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What Is Stock Exchange MATHIVANAN K. MBA 2014 SOURASHTRA COLLEGE, MADURAI WHAT IS STOCK EXCHANGE Stock exchange is that place where trading of shares is done in terms of sale and purchase. HISTORY STOCK EXCHANGE The first organized stock exchange in India was started in Bombay. The native share stock brokers association known as the Bombay stock exchange (BSE) BSE was Asia's oldest stock exchange Ahmedabad stock exchange was started to facilitate dealings in the shares of textile mills. The Calcutta stock exchange was started in 1908 to provide a market for shares of plantation and jute mills. The second world war saw great speculative activity in the country and the number of stock exchanges rose- 7 in 1939 to 21 in 1945. There where also illegal “dabba’ market in which stocks and shares were also bought and sold At present, there are twenty one recognized stock exchanges in India which does not include the Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL). Government policies during 1980's also played a vital role in the development of the Indian Stock Markets. There was a sharp increase in number of Exchanges NAME OF INDIAN STOCK EXCHANGES 1.Bombay stock exchange 2.national stock exchange(Mumbai) 3.Banglore stock exchange 4.Utter Pradesh stock exchange(kanpur) 5.Magadh stock exchange(Patna) 6.Ahmedabad stock exchange 7.vadodara stock exchange(Baroda) 8.Bhubaneswar stock exchange 9.Calcutta stock exchange(kolkata) 10.madras stock exchange 11.Cochin stock exchange 12.coimbatore stock exchange 13.Gauhati stock exchange 14.Hydrabad stock exchange 15.Madhya Pradesh stock exchange(indore) 16.Jaipur stock exchange 17.Ludhina stock exchange 18.Mangalore stock exchange 19.Pune stock exchange 20.saurashtrakutch stock exchange BSE: THE BOMBAY STOCK EXCHANGE Mumbai's (earlier known as Bombay), Bombay Stock Exchange is the largest, with over 6,000 stocks listed. The BSE accounts for over two thirds of the total trading volume in the country. Established in 1875, the exchange is also the oldest in Asia. Among the twenty-two Stock Exchanges recognized by the Government of India under the Securities Contracts (Regulation) Act, 1956, it was the first one to be recognized and it is the only one that had the privilege of getting permanent recognition ab-initio. STRUCTURE OF INDIAN STOCK EXCHANGES SEBI Stock Exchanges National Exchanges Regional Exchanges BSE NSE 21 Other Regional Exchanges SECURITIES AND EXCHANGE BOARD OF INDIA PERFORMS Regulatory Development o Research and Development o Operates the trading of stock exchange o Publishing of Information o Registration of broker, o Educates investors transfer agents, o Promoting Self operating merchant banks etc organisation o Abolition of internal o Control over fraud trading o Auditing of stock exchange o Registration of credit rating agency NSE: NATIONAL STOCK EXCHANGE The National Stock Exchange (NSE), location India's first debt market. Year of inception - 1993 Year of operation - 1994 The instruments traded Treasury Bills, Government Security Bonds Issued By Public Sector Companies PURPOSE NSE Establishing a National wide trading facility for all type of securities. Ensuring equal access to investor all over the country through an appropriate communication network Providing for a Fair, efficient and transparent securities market using electronic Trading system Enabling shorter Settlement cycles. Meeting up with international benchmark and standard FEATURES OF STOCK EXCHANGE It is an organized market It is a securities market It is an important constituent of capital market i.e., market for long- term finance It is a voluntary association of persons desirous of dealing in securities Stock exchange is a voluntary association, its membership is not open to everybody In a stock exchange, only the members can deal in i.e., buy & sell securities The dealings in a stock exchange are under certain accepted code of conduct i.e., rules and regulations The dealings in a stock exchange are under certain accepted code of conduct i.e., rules and regulations IMPORTANT FUNCTION OF STOCK EXCHANGE Provide central and convenient meeting places for sellers and buyer of securities Increase the marketability and liquidity of securities Contribute to stability of prices of securities Equalization of price of securities Smoothen price movement Help the investors to know the worth of their holdings Promote the habit of saving and investment Help capital formation Help companies and government to raise funds from the investors Provide forecasting service ROLE OF NSE Raising capital for businesses Mobilizing savings for investment Facilitating company growth Profit sharing Corporate governance Barometer of the economy NSE - TRADING: Trading