Posts Tagged ‘stock exchanges’

IFRS: THE IMPACT ON INDIAN CORPORATE

International Financial Reporting Standards (IFRS) has gained huge momentum in recent years across the world as it is used as a universal financial  reporting language. Almost 100 countries have adopted it while few other countries have declared their willingness to adopt or converge with IFRS over the next two-three years.

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In the world of globalization, world has become more dependent on each other, which forces more and more countries to open their doors for businesses expansion across borders and to foreign investment. A large number of multi-national companies are establishing their businesses in various countries especially in emerging countries; as a result the companies in emerging countries are increasingly accessing the global markets to fulfill their capital requirement by getting their securities listed on the stock exchanges outside their country. Few Indian companies are also being listed on overseas stock exchanges, but different countries follow their own accounting frameworks, which create a great confusion for users of financial statements, finally it leads to inefficiency in capital markets across the world.

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Therefore, there is a requirement for a single set of high quality accounting standards that should be spoken by all of them across the globe, to meet the increasing complexity of business transactions and globalisation of capital, which has prompted many countries to go for convergence of national accounting standards with IFRSs.

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In this changing scenario, India cannot cut off itself from the developments taking place worldwide. At present, the Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI) formulates Accounting Standards (ASs). Complex nature of IFRSs and the differences between the existing ASs and IFRSs, the ICAI is of the view that IFRSs should be adopted for the public interest entities such as listed entities, banks and insurance entities and largesized entities from the accounting periods beginning effect from April, 2011. Convergence to IFRS would mean India would join a league of more than 100 countries, which have converged with IFRS. Converging to IFRS by Indian companies will be very challenging and on the contrary it could also be rewarding too.

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Benefits to corporates in the Indian context World Class Peer Standards for Financial Reporting: IFRSs will surely enhance the comparability of financial information and financial performance with global peers and industry. This will result in more transparent financial reporting of a company’s activities which will benefit investors, customers and other key stakeholders in India and overseas. The adoption of IFRS is expected to result in better quality of financial reporting due to consistent application of accounting principles and improvement in reliability of financial statements.

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Investors: It will be a great help for those investors who wish to invest outside their own country and looking for a Financial statements, which prepared by using a common set of accounting standards IFRS provides them better comprehensible investment opportunities as opposed to financial statements prepared using a different set of national accounting standards. For better understanding of financial statements, global investors have to incur more cost in terms of the time and efforts to convert the financial statements so that they can confidently compare opportunities. Investors’ confidence would be well-built if accounting standards used are globally accepted. Convergence with IFRSs contributes to investors’ understanding and confidence in high quality financial statements.

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The industry: It will be easier to raise capital from foreign markets at lower cost if the industry can create confidence in the minds of foreign investors that their financial statements comply with globally accepted accounting standards. The burden of financial reporting is lessened with convergence of accounting standards because it simplifies the process of preparing the individual and group financial statements and thereby reduces the costs of preparing the financial statements using different sets of accounting standards.

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The accounting professionals: Convergence with IFRSs also create more business opportunity to the accounting professionals in a great way that they are able to sell their services as experts in different parts of the world, it offers them more opportunities in any part of the world if same accounting practices prevail throughout the world. They are able to quote IFRSs to clients to give them backing for recommending certain ways of reporting.

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Challenges to Indian Corporate Laws and regulations: There is a need to bring a change in several laws and regulations governing financial accounting and reporting system in India. In addition to accounting standards, there are legal and regulatory requirements that determine the manner in which financial information is reported or presented in financial statements.

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Lack of adequate professionals: There is a lack of adequate professionals with practical IFRS conversion experience and therefore many companies will have to rely on external advisers and their auditors.

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Replacement and Up gradation in systems: Conversion to IFRS will require extensive upgrades or total replacement of major system. With sufficient planning, upgrades and replacements can occur as part of the overall strategic technology planning and procurement process.

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.Convert historical data: Historical data from recent prior periods will have to be recast for comparative purposes. This is necessary to permit accurate and comparative trend and ratio analysis. Record retention requirements should be reviewed to ensure that data currently being retained is detailed enough to permit proper restatement of prior-period financials.

