DHRUVA COLLEGE

OF MANAGEMENT

MEDCHAL, HYDERABAD
Study Of Stock Exchange

Submitted to: - Prof. Narsamhulu.

Submitted by: - Sandip Bhowal
Roll no - 08m99
Subject: - MC 204 Corporate Financial Management
Term: - 2nd PGDBM
Year: - 2008 – 2010
 Stock Exchange
Stock Exchanges are perhaps the most crucial agents and facilitators of entrepreneurial
progress among modern service institutions. Since the industrial revolution, business
enterprises have grown such that proprietors or even partnership firms can no longer
raise the colossal amounts of money required for large entrepreneurial ventures. Such
massive capital can only be raised through the participation of large number of investors
and running into thousands, millions.
SEBI established in 1988 and became a fully autonomous body by the year 1992 with
defined responsibilities to cover both development & regulation of the market.
The world’s stock exchange probably dates back to 1460 in Antwerp, Belgium. In
fact, many consider the Amsterdam stock exchange, established in 1602, as the oldest in
the world because of its uninterrupted continuity.
Indian stock exchange was an association of individual members called, members
brokers formed for the express purpose of self-regulating and facilitating the buying and
selling of securities by the public and institutions at large. There are currently 23
recognized stock exchanges in India of which 4 are national and 19 are regional
exchanges. The 4 national stock exchanges are
1. Bombay Stock Exchange (BSE)
2. National Stock Exchange (NSE)
3. Over The Counter Exchange of India (OTCEI)
4. Inter connected Stock Exchange of India (ISE)
In the world following are the some of stock exchanges
1. DOWJONES
2. National Association of Securities and Dealers Automated Quotations
(NASDAQ) popularly called as New York Stock Exchange (NYSE)
Difference between NSE and BSE
NSE Stands for National Stock Exchange. It has more than 2000 stocks from different sectors
listed with it. It is fully automated electronic order processing exchange. Nifty is major index of
NSE and it comprise of 50 scripts from different sectors.

BSE Stand for Bombay Stock Exchange. It is India's Oldest Stock Exchange with listing of
over 4000 scripts with it. This not fully automated yet but progress towards full automation is
underway. SENSEX is major index of BSE and it comprise of 30 scripts from different sectors.

Index
The stock exchange index is a relative measure of the performance of all or a number of stocks
that are traded on a stock exchange. It incorporates the return on stocks, their volumes traded
and the shares outstanding. There can be a number of indices relating to a single stock exchange
that incorporates the returns on a number of companies. They can also be differentiated on the
basis of the return on different industries.

Construction of Index

In computing the index, the following steps are taken:

a. For each month, the arithmetic average price for each item in the market basket is derived
first. This is done by summing all the prices taken divided by the number of sources. Hence, if a
certain item has three price quotations, simply get the sum of the three prices and divide it by
three.

b. The price relative or index for each commodity is then taken by dividing the computed
arithmetic average price by the corresponding average base price, as follows:

where:
PRi is the price relative or index of the commodity;
PRni is the current average price of the commodity; and
PRoi is the base price of the commodity.

c. The index of the subgroup of the commodities is computed using the following formula:
where:
PRj is the index of the jth subgroup;
PRij is the price relative of the ith commodity in the jth subgroup; and
N is the number of commodities in the jth subgroup.

d. The index for the next subgroup of commodities is computed by dividing the aggregate of
weighted indices of component items in a subgroup by the total of their corresponding weights,
as follows:

where:
PRk is the index of the kth subgroup;
PRjk is the index of the jkth subgroup; and
Wjk is the weight of the jkth subgroup.

The weighted average of these subgroup indexes, in turn, becomes the index of the major
commodity group, until finally the weighted average of the major commodity group indexes
becomes the overall index.

e. The overall index is computed using the following formula:

where:
I is the index for all items;
PRn is the index of nth major commodity group; and
Wn is the weight of the major commodity group.
 National Stock Exchange

History of the National Stock Exchange of India

Capital market reforms in India and the launch of the Securities

and Exchange Board of India (SEBI) accelerated the incorporation of the second Indian stock
exchange called the National Stock Exchange (NSE) in 1992. After a few years of operations,
the NSE has become the largest stock exchange in India.