Fully automated screen-based trading mechanism Strictly follows the principle of an order-driven market Trading members are linked through a communication network This network allows them to execute trade from their offices The prices at which the buyer and seller are willing to transact will appear on the screen When the prices match the transaction will be completed confirmation slip will be printed at the office of the trading member SPECULATION : Definition : it involves the buying, holding, selling, short- term selling of stocks, bonds. commodities, currencies, collectibles or any valuable financial instrument to profit from fluctuations in its price as opposed to buying it for use or for income via method like dividends or interest. KINDS OF SPECULATION : Bull Market (Tejiwala): In case of that they purchase the shares at current prices to sell at a higher price in the near future and makes a profit if his expectations come true. He is also called a long buyer. Bear Market (Mandiwala) : He sells security in the hope that he will be able to buy them back at lesser price.It is also called “short selling”. Lame duck : When a bear has made contracts to sell securities, find it difficult to meet his commitment due to non-availability of security, they always struggling. Stag : He is that type of speculator who applies for a large number of a shares in a new issue with the intention of selling them at a premium. He is bullish and very cautious. BENEFITS OF STOCK EXCHANGE : FROM THE POINT OF VIEW OF COMMUNITY: It assist the economist development by providing a body of interested investors. It uploads the position of superior enterprises and assist them in raising further funds. It encourages capital formation Government can undertake projects of national importance and social value raising funds through the sale of its securities on the stock exchange. It is the stock exchanges that central bank of a country can control credit by undertaking open market operations (purchase and sale of securities) FROM THE INVESTORS POINT OF VIEW Liquidity of the investment is increased The securities dealt on a stock exchange are good collateral security for loans. The stock exchange safeguards interests of investors through strict enforcement of rules and regulations. The present net worth of investments can be easily known by the daily quotations. His risk is considerably less when he holds or purchases listed securities. FROM THE COMPANY POINT OF VIEW A company whose shares quoted on stock exchange they enjoy better reputation and credit The market for the shares of such a company is naturally widened The market price of securities is likely to be higher in relation to its earnings, dividends and property values This raises the bargaining power of the company in the event of a takeover, merger or amalgamation BROKER AND JOBBER BROKER: He is one acts as a intermediary on behalf of others. A broker in a stock exchange ,is a commission agent who transacts business in securities on behalf of non members. JOBBER: He is not allowed to deal with the public directly. He deals with brokers who are engaged with the investors . Thus, the securities is bought by the jobber from members and sells to members who are operating on the stock exchange as broker. DIFFERENCE BETWEEN A BROKER AND A JOBBER Broker Jobber A broker deals with the jobber A jobber is an independent on behalf of his clients. in dealer in securities, purchasing other words, a broker is or selling securities on his own middleman between a jobber account and clients Jobbers deals only with the A broker is merely an agent, brokers, does not deal with the buying and selling securities general public on behalf of his clients A jobber earns profit from his A broker gets only the operations i.e., buying and commission for his dealing selling securities A broker deals in all types of Each jobber specializes in securities certain group of securities MEMBERS OF STOCK EXCHANGE Only the members can make transactions on a stock exchange. A non member can buy or sell securities through a member broker In order to become a member, a person must satisfy the qualification prescribed by the stock exchange Members can act as brokers and jobbers CURRENTLY, NSE HAS THE FOLLOWING MAJOR SEGMENTS OF THE CAPITAL MARKET: Equity Futures and Options Retail Debt Market Wholesale Debt Market Currency futures MUTUAL FUND STOCKS LENDING & BORROWING The Organisation: The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax- paying company unlike other stock exchanges in the country oNSE GROUP: 1. India Index Services & Products Ltd. (IISL) 2. National Securities Clearing Corporation Ltd. (NSCCL) 3. NSE.IT Ltd. 4. National Securities Depository Ltd.
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