Stock Exchange

Stock Exchange

A Stock Exchange is an organised and regulated marketplace where investors can buy and sell securities, such as shares and bonds, according to prescribed rules and procedures.

In India, major stock exchanges include the National Stock Exchange (NSE) and the BSE.

How a Stock Exchange Works?

Seller places sell order → Buyer places buy order → Orders are matched on Stock Exchange → Securities transferred to buyer → Money transferred to seller

Features of Stock Exchange

• Organised Market: It provides a formal platform for buying and selling securities.
• Secondary Market: Most stock exchange transactions involve the trading of securities that have already been issued.
• Electronic Trading: Buying and selling of securities is largely carried out through electronic trading systems.
• Listed Securities: Securities generally have to meet prescribed requirements to be listed and traded on the exchange.
• Regulated Market: Stock exchanges in India operate under the regulatory supervision of SEBI.
• Transparent Prices: Prices and trading information are made available to market participants, helping improve transparency.

Functions of Stock Exchange

• Provides Liquidity: Investors can buy and sell listed securities relatively easily.
• Price Discovery: Continuous buying and selling helps determine the market price of securities based on demand and supply.
• Facilitates Investment: It provides investors with an organised platform to invest in securities.
• Supports Capital Formation: By providing a liquid secondary market, stock exchanges make securities more attractive to investors and thereby support fund raising in the primary market.
• Promotes Transparency: Trading under prescribed rules and disclosure requirements improves market transparency.
• Investor Protection: Regulatory and exchange rules seek to promote fair trading and protect investors from market misconduct.

Stock Exchanges in India

• BSE: Established in 1875, it is Asia’s oldest stock exchange.
• NSE: Incorporated in 1992 and commenced operations in 1994. It introduced nationwide electronic screen based trading in India.
• Calcutta Stock Exchange Ltd.
• Metropolitan Stock Exchange of India Ltd.
• Multi Commodity Exchange of India Ltd. (MCX)
• National Commodity & Derivatives Exchange Ltd. (NCDEX)