Introduction:-

A stock exchange is a place where securities, shares, bonds and other

financial instruments are listed and bought and sold by traders or brokers. To
be able to trade on a stock exchange, securities must be listed on it. Stock
exchanges help companies to raise funds. Therefore the company needs to
list themselves in the stock exchange. Shares listed on the stock exchange
are known as equity and these shareholders are known as Equity
Shareholders.
Stock exchange is a platform where dealings take place in shares,
debentures, and bonds issued by the public sector companies,
private enterprises and government etc.1 In other words, it can be
said that stock excha9nge means an organized market where
various securities i.e. shares, debentures, and bonds issued by
companies, government organizations and semi-government
organizations are sold and purchased.
Stock Exchange (also known as stock market or share market) is one of
the main integral part of capital market in India. It plays a vital role in
growing industries and commerce of a country which eventually affect
the economy. It is well organized market for purchase and sale of
corporate and other securities which facilitates companies to raise
capital by pooling funds from different investors as well as act as an
investment intermediary for investors. Moreover, it ensures that
securities should be traded according to some pre-defined rules and
regulations. Here we shall discuss the Stock Exchange in India.
Indian stock exchange is one of the oldest markets in Asia and is a yardstick
to measure the health and progress of the economy of the country. Over the
course of the period, the market has transitioned into the electronic market
and securities are dealt in dematerialization form.

A stock exchange, securities exchange or bourse[note 1] is a facility where

stockbrokers and traders can buy and sell securities, such as shares of
stock and bonds and other financial instruments. Stock exchanges may also
provide facilities for the issue and redemption of such securities and
instruments and capital events including the payment of income and
dividends.[citation needed] Securities traded on a stock exchange include stock
issued by listed companies, unit trusts, derivatives, pooled investment
products and bonds. Stock exchanges often function as "continuous
auction" markets with buyers and sellers consummating transactions via
open outcry at a central location such as the floor of the exchange or by
using an electronic trading platform.[5]

To be able to trade a security on a certain stock exchange, the security

must be listed there. Usually, there is a central location at least for record
keeping, but trade is increasingly less linked to a physical place, as modern
markets use electronic communication networks, which give them
advantages of increased speed and reduced cost of transactions. Trade on
an exchange is restricted to brokers who are members of the exchange. In
recent years, various other trading venues, such as electronic
communication networks, alternative trading systems and "dark pools"
have taken much of the trading activity away from traditional stock
exchanges.[6]

Initial public offerings of stocks and bonds to investors is done in the

primary market and subsequent trading is done in the secondary market.
A stock exchange is often the most important component of a stock market.
Supply and demand in stock markets are driven by various factors that, as
in all free markets, affect the price of stocks (see stock valuation).

There is usually no obligation for stock to be issued through the stock

exchange itself, nor must stock be subsequently traded on an exchange.
Such trading may be off exchange or over-the-counter. This is the usual
way that derivatives and bonds are traded. Increasingly, stock exchanges
are part of a global securities market. Stock exchanges also serve an
economic function in providing liquidity to shareholders in providing an
efficient means of disposing of shares.

Early history

The term bourse is derived from the 13th-century inn named "Huis
ter Beurze" (center) in Bruges. From Dutch-speaking cities of the
Low Countries, the term 'beurs' spread to other European states
where it was corrupted into 'bourse', 'borsa', 'bolsa', 'börse', etc. In
England, too, the term ‘bourse’ was used between 1550 and 1775,
eventually giving way to the term ‘royal exchange’.
There is little consensus among scholars as to when corporate stock was
first traded. Some see the key event as the Dutch East India Company's
founding in 1602,[7] while others point to earlier developments (Bruges,
Antwerp in 1531 and in Lyon in 1548). One of Europe's oldest stock
exchanges is the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse)
established in 1585 in Frankfurt am Main. Economist Ulrike Malmendier
of the University of California at Berkeley argues that a share market
existed as far back as ancient Rome, that derives from Etruscan
"Argentari". In the Roman Republic, which existed for centuries before
the Empire was founded, there were societates publicanorum, organizations
of contractors or leaseholders who performed temple-building and other
services for the government. One such service was the feeding of geese on
the Capitoline Hill as a reward to the birds after their honking warned of a
Gallic invasion in 390 B.C. Participants in such organizations had partes or
shares, a concept mentioned various times by the statesman and orator
Cicero. In one speech, Cicero mentions "shares that had a very high price
at the time". Such evidence, in Malmendier's view, suggests the
instruments were tradable, with fluctuating values based on an
organization's success. The societas declined into obscurity in the time of
the emperors, as most of their services were taken over by direct agents of
the state.

