Every market needs rules and regulations to govern properly. Rules and regulations help for the smooth functioning of a market and provides for accelerated growth and development.
An important aspect for checks and balances of the market is the need to keep all the unhealthy elements of competition and corruption in check. This is needed to ensure that the market is always fully functional and doesn't suffer from any anti-social drawbacks.
Regulation of the Indian Stock Market is made by three different boards, i.e., the Securities and Exchange Board of India, Ministry of Finance and the Reserve Bank of India. Though SEBI is the main regulatory body, Exchanges also have a list of rules and regulations that help govern stock trading.
SEBI caters to a lot of capital functions. However, its primary functions include promoting and being a regulatory body of the Indian Securities Market and promoting the interests of the investors.
Irrespective of being an Indian or a Foreign Institution, all financial institutions allowed to participate in the workings of the Indian Securities market are governed by the regulations established by SEBI. Foreign investors also come under the governance of SEBI if they deal with Indian stock.
The Reserve Bank of India regulates markets by passing different legislations. RBI regulates foreign trade on our markets through the FEMA or the Foreign Exchange Management Act, 1999.
Exchanges implement the rules and regulations laid down by SEBI. NSE has sector or area specific rules and regulations for each of its trading segments. To ensure compliance with rules and regulations, SEBI regularly inspects and monitors the NSE.