complaint resolution | 21 days |
| Annual report before AGM | Minimum 21 days before AGM |
| IEPF transfer threshold | Unclaimed for 7 years |
| QIP listing requirement | At least 1 year listed before QIP |
| FPO dividend track record | At least 3 immediately preceding years |
| Minimum public holding for listing | 25% (or 10% if post-issue capital > ₹4,000 Crore) |
| SCSB certificate collection post-issue | 2 working days after issue closure |
| SEBI (Credit Rating) Regulations year | 1999 |
| SEBI (Depositories & Participants) Regulations year | 1996 |
| Treasury Bills – Government borrowing periods | 91, 182, 364 days |
| Commercial Paper (CP) maturity range | Minimum 7 days to maximum 1 year |
| Buyback – promoter transaction disclosure period | 6 months prior to special resolution |
Internal Links – Complete Your NISM Series IIA Preparation
- Part 1: Introduction to Securities – Equity & Debt
- Part 2: Other Securities & Debt Instruments
- Part 3: Mutual Funds & SEBI Regulations
- Part 4: Public Offer of Securities (IPO, FPO, Book Building)
- Part 5: Roles in a Public Issue & Depository Services
- Part 6: Depository Processes & Investor Interface
- 🎯 NISM Series IIA Mock Test – Test Yourself Now
- NISM Exam Registration & Fees
- All NISM Certification Courses List
- NISM Study Material – All Series
FAQs – Secondary Market & SEBI LODR What is the difference between primary market and secondary market?
In the primary market, companies issue new securities directly to investors and receive the funds. In the secondary market, already issued securities are bought and sold among investors — the company does not receive any proceeds from secondary market transactions.
What is price-time priority in stock exchange trading?
Price-time priority means that trades are executed at the best available price first (lowest for buyers, highest for sellers). Among orders at the same price, the one entered earlier gets priority.
What is the minimum public shareholding requirement for listing?
A listed company must maintain at least 25% public shareholding in each class of listed securities. For companies with post-issue capital exceeding ₹4,000 Crore at offer price, this can be reduced to 10%.
When did SEBI LODR Regulations come into effect?
The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 came into effect on December 1, 2015.
Who is prohibited from investing in Indian securities markets?
Overseas Corporate Bodies (OCBs) are prohibited from investing in Indian securities markets.
What is the benefit of screen-based trading over floor trading?
Screen-based (electronic) trading provides anonymity, price-time priority, wider geographic reach, faster execution, and greater transparency compared to traditional floor-based trading. It allows investors from anywhere in the country to trade through member terminals.
Your NISM Series IIA Preparation is Now Complete!
You have covered the entire NISM Series IIA – Registrar to an Issue and Share Transfer Agent (Corporate) syllabus across all 7 parts of this short notes series.
Here are your next steps to ensure you clear the exam:
- Review the Master Revision Table above to memorise all key numbers
- Take the NISM IIA Mock Test on PassNISM.in
- Re-read any chapters where you felt less confident
- Register for your NISM exam when ready
All 7 parts of the NISM Series IIA Short Notes are available exclusively at PassNISM.in — India's trusted platform for NISM exam preparation, mock tests, and study material.