Dr. Vinosh Peter K.V.

Stock ExchangeIn India the first organized stock exchange was Bombay Stock Exchange. It was started in 1877. Later on, the Ahmadabad Stock Exchange and Calcutta Stock Exchange were started in 1894 and 1908 respectively. At present there are 24 stock exchanges in India.Characteristics of a Stock ExchangeIt is an organized capital marketIt is an open market for the purchase and sale of securities.It works under established rules and regulations. The securities are bought and sold either for investment or for

speculative purpose. Major Stock Exchanges in IndiaAt present there are 24 recognized stock exchanges in India. Further OTCEI (Over-The-Counter Exchange Of India), NSE also has started functioning in our country. Brief descriptions of major SEs are given below:

Bombay Stock Exchange (BSE), National Stock Exchange (NSE)

 Bombay Stock Exchange (BSE) BSE is the leading and the oldest stock exchange in India as well as in Asia. It was established in 1887 with the formation of "The Native Share and Stock Brokers' Association". BSE is a very active stock exchange with highest number of listed securities in India. Nearly 70% to 80% of all transactions in the India are done alone in BSE.National Stock Exchange (NSE)   Formation of National Stock Exchange of India Limited (NSE) in

1992 is one important development in the Indian capital market. The need was felt by the industry and investing community since 1991. The NSE is slowly becoming the leading stock exchange in terms of technology, systems and practices in due course of time. NSE is the largest and most modern stock exchange in India. In addition, it is the third largest exchange in the world next to two exchanges operating in the USA.

Procedure for Dealing at Stock Exchange (Trading Mechanism or Method of Trading on a Stock Exchange)

Selection of a broker: An individual cannot buy or sell securities directly at stock

exchange. He can do so only through a broker. So he has to select a broker through whom the purchase or sale is to be made.

Placing an order: After selecting the broker, the next step is to place an order for purchase or sale of securities.

Making the contract: The trading floor of the stock exchange is divided into different parts known as trading posts.

Contract Note: After issue of confirmation memo, a contract note is signed between the broker and the client. This contract note will state the transaction fees (commission of broker), number of shares bought or sold, price at which they are bought or sold, etc.

Settlement: Settlement involves making payment to sellers of shares and delivery of share certificate to the buyer of shares after receiving the price. The settlement procedure depends upon the nature of the transactions.

Economic Functions of Stock Exchange

Ensures liquidity to capital: The stock exchange provides a place where shares and stocks are converted into cash.

Continuous market for securities: It provides a continuous and ready market for buying and selling securities.

Mobilisation of savings: It helps in mobilizing savings and surplus funds of individuals, firms and other institutions. It directs the flow of capital in the most profitable channel.

Economic developments: It promotes industrial growth and economic development of the country by encouraging industrial investments.

Barometer of economic conditions: Stock exchange reflects the

changes taking place in the country’s economy.

 

The stock exchange plays the role of a friend, philosopher and guide to investors by providing information about the prices of various securities

It offers a ready market for buying and selling securities.

It helps investors in making wise investment decisions by providing useful information about the financial position of the companies.

 

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