Three segments of the NSE trading platform were established one after another. The Wholesale
Debt Market (WDM) commenced operations in June 1994 and the Capital Market (CM)
segment was opened at the end of 1994. Finally, the Futures and Options segment began
operating in 2000. Today the NSE takes the 14th position in the top 40 futures exchanges in the
world.
In 1996, the National Stock Exchange of India launched S&P CNX Nifty and CNX Junior
Indices that make up 100 most liquid stocks in India. CNX Nifty is a diversified index of 50
stocks from 25 different economy sectors. The Indices are owned and managed by India Index
Services and Products Ltd (IISL) that has a consulting and licensing agreement with Standard &
Poor's.

In 1998, the National Stock Exchange of India launched its web-site and was the first exchange
in India that started trading stock on the Internet in 2000. The NSE has also proved its leadership
in the Indian financial market by gaining many awards such as 'Best IT Usage Award' by
Computer Society in India (in 1996 and 1997) and CHIP Web Award by CHIP magazine
(1999).

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About the National Stock Exchange of India

In the fast growing Indian financial market, there are 23 stock exchanges trading securities. The
National Stock Exchange of India (NSE) situated in Mumbai - is the largest and most advanced
exchange with 1016 companies listed and 726 trading members.

The NSE is owned by the group of leading financial institutions such as Indian Bank or Life
Insurance Corporation of India. However, in the totally de-mutualised Exchange, the ownership
as well as the management does not have a right to trade on the Exchange. Only qualified traders
can be involved in the securities trading.

The NSE is one of the few exchanges in the world trading all types of securities on a single
platform, which is divided into three segments: Wholesale Debt Market (WDM), Capital Market
(CM), and Futures & Options (F&O) Market. Each segment has experienced a significant
growth throughout a few years of their launch. While the WDM segment has accumulated the
annual growth of over 36% since its opening in 1994, the CM segment has increased by even
61% during the same period.

The National Stock Exchange of India has stringent requirements and criteria for the companies
listed on the Exchange. Minimum capital requirements, project appraisal, and company's track
record are just a few of the criteria. In addition, listed companies pay variable listing fees based
on their corporate capital size.

The National Stock Exchange of India Ltd. provides its clients with a single, fully electronic
trading platform that is operated through a VSAT network. Unlike most world exchanges, the
NSE uses the satellite communication system that connects traders from 345 Indian cities. The
advanced technologies enable up to 6 million trades to be operated daily on the NSE trading
platform.

Indices
NSE also set up as index services firm known as India Index Services & Products Limited
(IISL) and has launched several stock indices, including :

• S&P CNX Nifty

• CNX Nifty Junior

• CNX 100 (= S&P CNX Nifty + CNX Nifty Junior)

• S&P CNX 500 (= CNX 100 + 400 major players across 72 industries)

• CNX Midcap (introduced on 18 July 2005 replacing CNX Midcap 200)