Tradable bonds as a commonly used type of security were a more recent

innovation, spearheaded by the Italian city-states of the late medieval and
early Renaissance periods.[

Role of stock exchanges

1 Raising capital for businesses

Besides the borrowing capacity provided to an individual or firm by the

banking system, in the form of credit or a loan, a stock exchange provides
companies with the facility to raise capital for expansion through selling
shares to the investing public.[18]

Capital intensive companies, particularly high tech companies, always need

to raise high volumes of capital in their early stages. For this reason, the
public market provided by the stock exchanges has been one of the most
important funding sources for many capital intensive startups. After the
1990s and early-2000s hi-tech listed companies' boom and bust in the
world's major stock exchanges it has been much more demanding for the
high-tech entrepreneur to take his/her company public, unless either the
company is already generating sales and earnings, or the company has
demonstrated credibility and potential from successful outcomes: clinical
trials, market research, patent registrations, etc. This is quite different
from the situation of the 1990s to early-2000s period, when a number of
companies (particularly Internet boom and biotechnology companies) went
public in the most prominent stock exchanges around the world in the total
absence of sales, earnings, or any type of well-documented promising
outcome. Though it's not as common, it still happens that highly
speculative and financially unpredictable hi-tech startups are listed for the
first time in a major stock exchange. Additionally, there are smaller,
specialized entry markets for these kind of companies with stock indexes
tracking their performance (examples include the Alternext, CAC Small,
SDAX, TecDAX).

Alternatives to stock exchanges for raising capital

Research and Development limited partnerships

Companies have also raised significant amounts of capital through R&D

limited partnerships. Tax law changes that were enacted in 1987 in the
United States changed the tax deductibility of investments in R&D limited
partnerships. In order for a partnership to be of interest to investors today,
the cash on cash return must be high enough to entice investors.

2 Venture capital

A usual source of capital for startup companies has been venture capital.
This source remains largely available today, but the maximum statistical
amount that the venture company firms in aggregate will invest in any one
company is not limitless (it was approximately $15 million in 2001 for a
biotechnology company).

3 Corporate partners

Another alternative source of cash for a private company is a corporate

partner, usually an established multinational company, which provides
capital for the smaller company in return for marketing rights, patent
rights, or equity. Corporate partnerships have been used successfully in a
large number of cases.

4 Mobilizing savings for investent

When people draw their savings and invest in shares (through an initial
public offering or the seasoned equity offering of an already listed
company), it usually leads to rational allocation of resources because funds,
which could have been consumed, or kept in idle deposits with banks, are
mobilized and redirected to help companies' management boards finance
their organizations. This may promote business activity with benefits for
several economic sectors such as agriculture, commerce and industry,
resulting in stronger economic growth and higher productivity levels of
firms.

5 Facilitating acquisitions

Companies view acquisitions as an opportunity to expand product lines,

increase distribution channels, hedge against volatility, increase their
market share, or acquire other necessary business assets. A takeover bid or
mergers and acquisitions through the stock market is one of the simplest
and most common ways for a company to grow by acquisition or fusion.

6 Profit sharing
Both casual and professional stock investors, as large as institutional
investors or as small as an ordinary middle-class family, through dividends
and stock price increases that may result in capital gains, share in the
wealth of profitable businesses. Unprofitable and troubled businesses may
result in capital losses for shareholders.

7 Corporate governance

By having a wide and varied scope of owners, companies generally tend to

improve management standards and efficiency to satisfy the demands of
these shareholders and the more stringent rules for public corporations
imposed by public stock exchanges and the government. This improvement
can be attributed in some cases to the price mechanism exerted through
shares of stock, wherein the price of the stock falls when management is
considered poor (making the firm vulnerable to a takeover by new
management) or rises when management is doing well (making the firm
less vulnerable to a takeover). In addition, publicly listed shares are subject
to greater transparency so that investors can make informed decisions
about a purchase. Consequently, it is alleged that public companies
(companies that are owned by shareholders who are members of the
general public and trade shares on public exchanges) tend to have better
management records than privately held companies (those companies
where shares are not publicly traded, often owned by the company
founders, their families and heirs, or otherwise by a small group of
investors).
Despite this claim, some well-documented cases are known where it is
alleged that there has been considerable slippage in corporate governance
on the part of some public companies, particularly in the cases of
accounting scandals. The policies that led to the dot-com bubble in the late
1990s and the subprime mortgage crisis in 2007–08 are also examples of
corporate mismanagement. The mismanagement of companies such as
Pets.com (2000), Enron (2001), One.Tel (2001), Sunbeam Products (2001),
Webvan (2001), Adelphia Communications Corporation (2002), MCI
WorldCom (2002), Parmalat (2003), American International Group (2008),
Bear Stearns (2008), Lehman Brothers (2008), General Motors (2009) and
Satyam Computer Services (2009) all received plenty of media attention.

