Stock Exchange

Stock exchange is an organized market for buying

and selling corporate and other securities. Here,
securities are purchased and sold out as per
certain well-defined rules and regulations.
It provides a convenient and secured mechanism
or platform for transactions in different securities.
Such securities include shares and debentures
issued by public companies which are duly listed
at the stock exchange, and bonds and
debentures issued by government, public
corporations and municipal and port trust bodies.

 Stock exchanges are indispensable for the

smooth and orderly functioning of corporate
sector in afree marketeconomy.
A stock exchangeneed not be treated as a
place for speculation or a gambling den. It
should act as a place for safe and profitable
investment, for this, effective control onthe
workingof stock exchangeis necessary.
This will avoid misuse of this platform for
excessive speculation, scams and other
undesirable and anti-social activities

 London stock
exchange(LSE) is the
oldest stock exchange in
the world. WhileBombay
stock exchange(BSE) is
the oldest in India.


Definitions of Stock Exchange

According toHusband and Dockerary,

"Stock exchanges are privately organized
markets which are used to facilitatetrading in
securities.
The Indian Securities Contracts (Regulation) Act
of 1956, defines Stock Exchange as,
"An association, organization or body of
individuals, whether incorporated or not,
established for the purpose of assisting,
regulating and controlling business in buying,
selling and dealing in securities."

Features of Stock
Exchange

Market for securities

Deals in new andsecond handsecurities
Regulates trade in securities
Allows dealings only in listed securities
Transactions effected only through members
Association of persons
Recognition from Central
Workingas per rules
Specific location
Financial Barometers

Functions of sock exchange

Continuous and ready market for
securities
Facilitates evaluation of securities
Encourages capital formation
Provides safety and security in dealings
Regulates company management
Facilitates healthy speculation
Serves as Economic Barometer
Facilitates Bank Lending

Services given by Stock Exchange to Investors

Provides liquidity to investment

Provides collateral value to
securities
Offers opportunity to participate
in the industrial growth
Estimates the worth of
securities
Offers safety incorporate


Services given by Stock Exchange to Companies

Widens market for securities

Creates goodwill and reputation
Facilitates fair pricing of listed
securities
Provides better response from
investors
Facilitates quick selling of
securities
Service given by Stock Exchange
to Economy

Listing
Listing means permission to quote
shares and debenture officially on
the trading floor of the stock
exchange.

Requirement of listing
Following information must be filled by
the exchange: Memorandum of article of association.
Copies of all prospectuses.
Copies of balance sheet, audited
accounts,agreements,promoters,underw
riters,brokers.
Details of shares and debenture &shares
forfeited.

 Details of issue of bonus and

dividend declared.
History of company in brief.
Agreement with managing director
etc.
List of highest 1o holders of each
class or kind of securities of
company.

Objectives of listing
To ensure the proper supervision and
control of dealings in securities.
To protect the interest of
shareholders and the investors.
To ensure marketing facilities for
securities.
To ensure liquidity of securities.
To regulate the dealings in securities.

Advantage of listing

Publicity of security.
Protection of investors.
Ensure liquidity.
Better goodwill.

Procedure for dealing at stock

exchange

Selection of a broker.
Pacing an order.
Making the contract.
Contract note (buying and selling note).
Settlements-The selling broker handover the
certificate and transfer form to buying broker. the
settlement of ready and forward delivery done
with different types:Settlement of ready delivery: done in 3 -7
days of the transaction. if full settlement is done
than it is known as liquidation in full.

Settlement of forward delivery

contract: can be done speculative
purposes, can be done in any of three
ways:
liquidity in full
liquidation in full payment of
differences
carry over to the next settlement

 Electronic settlement for trade.

purchasing the dematerlised
securities & selling the the
dematerlised securities
Rolling statement-T+5
T-is trade date
5- 5 days are given for delivery of
securities and payment

Operators of stock
excahnge
Jobbers:- who deals In security on
their own. they fixed two prices one
in which they wants to purchase and
second in which they wants to sell
the security . and the difference of
these two prices known as jobbers
profit.
Brokers:- a commission agent who
bring together buyers & seller to
perform a deal.

 Tarawaniwalas:- The menbers of

bombay stock exchange divided
them in to two parts i.e:Brokers & Tarawaniwalas
Last one act like a broker as well as
jobber, he purchase and sell security
on their own and from the side of
public also.

Speculators in stock
excahnge
Bull:- also known as Tejiwala who
expects high in prices .he purchases
the securities with the intention to
sell the securities at high prices. bull
speculator tries to raise the prices by
placing the big orders.
Bear:-also known as Mandiwala,
expects that prices fall in future and
tends to sell the securities in present.

 Stag:- satg purchase the shares to

sell them in premium.
Lame duck:- when bear find it
difficult to fulfill its commitment it is
known as lame duck.

Weaknesses
&
Development in Stock
Exchange
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