NSE Milestones

November 1992 Incorporation

April 1993 Recognition as a stock exchange
May 1993 Formulation of business plan
June 1994 Wholesale Debt Market segment goes live
November 1994 Capital Market (Equities) segment goes live
March 1995 Establishment of Investor Grievance Cell
April 1995 Establishment of NSCCL, the first Clearing Corporation
June 1995 Introduction of centralised insurance cover for all trading members
July 1995 Establishment of Investor Protection Fund
October 1995 Became largest stock exchange in the country
April 1996 Commencement of clearing and settlement by NSCCL
April 1996 Launch of S&P CNX Nifty
June 1996 Establishment of Settlement Guarantee Fund
Setting up of National Securities Depository Limited, first depository in
November 1996
India, co-promoted by NSE
November 1996 Best IT Usage award by Computer Society of India
December 1996 Commencement of trading/settlement in dematerialised securities
December 1996 Dataquest award for Top IT User
December 1996 Launch of CNX Nifty Junior
February 1997 Regional clearing facility goes live
November 1997 Best IT Usage award by Computer Society of India
Promotion of joint venture, India Index Services & Products Limited
May 1998
(IISL)
May 1998 Launch of NSE's Web-site: www.nse.co.in
July 1998 Launch of NSE's Certification Programme in Financial Market
August 1998 CYBER CORPORATE OF THE YEAR 1998 award
February 1999 Launch of Automated Lending and Borrowing Mechanism
April 1999 CHIP Web Award by CHIP magazine
October 1999 Setting up of NSE.IT
January 2000 Launch of NSE Research Initiative
February 2000 Commencement of Internet Trading
June 2000 Commencement of Derivatives Trading (Index Futures)
September 2000 Launch of 'Zero Coupon Yield Curve'
Launch of Broker Plaza by Dotex International, a joint venture between
November 2000
NSE.IT Ltd. and i-flex Solutions Ltd.
December 2000 Commencement of WAP trading
June 2001 Commencement of trading in Index Options
July 2001 Commencement of trading in Options on Individual Securities
November 2001 Commencement of trading in Futures on Individual Securities
December 2001 Launch of NSE VaR for Government Securities
January 2002 Launch of Exchange Traded Funds (ETFs)
 NSE wins the Wharton-Infosys Business Transformation Award in the
May 2002
Organization-wide Transformation category
October 2002 Launch of NSE Government Securities Index
January 2003 Commencement of trading in Retail Debt Market
June 2003 Launch of Interest Rate Futures
August 2003 Launch of Futures & options in CNXIT Index
June 2004 Launch of STP Interoperability
August 2004 Launch of NSE’s electronic interface for listed companies
March 2005 ‘India Innovation Award’ by EMPI Business School, New Delhi
June 2005 Launch of Futures & options in BANK Nifty Index
December 2006 'Derivative Exchange of the Year', by Asia Risk magazine
January 2007 Launch of NSE – CNBC TV 18 media centre
March 2007 NSE, CRISIL announce launch of IndiaBondWatch.com
June 2007 NSE launches derivatives on Nifty Junior & CNX 100
October 2007 NSE launches derivatives on Nifty Midcap 50
January 2008 Introduction of Mini Nifty derivative contracts on 1st January 2008
March 2008 Introduction of long term option contracts on S&P CNX Nifty Index
April 2008 Launch of India VIX
April 2008 Launch of Securities Lending & Borrowing Scheme
August 2008 Launch of Currency Derivatives

Individual stock performance – S&P CNX Nifty

The S&P CNX Nifty closed at 2755.1 points on November 28, 2008 representing a decrease of
130.50 pts points (4.52%), as compared to 2885.6 points on October 31, 2008. During the month
of November 2008, S&P CNX Nifty touched a high of 3240.55 points on November 05, 2008
before closing at 2755.1 points on November 28, 2008. The market capitalization of S&P CNX
Nifty decreased from Rs.1785998 corers on October 31, 2008, to Rs.1706209 corers on
November 28, 2008 i.e. a decrease of Rs.79789crores (4.47%). During the month of November
2008, Bharat Petroleum Corporation Ltd. was the biggest gainer in S&P CNX Nifty constituent
list delivering a positive return of 23.72%, Unitech Ltd. was the biggest loser, delivering
negative returns of 52.17%, during the same month.