Many banks and companies worldwide utilize securities identification

numbers (ISIN) to identify, uniquely, their stocks, bonds and other
securities. Adding an ISIN code helps to distinctly identify securities and
the ISIN system is used worldwide by funds, companies, and governments.

However, when poor financial, ethical or managerial records become

public, stock investors tend to lose money as the stock and the company
tend to lose value. In the stock exchanges, shareholders of underperforming
firms are often penalized by significant share price decline, and they tend
as well to dismiss incompetent management teams.

8 Creating investment opportunities for small investors

As opposed to other businesses that require huge capital outlay, investing
in shares is open to both the large and small stock investors as minimum
investment amounts are minimal. Therefore, the stock exchange provides
the opportunity for small investors to own shares of the same companies as
large investors.

9 Government capital-raising for development projects

Governments at various levels may decide to borrow money to finance

infrastructure projects such as sewage and water treatment works or
housing estates by selling another category of securities known as bonds.
These bonds can be raised through the stock exchange whereby members
of the public buy them, thus loaning money to the government. The
issuance of such bonds can obviate, in the short term, direct taxation of
citizens to finance development—though by securing such bonds with the
full faith and credit of the government instead of with collateral, the
government must eventually tax citizens or otherwise raise additional funds
to make any regular coupon payments and refund the principal when the
bonds mature.

10 Barometer of the economy

At the stock exchange, share prices rise and fall depending, largely, on
economic forces. Share prices tend to rise or remain stable when companies
and the economy in general show signs of stability and growth. A recession,
depression, or financial crisis could eventually lead to a stock market crash.
Therefore, the movement of share prices and in general of the stock indexes
can be an indicator of the general trend in the economy.

Most of the trading in the Indian stock market takes place on its two stock
exchanges: the Bombay Stock Exchange (BSE) and the National Stock
Exchange (NSE). The BSE has been in existence since 1875. The NSE, on
the other hand, was founded in 1992 and started trading in 1994. However,
both exchanges follow the same trading mechanism, trading hours,
settlement process, etc. At the last count, the BSE had more than 5,000
listed firms, whereas the rival NSE had about 1,600. Out of all the listed
firms on the BSE, only about 500 firms constitute more than 90% of its
market capitalization; the rest of the crowd consists of highly illiquid
shares.

Almost all the significant firms of India are listed on both the exchanges.
NSE enjoys a dominant share in spot trading, with about 70% of the
market share, as of 2009, and almost a complete monopoly in derivatives
trading, with about a 98% share in this market, also as of 2009. Both
exchanges compete for the order flow that leads to reduced costs, market
efficiency, and innovation. The presence of arbitrageurs keeps the prices on
the two stock exchanges within a very tight range.

Trading Mechanism
Trading at both the exchanges takes place through an open electronic limit
order book in which order matching is done by the trading computer.
There are no market makers or specialists and the entire process is order-
driven, which means that market orders placed by investors are
automatically matched with the best limit orders. As a result, buyers and
sellers remain anonymous. The advantage of an order-driven market is
that it brings more transparency by displaying all buy and sell orders in
the trading system. However, in the absence of market makers, there is no
guarantee that orders will be executed.
All orders in the trading system need to be placed through brokers, many
of which provide an online trading facility to retail customers. Institutional
investors can also take advantage of the direct market access (DMA) option
in which they use trading terminals provided by brokers for placing orders
directly into the stock market trading system.

An Instrument that signifies an ownership position (called Equity) in a corporation,

and represents a claim on its proportional share in the corporation's assets and
profits. What Is Stock Exchange? The securities regulation act of 1956 defined stock
exchange as "an association, organization, or a individual which is established for
the purpose of assisting, regulating and controlling business in buying, selling and
dealing in securities

FEATURES OF STOCK EXCHANGE

The main features of a stock exchange are as under:- • Stock exchange is an organized
market. It is run by an association, organization or body of individuals. • It deals in
securities issued by various concerns such as companies, government and other
authorized authorities. • The area of operation of a stock exchange is well defined. • It is
also called securities market or stock market. • The main object of establishing a stock
exchange is to assist, to regulate and to control the business in securities. • It operates as
per guidelines and rules issued by Securities and Exchange Board of India (SEBI).

