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
BSE was Asia's oldest stock exchange
Ahmedabad stock exchange was started to facilitate dealings in the shares of
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
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
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
National Exchanges Regional Exchanges
21 Other Regional Exchanges
SECURITIES AND EXCHANGE BOARD OF INDIA
o Operates the trading of
o Registration of broker,
merchant banks etc
o Abolition of internal
o Auditing of stock
o Registration of credit
o Research and Development
o Publishing of Information
o Educates investors
o Promoting Self operating
o Control over fraud
NSE: NATIONAL STOCK EXCHANGE
The National Stock Exchange (NSE),
India's first debt market.
Year of inception - 1993
Year of operation - 1994
The instruments traded
Bonds Issued By Public Sector Companies
Establishing a National wide trading facility for
all type of securities.
Ensuring equal access to investor all over the
country through an appropriate communication
Providing for a Fair, efficient and transparent
securities market using electronic Trading
Enabling shorter Settlement cycles.
Meeting up with international benchmark and
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
The dealings in a stock exchange are under
certain accepted code of conduct i.e., rules
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
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
Barometer of the economy
NSE - TRADING:
Trading Fully automated screen-based trading
Strictly follows the principle of an order-driven market
Trading members are linked through a communication
This network allows them to execute trade from their
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
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
BENEFITS OF STOCK EXCHANGE :
FROM THE POINT OF VIEW OF COMMUNITY:
It assist the economist development by providing a body of
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
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
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
The market price of securities is likely to be higher
in relation to its earnings, dividends and property
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
A broker deals with the jobber
on behalf of his clients. in
other words, a broker is
middleman between a jobber
A broker is merely an agent,
buying and selling securities
on behalf of his clients
A broker gets only the
commission for his dealing
A broker deals in all types of
A jobber is an independent
dealer in securities, purchasing
or selling securities on his own
Jobbers deals only with the
brokers, does not deal with the
A jobber earns profit from his
operations i.e., buying and
Each jobber specializes in
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:
Futures and Options
Retail Debt Market
Wholesale Debt Market
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
1. India Index Services & Products Ltd. (IISL)
2. National Securities Clearing Corporation Ltd. (NSCCL)
3. NSE.IT Ltd.
4. National Securities Depository Ltd. (NSDL)
5. DotEx International Limited
Over the counter exchange of India was started in 1992
The OTCEI was started with the objective of providing a
market for the smaller companies that could not afford the
listing fees of the large exchanges and did not fulfill minimum
requirements for listing.
It aimed at creating a fully decentralised and transparent
Over the counter means trading across the country in scrips.
The counter refers to the location of the member or dealer of
the OTCEI where the deal or trade takes place
Every counter is treated like trading floor for the OTCEI where
the investor can buy or sell
The member or dealers of OTCEI counters are linked to the
central OTCEI computer
The member should have the computer and
OTCEI is incorporated as a company under section 25(c) of
Indian companies act 1956. As per the registration norms,
OTCEI will be obliged to plough back all its profits and will not
be allowed to declare dividend on its share capital.
The promoters are as follows
ICICI SBI capital market
IDBI Canbank financial services
PLAYERS IN THE OTCEI MARKET
The players on the OTCEI exchange are the
members and dealers.
The activities of members and dealers are
1. Act as broker, buy and sell securities according to
the instructions of investor
2. Market makers in securities, they quote the prices
at which members are willing to buy and sell the
specified no. of securities.
Members may be public financial institutions,
scheduled banks, mutual funds , SEBI approved
merchant bankers, banking subsidiaries, venture
capital funds and other non-banking financial
companies with minimum net worth of Rs 2.5 crores
Members pay a one time non-refundable admission fee of rs
10 lakh and rs 5 lakh after one year.
The annual subscription fee is rs 1 lakh.
The dealers are individuals, partnership firm, and corporate
entities with a minimum net worth of Rs 5 lakh.
They should have adequate office space and
They have to pay one time non-refundable fee of Rs 2 lakh and
annual subscription fee of Rs 5000.
OTCEI may collect additional security deposit if it considers
necessary, depending upon the business experience of
SCRIPS TO BE TRADED
The minimum capital requirement for a company to be listed
on the OTCEI is Rs 3 crores and the maximum is Rs 50 crore.
For companies with an issued capital of more than 30 lakh but
less than 300 lakhs, the minimum public offer should be 25%
of the issued capital or 20 lakhs worth of shares in face value,
which ever is higher
Companies with an issued capital of more than Rs 30 crores
seeking to be listed have to comply with listing requirements
and guidelines that are applicable to such companies in other
SEBI – THE SECURITIES AND
EXCHANGE BOARD OF INDIA
The Securities and Exchange Board of India was established
by the government of India on 12 April 1988 as an interim
administrative body to promote orderly and healthy growth of
the securities market and for investor protection.
It was to function under the overall administrative control of
the Ministry of Finance of the GOI.
The SEBI was given a statutory status on 30 Jan 1992
through an ordinance.
The ordinance was later replaced by an Act of Parliament
known as the Securities and Exchange Board of India Act
REASONS FOR ESTABLISHMENT OF SEBI
The capital market had witnessed a tremendous growth
during the 1980·s characterized by the increasing
participation of the public.
This ever expanding investor population and
market capitalization led to a variety of malpractices on
the part of companies, brokers, merchant bankers,
investment consultants and others involved in the securities
The glaring examples of these malpractices include existence of
self styled merchant bankers, unofficial private placements,
rigging of prices, unofficial premium on new issues, non
adherence of provisions of The Companies Act , violation of
rules and regulations of stock exchanges and
listing requirements, delay in delivering shares etc.
These malpractices and unfair trade practices have eroded
investor confidence and multiplied investor grievances
The government and the stock exchanges were rather helpless
in redressing the investors problems because of lack of proper
penal provisions in the existing legislation.
Therefore the GOI decided to set up SEBI a separate regulatory
PURPOSE & ROLE OF SEBI :
To the issuers it aims to provide a market place in which they
can confidently look forward to raising finances they need in an
easy fair and efficient manner.
To the investors it provides protection of their rights and
interests through adequate accurate and authentic information
and disclosure of information on a continuous basis.
To the intermediaries it offers a competitive, professionalized and
expanding market with adequate and efficient infrastructure so as
render better service to investors and issuers.
To regulate stock exchanges and the securities industry and to
promote their orderly functioning.
To guide , educate and protect the rights and interests of
To prevent trading malpractices and achieve a balance between
self regulation by the securities industry and its statutory
To regulate and develop a code of conduct and fair practices
by brokers , merchant bankers with a view to make them
competitive and professional.
FUNCTIONS OF SEBI
Registration of brokers and sub brokers
and other players in the market
Registration of collective investment schemes and Mutual Funds
Prohibition of fraudulent and unfair trade practices
Controlling insider trading and takeover bids and imposing
penalties for such practices
Training of intermediaries
Promotion of fair practices and code of conduct of all SROs
Conducting research and publishing information useful to all