Name of NSE 50 companies

RELIANCE INDUSTRIES LTD., OIL AND NATURAL GAS CORPORATION LTD.,
BHARTI AIRTEL LIMITED, NTPC LTD, RELIANCE COMMUNICATIONS LTD., ICICI
BANK LTD., INFOSYS TECHNOLOGIES LTD., TATA CONSULTANCY SERVICES LTD,
BHEL, STATE BANK OF INDIA, STEEL AUTHORITY OF INDIA, LARSEN & TOUBRO
LTD., HERO HONDA MOTORS LTD, ZEE ENTERTAINMENT LTD, INDIAN
PETROCHEMICALS CORPORATION LTD., CIPLA LTD, BHARAT PETROLEUM
CORPORATION LTD., VIDESH SANCHAR NIGAM LTD, DR. REDDY'S
LABORATORIES, MAHANAGAR TELEPHONE NIGAM LTD, GLAXOSMITHKLINE
PHARMA LTD., ABB LTD., POWER GRID CORPORATION OF INDIA, RELIANCE
ENERGY LTD, SIEMENS LTD, ACC LIMITED, AMBUJA CEMENTS LTD, HCL
TECHNOLOGIES LTD, HINDALCO INDUSTRIES LTD, NATIONAL ALUMINIUM CO
LTD, SUN PHARMACEUTICALS IND., MAHINDRA & MAHINDRA LTD, TATA POWER
CO LTD, PUNJAB NATIONAL BANK, RANBAXY LABS LTD, ITC LTD, RELIANCE
PETROLEUM LTD., HDFC LTD, WIPRO LTD, STERLITE INDUSTRIES LTD., HDFC
BANK LTD, TATA STEEL LIMITED, HINDUSTAN UNILEVER LTD., SUZLON ENERGY
LIMITED, GAIL (INDIA) LTD, GRASIM INDUSTRIES LTD, SATYAM COMPUTER
SERVICES, TATA MOTORS LIMITED, MARUTI UDYOG LIMITED.
 Bombay Stock Exchange
History of the Bombay Stock Exchange

The Bombay Stock Exchange is known as the oldest exchange in Asia. It traces
its history to the 1850s, when stockbrokers would gather under banyan trees in front of
Mumbai's Town Hall. The location of these meetings changed many times, as the number of
brokers constantly increased. The group eventually moved to Dalal Street in 1874 and in 1875
became an official organization known as 'The Native Share & Stock Brokers Association'. In
1956, the BSE became the first stock exchange to be recognized by the Indian Government
under the Securities Contracts Regulation Act.

The Bombay Stock Exchange developed the BSE Sensex in 1986, giving the BSE a means to
measure overall performance of the exchange. In 2000 the BSE used this index to open its
derivatives market, trading Sensex futures contracts. The development of Sensex options along
with equity derivatives followed in 2001 and 2002, expanding the BSE's trading platform.

Historically an open-cry floor trading exchange, the Bombay Stock Exchange switched to an
electronic trading system in 1995. It took the exchange only fifty days to make this transition.

About the Bombay Stock Exchange

As the first stock exchange in India, the Bombay Stock Exchange is considered to have played a
very important role in the development of the country's capital markets. The Bombay Stock
Exchange is the largest of 22 exchanges in India, with over 6,000 listed companies. It is also the
fifth largest exchange in the world, with market capitalization of $466 billion.

The Bombay Stock Exchange uses the BSE Sensex, an index of 30 large, developed BSE stocks.
This index gives a measure of the overall performance of the Bombay Stock Exchange, and is
closely followed around the world. Based on the Sensex, the BSE equity market has grown
significantly since 1990.

In addition to individual stocks, the BSE also has a market in derivatives, which was the first to
be established in India. Listed derivatives on the exchange include stock futures and options,
index futures and options, and weekly options.

The Bombay Stock Exchange is also actively involved with the development of the retail debt
market. The debt market in India is considered extremely important, as the country continues to
develop and depends on this type of investment for growth. Until recently, the debt market in
India was limited to a wholesale market, with banks and financial institutions as the only
participants. The Bombay Stock Exchange believes that a retail market will bring great
opportunities to individual investors through better diversification.

SENSEX Calculation Methodology

SENSEX is calculated using the "Free-float Market Capitalization" methodology, wherein, the
level of index at any point of time reflects the free-float market value of 30 component stocks
relative to a base period. The market capitalization of a company is determined by multiplying
the price of its stock by the number of shares issued by the company. This market capitalization
is further multiplied by the free-float factor to determine the free-float market capitalization.
Definition of Free-float

Shareholding of investors that would not, in the normal course come into the open market for
trading are treated as 'Controlling/ Strategic Holdings' and hence not included in free-float.
Specifically, the following categories of holding are generally excluded from the definition of
Free-float:

• Shares held by founders/directors/ acquirers which has control element

• Shares held by persons/ bodies with "Controlling Interest"

• Shares held by Government as promoter/acquirer

• Holdings through the FDI Route

• Strategic stakes by private corporate bodies/ individuals

• Equity held by associate/group companies (cross-holdings)

• Equity held by Employee Welfare Trusts

• Locked-in shares and shares which would not be sold in the open market in normal
course.