Major stock exchanges in India:-

There are two major stock exchanges in India- National Stock Exchange of
India (NSE) and Bombay Stock Exchange (BSE). National Stock Exchange
was established in Mumbai in 1992 and started trading in 1994. Bombay
Stock Exchange was established in 1875 in Mumbai.

Other stock exchanges are as follows-

1. Calcutta Stock Exchange in Kolkata

2. India International Exchange
3. Metropolitan Stock Exchange

Market Indices:-

There are two major indices in the stock exchange of India – Sensex and
Nifty. Sensex comprises of the weighted average of the market capitalization
of stock of 30 well established and financially sound companies across
different key sectors in India. Nifty comprises of top 50 companies in 12
sectors of the Indian economy in one portfolio. It reflects the health of the
Indian economy from a broader perspective.

SENSEX is an indicator of Bombay Stock Exchange and NIFTY is an

indicator of National Stock Exchange of India.

Trading Hours and Settlement on Stock Exchange of India :-

Trading in the stock market in India takes place in between 9:55 AM to 3:30
PM Indian Standard Time, Monday to Friday.Settlement of securities takes
places in T+2 period. It means if the transaction has happened on Tuesday,
it will be settled on Thursday.

Functions of Stock Exchange in India:-

1. Stability of prices of securities.

2. Convenient and transparent place to trade in securities.
3. Help companies to raise their funds.
4. Promote the habit of saving and investment
5. Provide forecasting service.
How to Deal in Stock Exchanges in India:-

In order to deal in stock exchange in India, one must have a Demat A/c. It is
just like a bank account. Various banks in India provide this facility. Through
Demat A/c, an investor can buy or sell securities in trading hours.

Regulation of Stock Exchange in India:-

Entire stock exchange of India is regulated by the Securities and Exchange

Board of India (SEBI) which was established in 1992 as an independent
authority. SEBI has the power to impose fines and penalties in case of
violation of rules and regulations. It plays a pivotal role and protects the
interest of investors in the stock exchange of India. SEBI promotes education
and training of intermediaries of the stock market.

Future of Stock Exchange in India :-

In a growing economy like India, the future of stock exchange is bright and
the volume of transactions will grow substantially in the coming years.

Out of 1.2 billion people, there are only 20 million demat accounts as of now.
Government’s initiative to bring retail customers in mutual funds and foreign
investments in India will help the stock exchange of India.

Bombay stock exchange:-

The Bombay Stock Exchange (Marathi: मुंबई रोखे बाजार) (BSE) is an Indian
stock exchange located at Dalal Street, Mumbai.

Established in 1875, the BSE (formerly known as Bombay Stock Exchange

Ltd.)[4] is Asia's first stock exchange.[5] The BSE is the world's 10th largest
stock exchange with an overall market capitalization of more than $2.2
trillion on as of April 2018.

FUNCTIONS OF STOCK EXCHANGE

The main functions performed by a stock exchange are as
under:- • Stock Exchange provides a ready market for the shares,
debentures, and bonds issued by various concerns. • It helps in
determining the price of various securities i.e. shares, debentures,
and bonds. • It helps in mobilization of surplus funds of
cooperatives, business firms, and individuals for investment in
popular securities. • It plays a vital role in ensuring wider shares
ownership.
ROLE OF STOCK EXCHANGES

Role of Stock Exchanges are diverse and highly important in the

development of economy of a country. They gauge and manage the growth
of a country. Stock exchanges apart from being center of primary and
secondary market, they have very important role to play in the economic
growth of the country. Some of them are as follows:- 1. Raising capital for
businesses: - Stock Exchanges help joint stock companies to capitalize by
selling shares to the investing public. 2. Mobilizing savings for investment:-
They help investing public to mobilize their savings to invest in high
yielding sectors of economy, which results in higher yield, both to the
individual and to the nation. 3. Facilitating company expansion: - They help
joint stock companies to spread out and grow by acquisition or fusion. 4. Profit
sharing: - They help stock investors, to get their share in the wealth of profitable
businesses. 5. Corporate governance:-They impose severe rules to get listed in
them. Therefore, listed public companies have better management records than
privately held companies. 6. Creating investment opportunities for small
investors: - By buying a small number of shares, small investors can also
participate in the growth of large companies. 7. Government capital rising for
development projects: - Through the issue of bonds, they help government to
rise fund for developmental activities. An investor who buys them will be
lending money to the government, which is safer (secure), and sometimes
enjoys tax benefits also. 8. Barometer of the economy: - They maintain the
stock indices which are the indicators of the general trend in the economy. They
also regulate the price fluctuations in stock.

