Monday, February 23, 2009

Corporate Actions

Corporate Actions is an event declared by some compnay in the market that affects the shareholders.These are the events that are declared for the benefits of the shareholders,changing the price of shares and for the restructuring of the corporates.Some examples of corporate actions are Bonus issue,stock splits,dividends,rights issue etc.
Corporate actions are basically classified into three types:
1)Mandatory Events
2)Voluntary Events
3)Mandatory with choice
Mandatory Event:The event in which the all the holder of the securities are automatically impacted i,e. the holders donot need to respond to the event.For ex.Cash dividend or Bonus issue are mandatory events as the holders will get the dividend or bonus automatically.
Voluntary Event:The event in which the holder has the option to participate in the event or not.In such type of events sometimes the holder has also the options the choose .For ex:Dividend option in which the holder can choose the option of cash or stock dividend.Tender offer is another example of voluntary event in which the holder has the option to respose to it or not.
Mandatory Event With Choice:This type of event give the holder choice to responsed to the available options otherwise the default option is applied.

Primary and Seconday markets

Whenever some new venture is started it needs money for the business and they do it by raising money through the public by issuing the Intial Public offer(IPO).So the primary markets are basically the markets that provide the channel for the trading of new securities .Secondary markets are those which deals in the trading of the securities that are already being traded or are listed on the stock exchange.For ex:Reliance power IPO.

Security Markets

As per the Securities Contract Regulatgion Act(SCRA 1956) ,instruments such as bonds,stocks,derivatives,mutual funds and other such instruments are considered as securities.
Security market is a place where the seller and buyer of the securities can make transactions of
securities.So it plays the role of raising funds for the corporates and the business ventures from the public.

With the increase competition in the securities markets it was felt that there must be some regulatory bodies so as to save the interests of the shareholder and to avoid the unfair practices.
In India this responsibility is shared by many bodies mainly being the RBI and SEBI.

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