Step1: Find out the “free-float market cap” of all the 30 companies that make up the
Sensex.
Step2: Add all the “free-float market cap’s” of all the 30 companies.
Step3: Make all this relative to the Sensex base. The value you get is the Sensex value!

Suppose, for a “free-float market cap” of Rs.100,000 Cr... the Sensex value is 4000…
Then, for a “free-float market cap” of Rs.150,000 Cr... the Sensex value will be..

So, the Sensex value will be 6000 if the “free-float market cap” comes to Rs.150,000 Cr!

Major advantages of Free-float Methodology

 • A Free-float index reflects the market trends more rationally as it takes into consideration
only those shares that are available for trading in the market.

• Free-float Methodology makes the index more broad-based by reducing the

concentration of top few companies in Index.

• A Free-float index aids both active and passive investing styles. It aids active managers
by enabling them to benchmark their fund returns vis-Ã -vis an investible index. This
enables an apple-to-apple comparison thereby facilitating better evaluation of
performance of active managers. Being a perfectly replicable portfolio of stocks, a Free-
float adjusted index is best suited for the passive managers as it enables them to track the
index with the least tracking error.

• Free-float Methodology improves index flexibility in terms of including any stock from
the universe of listed stocks. This improves market coverage and sector coverage of the
index. For example, under a Full-market capitalization methodology, companies with
large market capitalization and low free-float cannot generally be included in the Index
because they tend to distort the index by having an undue influence on the index
movement. However, under the Free-float Methodology, since only the free-float market
capitalization of each company is considered for index calculation, it becomes possible
to include such closely-held companies in the index while at the same time preventing
their undue influence on the index movement.

Globally, the Free-float Methodology of index construction is considered to be an

industry best practice and all major index providers like MSCI, FTSE, S&P and STOXX have
adopted the same. MSCI, a leading global index provider, shifted all its indices to the Free-float
Methodology in 2002. The MSCI India Standard Index, which is followed by Foreign
Institutional Investors (FIIs) to track Indian equities, is also based on the Free-float
Methodology. NASDAQ-100, the underlying index to the famous Exchange Traded Fund (ETF)
- QQQ is based on the Free-float Methodology.

Dollex-30
BSE also calculates a dollar-linked version of SENSEX and historical values of this index are
available since its inception. (For more details click 'Dollex series of BSE indices').
BSE-100 Index
A broad-based index, the BSE-100 was formerly known as the BSE National index.
This Index has 1983-84 as the base year and was launched in 1989. In line with the shift of the
BSE Indices to the globally accepted Free-Float methodology, BSE-100 was shifted to Free-
Float methodology effective from April 5, 2004. The method of computation of Free-Float
index and determination of free-float factors is similar to the methodology for SENSEX.

BSE-200 Index

Though SENSEX (1978-79=100) was serving the purpose of quantifying the price movements
as also reflecting the sensitivity of the market in an effective manner, the rapid growth of the
market necessitated compilation of a new broad-based index series reflecting the market trends
in a more effective manner and providing a better representation of the increased equity stocks,
market capitalization as also to the new industry groups. As such, BSE launched on 27th May
1994, two new index series-BSE-200 and Dollex-200.

Dollex-200
BSE also calculates a dollar-linked version of BSE-200 index and historical values of this index
are available since its inception.

BSE-500 Index
Bombay Stock Exchange Limited constructed a new index, christened BSE-500, consisting of
500 scrips w.e.f. August 9, 1999. The changing pattern of the economy and that of the market
were kept in mind while constructing this index.

BSE-500 index represents nearly 93% of the total market capitalization on BSE. BSE-500
covers all 20 major industries of the economy. In line with other BSE indices, effective August
16, 2005 calculation methodology was shifted to the free-float methodology.

Awards
• The World Council of Corporate Governance has awarded the Golden Peacock Global
CSR Award for BSE's initiatives in Corporate Social Responsibility (CSR).

• The Annual Reports and Accounts of BSE for the year ended March 31, 2006 and March
31 2007 have been awarded the ICAI awards for excellence in financial reporting.