History:-
The Bombay stock exchange was founded by Premchand Roychand, an
influential businessmen in 19th-century Bombay. He made a fortune in the
stockbroking business and came to be known as the Cotton King, the
Bullion King or just the Big Bull. He was also the founder of the Native
Share and Stock Brokers Association, an institution that is now known as
the BSE.

While BSE Ltd is now synonymous with Dalal Street, it was not always so.
The first venue of the earliest stock broker meetings in the 1850s was in
rather natural environs—under banyan trees—in front of the Town Hall,
where Horniman Circle is now situated. A decade later, the brokers moved
their venue to another set of foliage, this time under banyan trees at the
junction of Meadows Street and what is now called Mahatma Gandhi
Road. As the number of brokers increased, they had to shift from place to
place, but they always overflowed to the streets. At last, in 1874, the
brokers found a permanent place, and one that they could, quite literally,
call their own. The new place was, aptly, called Dalal Street (Brokers'
Street).

The Bombay Stock Exchange is the oldest stock exchange in Asia.[8] Its
history dates back to 1855, when 22 stockbrokers would gather under
banyan trees in front of Mumbai's Town Hall. The location of these
meetings changed many times to accommodate an increasing number of
brokers. The group eventually moved to Dalal Street in 1874 and became
an official organization known as "The Native Share & Stock Brokers
Association" in 1875.

On August 31, 1957, the BSE became the first stock exchange to be
recognized by the Indian Government under the Securities Contracts
Regulation Act. In 1980, the exchange moved to the Phiroze Jeejeebhoy
Towers at Dalal Street, Fort area. In 1986, it developed the S&P BSE
SENSEX index, giving the BSE a means to measure the overall
performance of the exchange. In 2000, the BSE used this index to open its
derivatives market, trading S&P BSE SENSEX futures contracts. The
development of S&P BSE SENSEX options along with equity derivatives
followed in 2001 and 2002, expanding the BSE's trading platform.

Historically an open outcry floor trading exchange, the Bombay Stock

Exchange switched to an electronic trading system developed by CMC Ltd.
in 1995. It took the exchange only 50 days to make this transition. This
automated, screen-based trading platform called BSE On-Line Trading
(BOLT) had a capacity of 8 million orders per day. Now BSE has raised
capital by issuing shares and as on 3 May 2017 the BSE share which is
traded in NSE only closed with Rs.999 .

The BSE is also a Partner Exchange of the United Nations Sustainable

Stock Exchange initiative, joining in September 2012.
BSE established India INX on 30 December 2016. India INX is the first
international exchange of India.

BSE launches commodity derivatives contract in gold, silver.

National Stock Exchange of India

The National Stock Exchange of India Limited (NSE) is the leading stock
exchange of India, located in Mumbai. The NSE was established in 1992 as
the first dematerialized electronic exchange in the country. NSE was the
first exchange in the country to provide a modern, fully automated screen-
based electronic trading system which offered easy trading facility to the
investors spread across the length and breadth of the country. Vikram
Limaye is Managing Director & Chief Executive Officer of NSE.

National Stock Exchange has a total market capitalization of more than

US$2.27 trillion, making it the world's 11th-largest stock exchange as of
April 2018. NSE's flagship index, the NIFTY 50, the 50 stock index is used
extensively by investors in India and around the world as a barometer of
the Indian capital markets. Nifty 50 index was launched in 1996 by the
NSE. However, Vaidyanathan (2016) estimates that only about 4% of the
Indian economy / GDP is actually derived from the stock exchanges in
India.

Unlike countries like the United States where nearly 70% of the GDP is
derived from larger companies and the corporate sector, the corporate
sector in India accounts for only 12-14% of the national GDP (as of
October 2016). Of these only 7,800 companies are listed of which only 4000
trade on the stock exchanges at BSE and NSE. Hence the stocks trading at
the BSE and NSE account for only around 4% of the Indian economy,
which derives most of its income related activity from the so-called
unorganized sector and households.