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Coordination of Conversion System: For many organizations, the conversion to IFRS will be a multi-year exercise with numerous changes to technology infrastructure and systems. Development of new technology systems should be carefully examined so IFRS requirements can be incorporated.

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Conclusion

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Convergence to IFRS will greatly enhance the transparency of Indian companies which will surely help them to project themselves in global map, which will help Indian companies benchmark their performance with global counterparts. But companies will need to be proactive to build awareness and consensus amongst investors and analysts to explain the reasons for this volatility in order to improve understanding, and increase transparency and reliability of their financial statements. However, the responsibility for enforcement and providing guidance on implementation vests with local government and accounting and regulatory bodies, such as the ICAI in India will play a vital role. The ICAI will have to make adequate investments and build infrastructure for awareness and training program.

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Successful implementation of IFRS in India depends on the regulator’s immediate intention to convert to IFRS and make appropriate regulatory amendments.

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Indian Stock Traders To Contend With Fewer Holidays in 2010 !

Indian Stock Traders To Contend With Fewer Holidays in 2010

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Indian brokerages and traders would have to contend with fewer trading holidays in 2010, going by the list of weekdays on which the markets will remain closed in 2010.

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Moreover, they would have to put in longer hours this year owing to the decision of stock exchanges to increase the trading hours.

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In comparison to 2009, when there were 19 holidays throughout the year, the projected number of public holidays in 2010 has dropped to just 11, including the first day of the year.

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As per the official of Bombay Stock Exchange (BSE), this is certainly not by design.

Eight holidays this year — including Dussehra, Guru Nanak’s birthday, Christmas, Independence Day — fall either on a Saturday or Sunday,” he said.

“It’s only that we have mentioned them on our holiday list.”

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According to SMC Capital’s Jagannadham Thunuguntla, the Securities and Exchange Board of India was already contemplating a cut in the number of holidays to align the Indian markets with other peers, where trading holidays are restricted to six-seven a year.

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“This year, coincidentally, this has fallen in place. Many festivals and events are on weekends. That’s why, if you notice, today has been declared a holiday as a consolation to us,” Thunuguntla told.

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The authorities at the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) have not only increased the trading hours by 55 minutes but have also decided not to advance the opening bell this year .

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From Jan 4 onwards, trading will commence at 9 a.m., while the closing bell will ring at 3.30 p.m. in a move intended to woo foreign funds from other major Asian markets like Singapore and Hong Kong.

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SEBI May Reduce the Trading Holidays at Bourses

SEBI May Reduce the Trading Holidays at Bourses

SEBI May Reduce the Trading Holidays at Bourses

Market regulator SEBI is looking into a proposal by several investors to allow fewer trading holidays on stock exchanges in line with the global practice.

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“SEBI is actively considering the proposal to reduce the trading holidays at bourses and is likely to take a decision on the matter soon,” an official close to the development said.


According to analysts, this move by Securities and Exchange Board of India (SEBI) will increase the trading volume in domestic bourses and would also attract foreign investors.


SMC Capitals Equity Head Jagannadham Thunuguntla said,

“From the global standards, India has more number of trading holidays. The reducing of holidays would increase the participation of investors, including the foreign ones, and would increase the trading volume,” he said.

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For 2009, the Bombay Stock Exchange has 19 listed trading holidays and these exclude the weekly Saturday and Sunday off.

In developed countries, the trading holiday at leading bourses are far less.

For 2009, there are only nine trading holidays on the New York Stock Exchange.

In European markets, there are just four holidays this year excluding Saturdays and Sundays.

Recently, Sebi opened gates for longer trading hours for stock exchanges, allowing the bourses to extend market hours by around two-and-a-half hours between 9 am and 5 pm.

The market regulator had further asked the bourses to reset their timings provided they have in place risk management system and infrastructure commensurate to the trading hours.

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SEBI’s New Direction to All Stock Exchanges & Intermediaries !

