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Features of Stock Exchange

The Stock Exchange is a segment of the Capital Market where corporate securities are traded, with only listed securities allowed. Major stock exchanges in India include the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), both regulated by the Securities and Exchange Board of India (SEBI). The functions of stock exchanges include mobilizing savings, promoting investment, capital formation, and contributing to economic growth.

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24 views1 page

Features of Stock Exchange

The Stock Exchange is a segment of the Capital Market where corporate securities are traded, with only listed securities allowed. Major stock exchanges in India include the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), both regulated by the Securities and Exchange Board of India (SEBI). The functions of stock exchanges include mobilizing savings, promoting investment, capital formation, and contributing to economic growth.

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12: Stock Exchange

Stock Exchange is a part of Capital Market where Corporate Securities are bought and sold.
Only listed securities can be traded on a stock exchange.
Oldest Stock Exchange – London Stock Exchange – founded in 1571.
Bombay Stock Exchange – founded in 1875.

Features of Stock Exchange:


1. Market for Securities: Govt and corporate securities are traded.
2. Second Hand Securities: already issued securities are traded.
3. Listed Securities: only listed securities are traded.
4. Organized and Regulated Market: SEBI regulates Stock Exchanges.
5. Trading only through Members: through DPs.
6. Specific Location: earlier – a place. Now – electronically traded.

Functions of Stock Exchange


1. Mobilization of Savings: from lenders to borrowers.
2. Promotes the Habit of Savings and Investment: leads to capital formation.
3. Capital Formation: savings when invested leads to capital formation.
4. Better Allocation of Capital: profit making companies are high demand and thus people invest more in such companies.
5. Contributes to Economic Growth: Industrial development leads to economic growth.
6. Economic Barometer: measure the economic condition of a country.
7. Pricing of Securities: demand and supply forces.
8. Protecting Interest of Investors: shares of only listed companies are traded. Listed companies must follow the rules and
regulations framed by SEBI.
9. Liquidity: securities can easily be converted into cash.
10. Providing Scope for Speculation: healthy speculation of securities.

Major Stock Exchanges in India:


Bombay Stock Exchange (BSE)
- Set up in 1975 and was called as ‘The Native Share and Stock Broker’s Association’
- Located in Dalal Street in Mumbai
- Asia’s first Stock Exchange
- 11th largest stock exchange in the world
- Largest number of companies listed
- Switched to electronic trading system in 1995

National Stock Exchange (NSE)


- Set up by a group of leading Indian Financial Institutions in 1992 as a Company
- Recognised as a stock exchange in 1993
- Started trading activities in 1994
- Largest and most modern stock exchange in India
- Located in Mumbai

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)


- Regulator of Capital Markets
- Established in 1992
- Headquarters in Mumbai

Functions:
1. Protect the interest of investors
2. Register and Regulate the working of Intermediaries
3. Register and Regulate the working of Depositories, DP, FII, CRA, etc.
4. Register and Regulate the working of VC, MF, etc.
5. Prohibit fraudulent and unfair trade practices
6. Prohibit Insider Trading
7. Promote development of Securities Market
8. Promote and Regulate Self Regulatory Organisations
9. Promote Investors’ Education and Training of Intermediaries

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