Economic Times estimated that as of April 2018, 60 million (6 crore) retail

investors had invested their savings in stocks in India, either through direct
purchases of equities or through mutual funds. Earlier, the Bimal Jalan
Committee report estimated that barely 1.3% of India's population
invested in the stock market, as compared to 27% in USA and 10% in
China.
History
NSE is mainly set up in the early 1990s to bring in transparency in the
markets. Instead of trading membership being confined to a group of
brokers, NSE ensured that anyone who was qualified, experienced and met
minimum financial requirements was allowed to trade. In this context, NSE
was ahead of its times when it separated ownership and management in the
exchange under SEBI's supervision. The price information which could
earlier be accessed only by a handful of people could now be seen by a
client in a remote location with the same ease. The paper-based settlement
was replaced by electronic depository-based accounts and settlement of
trades was always done on time. One of the most critical changes was that a
robust risk management system was set in place, so that settlement
guarantees could protect investors against broker defaults.

NSE was set up by a group of leading Indian financial institutions at the

behest of the government of India to bring transparency to the Indian
capital market. Based on the recommendations laid out by the Pherwani
committee, NSE has been established with a diversified shareholding
comprising domestic and global investors. The key domestic investors
include Life Insurance Corporation of India, State Bank of India, IFCI
Limited, IDFC Limited and Stock Holding Corporation of India Limited.
And the key global investors are Gagil FDI Limited, GS Strategic
Investments Limited, SAIF II SE Investments Mauritius Limited, Aranda
Investments (Mauritius) Pte Limited and PI Opportunities Fund I.

The exchange was incorporated in 1992 as a tax-paying company and was

recognized as a stock exchange in 1993 under the Securities Contracts
(Regulation) Act, 1956, when P. V. Narasimha Rao was the Prime Minister
of India and Manmohan Singh was the Finance Minister. NSE commenced
operations in the Wholesale Debt Market (WDM) segment in June 1994.
The capital market (equities) segment of the NSE commenced operations in
November 1994, while operations in the derivatives segment commenced in
June 2000. NSE offers trading, clearing and settlement services in equity,
equity derivatives, debt, commodity derivatives and currency derivatives
segments. It was the first exchange in India to introduce electronic trading
facility thus connecting together the investor base of the entire country.
NSE has 2500 VSATs and 3000 leased lines spread over more than 2000
cities across India.

NSE was also instrumental in creating the National Securities Depository

Limited (NSDL) which allows investors to securely hold and transfer their
shares and bonds electronically. It also allows investors to hold and trade in
as few as one share or bond. This not only made holding financial
instruments convenient but more importantly, eliminated the need for
paper certificates and greatly reduced the incidents of forged or fake
certificates and fraudulent transactions that had plagued the Indian stock
market. The NSDL's security, combined with the transparency, lower
transaction prices and efficiency that NSE offered, greatly increased the
attractiveness of the Indian stock market to domestic and international
investors.

Calcutta Stock Exchange

Calcutta Stock Exchange (CSE) located at the Lyons Range,
Kolkata, India, is the second oldest stock exchange in South Asia.
It was incorporated in 1908 and is the second largest bourse in
India. The Calcutta Stock Exchange has been asked to exit by
[2]

SEBI but the matter is subjudice before Calcutta High Court

while other 13 regional stock exchanges have closed in the last
three years under the exit policy of SEBI, including Bangalore
Stock Exchange, Hyderabad Stock Exchange and Madras Stock
Exchange

History
In 1830, the bourse activities in Kolkata were conducted under a neem tree.
The earliest record of dealings in securities in India is the British East
India Company’s loan securities. In 1908, the stock exchange was
incorporated and consisted of 150 members. The present building at the
Lyons Range was constructed in 1928. The Calcutta Stock Exchange Ltd
was granted permanent recognition by the Government of India with effect
from 14 April 1980, under the relevant provisions of the Securities
Contracts (Regulation) Act, 1956. The Calcutta Stock Exchange followed
the open outcry system for stock trading until 1997, when it was replaced
by C-STAR (CSE Screen Based Trading And Reporting), an electronic
trading platform.[5] The full form of CSE is Calcutta Stock Exchange.

The Bombay Stock Exchange (BSE) has made a strategic investment in

Calcutta Stock Exchange, acquiring 5% of its shares.

India International Exchange

The India International Exchange (INX) is India's first international stock
exchange, opened in 2017.[1][2] It is located at the International Financial
Services Centre (IFSC), GIFT City in Gujarat. It is a wholly owned
subsidiary of the Bombay Stock Exchange (BSE).[3] The INX will be initially
headed by V. Balasubramanian with other staff from the BSE.[3]

It was inaugurated on 9 January 2017 by Indian prime minister Narendra

Modi, the trading operations begin on 16 January 2017. It is the world’s
most advanced technological platform with a turn-around time of 4 micro
seconds which operates 22 hours a day & six days a week.[1] These timings
facilitate international investors and Non-Resident Indians to trade from
anywhere across the globe at their preferred timings.