• The Human Resource Management at BSE has won the Asia - Pacific HRM awards for
its efforts in employer branding through talent management at work, health management
at work and excellence in HR through technology.

Milestones of BSE
DATE POINTS

JULY-25-1990 1000
MARCH-30-1992 4000

FEBRUARY-11-2000 6000

DECEMBER-09-2005 9000

APRIAL-20-2006 12000

JULY-06-2007 15000

OCTOMBER-15-2007 19000

JANUARY-08-2008 21000
Current Sensex

Graph of BSE for the month of December

 CHANG %CHANG
DATE CLOSE
E E
1-Dec-08 8,839.87
2-Dec-08 8,739.24 -100.63 -1.138365
3-Dec-08 8,747.43 8.19 0.0937152
4-Dec-08 9,229.75 482.32 5.5138481
5-Dec-08 8,965.20 -264.55 -2.866275
8-Dec-08 9,162.62 197.42 2.2020702
10-Dec-08 9,654.90 492.28 5.3726991
11-Dec-08 9,645.46 -9.44 -0.097774
12-Dec-08 9,690.07 44.61 0.4624974
15-Dec-08 9,832.39 142.32 1.46872
16-Dec-08 9,976.98 144.59 1.4705479
17-Dec-08 9,715.29 -261.69 -2.622938
18-Dec-08 10,076.43 361.14 3.7172334
19-Dec-08 10,099.91 23.48 0.233019
22-Dec-08 9,928.35 -171.56 -1.698629
23-Dec-08 9,686.75 -241.60 -2.433436
24-Dec-08 9,568.72 -118.03 -1.218469
26-Dec-08 9,328.92 -239.80 -2.506082
29-Dec-08 9,533.52 204.60 2.1931799
30-Dec-08 9,716.16 182.64 1.9157667
31-Dec-08 9,647.31 -68.85 -0.708613

EXPLANATION

The month of December is started with a point of 8839.87 points and on the second day itself
sensex has lost nearly 100 points. On 4th December sensex has gain a 482.32 points with a 5%
increase and on 10th December sensex gain nearly 500 points. From 22nd December to 26th
December sensex has lost nearly 700 points and after this sensex has gained 204 points. At last
of day of the year sensex is closed with a negative value by losing 68 points.

Name of 30 BSE companies

ACC, BHARTI AIRTEL, BHEL, DLF, GRASIM, HDFC, HDFC BANK, HINDALCO, HUL,
ICICI BANK, INFOSYS, ITC, JAIPRAKASH ASSOCIATES, L&T, MAHINDR &
MAHINDRA, MARUTI SUZUKI, ONGC, NTPC, RANABAXY LAB, RELIENCE,
RELIENCE COMM, RELIENCE INFRASTRUCTURE, SATYAM, SBI, STERLITE
INDUSTRY, TATA MOTORS, TATA POWER, TATA STEEL. TCS, WIPRO.

NASDAQ

History of NASDAQ

When the NASDAQ stock exchange began trading on February 5, 1971,

the NASDAQ was the world's first electronic stock market. At first, it was merely a computer
bulletin board system and did not actually connect buyers and sellers. The NASDAQ helped
lower the spread (the difference between the bid price and the ask price of the stock) but
somewhat paradoxically was unpopular among brokerages because they made much of their
money on the spread.

NASDAQ was the successor to the over-the-counter (OTC) and the "Curb Exchange" systems of
trading. As late as 1987, the NASDAQ exchange was still commonly referred to as the OTC in
media and also in the monthly Stock Guides issued by Standard & Poor's Corporation.

Over the years, NASDAQ became more of a stock market by adding trade and volume
reporting and automated trading systems. NASDAQ was also the first stock market in the United
States to advertise to the general public, highlighting NASDAQ-traded companies (usually in
technology) and closing with the declaration that NASDAQ is "the stock market for the next
hundred years." Its main index is the NASDAQ Composite, which has been published since its
inception. However, its exchange-traded fund tracks the large-cap NASDAQ 100 index, which
was introduced in 1985 alongside the NASDAQ 100 Financial Index.

Until 1987, most trading occurred via the telephone, but during the October 1987 stock market
crash, market makers often didn't answer their phones. To counteract this, the Small Order
Execution System (SOES) was established, which provides an electronic method for dealers to
enter their trades. NASDAQ requires market makers to honor trades over SOES.