Sebi Directs Intermediaries/Stock Markets on the matter of Terror Funding

Sebi Directs Intermediaries/Stock Markets on the matter of Terror Funding

Market regulator SEBI has directed all stock exchanges and other securities intermediaries to keep a strict watch on UN-listed terror funding entities, including the famous underworld don Dawood Ibrahim.

The Securities and Exchange Board of India has asked the securities intermediaries to inform the Union home ministry within 24 hours if they find any client, whose particulars match with those of the entries listed by the United Nations.

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SEBI has issued a statement that in case of the issue of particulars of any of customers matching the particulars of the listed individuals or entities, stock exchanges, depositories and intermediaries are instructed to inform full particulars to Ministry of Home Affairs, within 24 hours.

SEBI has also asked the securities intermediaries to prevent designated persons from conducting financial transactions in aforesaid events, under intimation to the Home Ministry.

According to laid down rules, on receipt of particulars, the home ministry would initiate a verification to be conducted by the state police and the central agencies.

The verification would be completed within a week.

In Past, Concerns were raised by the National Security Advisors and Home ministry about the prospect of Terrorists using the stock markets to bring money into India to fund their activities.

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Trading Hours of Bourses Extended by SEBI :)

Trading Hours of Bourses Extended by SEBI

Trading Hours of Bourses Extended by SEBI

Market regulator SEBI on Friday extended the trading hours of bourses by up to two-and-a-half hours from 9 am to 5 pm, a move that may help in bringing back the trade that was seen shifting to Singapore Stock Exchange.

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It has been decided to permit the stock exchanges to set their trading hours (in the cash and derivatives segments) subject to the condition that the trading hours are between 9 am and 5 pm,” SEBI said in a statement.

The new trading hours would now help integrate the Indian bourses with Singapore and other Asian markets in the morning hours, and the European market in the evening hours, said SMC Capitals Equity Head Jagannadham Thunuguntla.

“Some trade that had shifted to SGX Nifty (Indian Nifty traded in Singapore Stock Exchange) can now be brought back to the country,” he said.

The current market hours stand from 9.55 am to 3.30 pm.

In Singapore, trading sessions are held between 9 am to 12.30 pm and 2 pm to 5 pm (local time).

In addition, there is pre-open routine from 8.30 am to 9 am and pre-close routine from 5 pm to 5.06 pm.

Singapore is around two and a half hours ahead of India.

This would provide an opportunity to NSE to try and align their timings to that of a few Asian markets like the SGX since this exchange permits trading in Nifty.

With market regulator SEBI now allowing longer trading hours, it is now up to the bourses to decide on the duration and when to reset their trade timings.

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Thunuguntla said, “All stock exchanges are likely to go for the maximum possible trading hours as they have been demanding it to be extended to 9 am to 9 pm.”

He said there is a serious competition ongoing between Bombay Stock Exchange and National Stock Exchange, and then there is the new competitor MCX-SX.

“I will be surprised if any bourse not utilises the full timing,” he added.

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Corporate Bonds to be Routed through Clearing Houses: SEBI

Trade in corporate bonds would have to be routed through clearing houses from very soon

Trade in corporate bonds would have to be routed through clearing houses from very soon

Market regulator SEBI has said that trade in corporate bonds would have to be routed through clearing corporations from December 1, a move that experts say would check factors that aggravated financial crisis.

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Directives of the Sebi will be applicable to corporate bond trading that are not currently settled through clearing corporations or clearing houses of stock exchanges.

“It has now been decided that, all trades in corporate bonds between specified entities shall necessarily be cleared and settled through the National Securities Clearing Corp (NSCCL) or Indian Clearing Corp (ICCL),” it said.

The specified entities are mutual funds, foreign institutional investors/ sub-accounts, venture capital funds, foreign venture capital investors, portfolio managers, and RBI regulated entities, the Sebi said.

“The provisions of this circular shall be applicable to all corporate bonds traded Over The Counter (OTC) or on debt segment of stock exchanges on or after Dec 01, 2009,” it said.

SMC Capitals Equity Head Jagannadham Thunuguntla said, “It is a learning from the global financial crisis.  One of the major reasons for the crisis to be so severe was that many fancy financial instruments were traded OTC with no records.”

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