Following the International trading timings, this unique stock exchange

starts when trading at Japanese stock exchange starts, and ends when US
stock exchange stops, from sunrise to sunset

Significance of stock exchange in india

There are 22 stock exchanges in India. A stock exchange has many functions and offers
valuable services to the investors, companies and community as a whole. I have listed
some of the stock exchanges of India along with their functions.

Services of a stock exchange

Services to the corporate sector

 Wider market: A stock exchange serves as the sales counter for the new
securities. A new company finds it easier to sell its securities if they are listed on a
stock exchange. Thus, it can raise a large amount of capital.

 Prestige: Investors knows that a stock exchange makes a close scrutiny of the
companies before listing its securities. Therefore, they have a greater faith in
such companies. Listing thus adds to the goodwill and credit-standing of a
company.

 High share prices: Listed securities enjoy greater demand as it draws buyers
form all over the country. This is profitable for a company engaged in bargains
concerning amalgamation, absorption, merging etc.
Services to the investors

 Liquidity of investment :Stock exchanges in India provides a ready market fro

the securities where the people can easily sell their securities for money and vice-
versa.

A stock exchange ensures safe and fair dealings in the securities.This is because
the management of the board exercises supervision and control over the activities
of the dealers in the securities.

 Loan facility: The securities dealt on a stock exchange are negotiable. They can
be used as a collateral security for raising loans.

 Publicity: Price quotations are published in newspapers on a daily basis. An

investor can find out the market value of his securities form the quotations. From
price trends, he can make a rational choice among securities.

 Investment guide: On a stock exchange, people buy and sell securities through
professionals. With the help of these, even a lay man can make rational decisions
in investments.

Services to the community

 Capital formation: As said earlier, stock exchanges in India foster the habit of
savings among the lay people and mobilizes these into productive channels
resulting in capital formation.

 Public finance:In a developing country like India, the government requires a

large amount of money for developmental projects as well as for social welfare
programs. Government agencies can easily sell their bonds through these
exchanges and raise the required amount.

 Economic mirror: Stock exchanges reflect the economical, social and political
conditions of the country. This is because every change in the economy has an
affect on the share prices. That is why the stock exchange in India is called the
pulse of the company .

Sale of Securities:
 The New Issue Market deals with ‘new securities’ issued for
the first time to the public and the stock exchange deals with
those securities which have already been issued once to the
public. Even though their functions differ, their roles are
complementary in nature. The NIM, functions as a ‘direct’
link between the companies which require a provision for
funds and the investing public.
The Stock Exchange provides capital to firms ‘indirectly’. The
transactions relating to purchase and sale of securities
provide both liquidity and marketability. The stock exchange
is, thus, an important medium of transfer of resources for
those shares which have already been issued.

It also plays a role in the transfer of securities with the

companies whose shares are being dealt with as the process of
registration of shares must be conducted when they are
transferred.

Objectives of Stock Exchange

The stock exchange is the index of the economy of a country. It is the center of
the capital market. It is called the economic mirror of a country. It is called share
market interchangeably. In developing trade, commerce and industries in a
country stock exchange play an important role. The objectives of establishing a
stock exchange are mentioned below:

 To supply capital

The main function of a stock exchange is to help companies elevate money. It

is established to supply the required capital for companies of a country. To
achieve this task, ownership in a private corporation is sold to the public in the
form of shares of stock. Funds received from the sale of stock contribute to the
firm’s capital formation.

 To inspire savings

This inspires people to save their income by making a profit. A stock exchange
helps in determining the prices for various securities. Continuous purchase and
 sale of securities on a stock exchange lead to the evaluation of their prices.
Regular dealings reduce wide fluctuations in prices. It accumulates the
individual income and yet they go to the industries to the economic development
of a country.

 To trade financial instruments

It is established to trade the financial instruments for individual investment and

company collect capital. It provides a regular meeting place where people can
convert their money into securities and securities into money. Buying and selling
of securities are confined to one particular place and the investors are saved
the trouble of going to different places to buy or sell securities.

 To develop economy

It helps economic development by supplying the capital to the industries.

Unregulated markets can have an unenthusiastic impact on capital formation.
Close regulation of stock exchanges allows strangers from all parts of the world
to honor contracts executed in the daily trading of shares. It is an important
objective of the stock exchange.