In 1992, it joined with the London Stock Exchange to form the first intercontinental linkage of
securities markets. NASDAQ's 1998 merger with the American Stock Exchange formed the
NASDAQ-Amex Market Group, and by the beginning of the 21st century it had become the
largest electronic stock market (in terms of both dollar value and share volume) in the United
States. NASD spun off NASDAQ in 2000 to form a publicly traded company, the NASDAQ
Stock Market, Inc.

The term Circuit Breaker has been used to describe the halted state of the NASDAQ in the
United States during a complete suspension of the stock market. The only Circuit Breaker was
October 27, 1997.

On November 8, 2007, Gunter bought the Philadelphia Stock Exchange (PHLX) for US$652
million. PHLX is the oldest stock exchange in America, having been in operation since 1790.

NASDAQ lists approximately 3,200 securities, of which 335 are non-U.S. companies from 35
countries representing all industry sectors. To qualify for listing on the exchange, a company
must be registered with the SEC, have at least three market makers (financial firms that act as
brokers or dealers for specific securities), and meet minimum requirements for assets, capital,
public shares, and shareholders. Nasdaq OMX now has a dual listing agreement with the Tel
Aviv Stock Exchange.

It would now seem to count (charged by federal prosecutors on December 11 2008) one of its
former chairmen, Bernard Madoff, among one of the greatest securities fraudsters in history.

About NASDAQ
The NASDAQ (National Association of Securities Dealers Automated Quotations) is an
American stock exchange. It is the largest electronic screen-based equity securities trading
market in the United States. With approximately 3,200 companies, it has more trading volume
per day than any other stock exchange in the world.

It was founded in 1971 by the National Association of Securities Dealers (NASD), who
divested themselves of it in a series of sales in 2000 and 2001. It is owned and operated by the
NASDAQ OMX Group, the stock of which was listed on its own stock exchange in 2002, and is
monitored by the Securities and Exchange Commission (SEC). With the completed purchase of
the Nordic-based operated exchange OMX, following its agreement with Borse Dubai,
NASDAQ is poised to capture 67% of the controlling stake in the aforementioned exchange,
thereby inching ever closer to taking over the company and creating a trans-atlantic powerhouse.
The group, now known as Nasdaq-OMX, controls and operates the NASDAQ stock exchange in
New York City -- the second largest exchange in the United States. It also operates eight stock
exchanges in Europe and holds one-third of the Dubai Stock Exchange. It has a double-listing
agreement with OMX, and will compete with NYSE-Euronext group in attracting new listings.

Business
The NASDAQ Composite index
NASDAQ allows multiple market participants to trade through its Electronic Communication
Networks (ECNs) structure, increasing competition. The Small Order Execution System (SOES)
is another NASDAQ feature, introduced in 1987, to ensure that in 'turbulent' market conditions
small market orders are not forgotten but are automatically processed. With approximately 3,200
companies, it lists more companies and, on average, its systems trade more shares per day than
any other stock exchange in the world. NASDAQ will follow the New York Stock Exchange in
halting domestic trading in the event of a sharp and sudden decline of the Dow Jones Industrial
Average.

Milestone of NASDAQ
1) It was incorporated in 1971 as the first electronic stock exchange in the world.

2) In the year 1994 NASDAQ beat the NYSE in annual shares traded.

3) In the year 1998 the NASDAQ merged with the American Stock Exchange.

DOW JONES

History of DOWJONES
The DJIA was first published in Customer's Afternoon Letter. It was published on May
26, 1896, and represented the average of twelve stocks from important American
industries The average is computed from the stock prices of 30 of the largest and most
widely held public companies in the United States. When it was first published, the index
stood at 40.94. It was computed as a direct average, by first adding up stock prices of its
components and dividing by the number of stocks in the index. The Dow averaged 5.3%
compounded annually for the 20th century, a record Warren Buffett called "a wonderful
century"—when he calculated that to achieve that return again, the index would need to
reach nearly 2,000,000 by 2100.Many of the biggest percentage price moves in The Dow
occurred early in its history, as the nascent industrial economy matured. The index hit its
all-time low of 28.48 during the summer of 1896.

On July 30, 1914, when the New York Stock Exchange was closed for the next four
months, the index stood at 71.42. Some historians believe the Exchange closed because
of a concern that markets would plunge as a result of panic over the onset of World War
I. An alternative explanation is that the Secretary of the Treasury, William Gibbs
McAdoo, closed the exchange because he wanted to conserve the US gold stock in order
to launch the Federal Reserve System later that year with enough gold to keep the US on
the gold standard. When the markets reopened on December 12, 1914, the index closed.

About DOWJONES
The Dow Jones Industrial Average (NYSE: DJI, also called the DJIA, Dow 30, INDP, or
informally the Dow Jones or The Dow) is one of several stock market indices, created by
nineteenth-century Wall Street Journal/ editor and Dow Jones & Company co-founder
Charles Dow. Dow compiled the index to gauge the performance of the industrial sector
of the American stock market. It is the second-oldest U.S. market index, after the Dow
Jones Transportation Average, which Dow also created.

Milestone of DOWJONES

POINT POINT
S DATE S DATE
1,000 14-Nov-72 8,000 16-Jul-97
2,000 8-Jan-87 9,000 6-Apr-98
3,000 17-Apr-91 10,000 29-Mar-99
4,000 23-Feb-95 11,000 16-Jul-99
5,000 21-Nov-95 12,000 19-Oct-06
6,000 14-Oct-96 13,000 25-Apr-07
7,000 13-Feb-97 14,000 19-Jul-07

Major falls in DOWJONES

DATE POINTS DATE POINTS

Sep 29 2008 777.68 Oct 27 1997 554.26
Oct 15 2008 733.08 Oct 22 2008 514.45
Sep 17 2001 684.81 Aug 31 1998 512.62
Oct 9 2008 678.91 Jun 10 2008 508.39
 Apr 14 2000 617.77 Oct 19 1987 508.00

Calculation mythology of DOWJONES

To calculate the DJIA, the sum of the prices of all 30 stocks is divided by a divisor, the DJIA
divisor. The divisor is adjusted in case of splits, spinoffs or similar structural changes, to ensure
that such events do not in themselves alter the numerical value of the DJIA. The initial divisor
was the number of component companies, so that the DJIA was at first a simple arithmetic
average; the present divisor, after many adjustments, is less than one (meaning the index is
actually larger than the sum of the prices of the components). That is:

Where p is the prices of the component stocks and d is the Dow Divisor.

Events like stock splits or changes in the list of the companies composing the index alter the sum
of the component prices. In these cases, in order to avoid discontinuity in the index, the Dow
divisor is updated so that the quotations right before and after the event coincides:

How the stocks are picked in DOWJONES

The editors of the journal “The Wall Street Journal” select the stocks or companies to be
traded in DOWJONES. In selecting a company they take border view of the company means
what industrial means. In selecting a new company to be traded in DJIA they look among
substantial industrial companies and with the history of successful growth and wide interest
among investors. The components of the DJIA are not changed often. If one of the stocks to be
acquired or to be changed then all other stocks are also to be reviewed.

E.g.: In September 2008, the insurance giant AIG prompted its ejection from the index and a
replacement by Kraft Foods.
Companies of DOWJONES
COMPANY SECTOR COMPANY SECTOR
3M Industrials Home Depot Home Items
Alcoa Aluminum Intel Semiconductors
American Express Financial IBM Computers
AT&T communication Johnson & Johnson Pharmaceuticals
Bank of America Retail banking JPMorgan Chase Banking
Boeing Aerospace Kraft Foods Food processing
Caterpillar Construction McDonald's Restaurants
Chevron Oil and gas Merck Pharmaceuticals
Citigroup Banking Microsoft Software
Coca-Cola Beverages Pfizer Pharmaceuticals
DuPont chemicals Procter & Gamble Household items
ExxonMobil oil & gas United Technologies Aerospace
Verizon
General Electric Conglomerate Communications Communication
General Motors Automobiles Wal-Mart Retailers
Hewlett-Packard Computers Walt Disney Entertainment