 To present information

Another objective of the stock exchange is to present information about

transactions and financial conditions of the companies. It reflects changes
taking place in the country’s economy. Price trends on stock exchange indicate
trade cycles i.e. boom, recession, depression, recovery, etc.

 To do long-term financing

Commercial banks generally disburse the short-term loan. So, supplying long-
term finance is an objective of the stock exchange. Any company which wants
to get its securities listed has to submit to these rules and regulations.

 To raise awareness

It raises awareness among the general people by giving information than to

invest and gain profit from the market. Thus, stock exchanges exercise a
healthy influence on the working and management of companies.

 To have a fair operation

To transact the financial instruments easily and fairly stock exchange is

established. A stock exchange channelizes the investible funds in more
productive industries. A company with better performance and prospects has
no difficulty in raising its capital. So, it is a duty of stock exchange to secure
both investors and borrower.
 To protect fraudulently

It is also to ensure that no fraudulence occurs in a transaction. A stock exchange

functions exactingly according to established rules and regulations. These rules
and regulations provide a check on overtrading in securities and manipulation
of prices. The Government, too; exercises supervision and control over a stock
exchange. By this means the evils can deceit the tender investors and the stock
are liable for protecting that.

 Convenience

The objective of the stock exchange is to formulate policies for easy

transactions and the safety of the investors and companies. A stock exchange
informs investors which way the investment wind is blowing. By directing the
flow of capital into worthwhile projects, it gives an impetus to the economic
development of the country.

 Security and Transparency

The lawful sale of stock on any exchange requires dependable and correct
information. By requiring a high level of transparency from all trading
companies, the stock exchange creates a more protected environment for
investors, which helps them to verify the risks of investing.

So, the objectives of the stock exchange are great and efficient operations of
stock exchange are so much required for the economic development of a
country.

Infrastructural Facilities:

The second factor that makes the role of the NIM and Stock
Exchange complementary to each other is the infrastructural
facilities provided for ‘sale and purchase’ of securities.
Infrastructural Facilities:
The second factor that makes the role of the NIM and Stock
Exchange complementary to each other is the infrastructural
facilities provided for ‘sale and purchase’ of securities.
ADVERTISEMENTS:
The NIM does not have a physical existence but the service as
is provided in India is taken up entirely by the brokers and
commercial banks. The New Issue Shares, in the private
corporate sector are subscribed to go through the application
forms supplied by the brokers before the date of
commencement of the issue.

On the opening day of the issue, these forms can also be

collected from the authorized banks. The authorized bankers
also undertake the function of collection of forms and
receiving the amount on application.

The NIM, thus, does not have a physical form or existence but
there are agencies which provide the facilities which are
conducive to the sale of the new issues. The stock exchange
unlike the NIM provides all the facilities in the form of a
market.

It is a well-established organization with professional

brokers, financial literature, information about companies
and the daily stock exchange lists are supplied for
information to investors. The Bombay Stock Exchange and
National Stock Exchange are well organized with proper
electronic gadgets to receive information about stock prices
from other parts of the country. They also give the daily
changes in prices of stocks.

ADVERTISEMENTS:

Public Confidence:
Another related factor between the NIM and Stock Exchange
is the relative strength and public confidence in their joint
participation in the sale, purchase and transfer of securities.
In India, the NIM and stock exchange are connected to each
other even at the time of the New Issue.
The usual practice by the firms issuing securities is to register
themselves on a stock exchange by applying for listing of
shares. Listing of shares provides the firm with an added
prestige and the investing public is encouraged with this
service.
The advantage of listing on a recognized stock exchange is
that it widens the market for the investor. It provides the
investor with the facility of sale of his shares thus offering
him a ‘market’ for immediate liquidity of funds.

Secondly, the working of the stock exchange and NIM

provides a greater protection for the investing public as the
companies applying for stock exchange registration are bound
by the statutory rules and regulations of the market.

Sensitivity:

Further, the securities markets are closely connected to each

other because of the sensitive nature of the movements of
stock prices. Stock prices are to a great extent affected by
environmental conditions such as political stability, economic
and social conditions, industrial pattern, monetary and fiscal
policies of the government.

The long-term and short-term changes in these factors have

an effect on the day-to-day changes in prices of stocks.

The NIM depends on the stock exchange to find out these

price movements and the general economic outlook to
forecast the climate for investing and the success of new
issues floated in the NIM.
Thus, the prices of shares in the NIM are sensitive to changes
in the stock market and act and react accordingly and in the
same direction and the general outlook in the market will
show an ‘upswing’ and ‘downswing’ in trading activity of
securities.