What is Stock Exchange?
A stock market is a place where the shares of publicly listed companies are traded. It originated in India at the end of the 18th century when a lot of negotiable instruments were introduced in the market. A Stock Exchange helps in facilitating the trades that allow the smooth functioning of the transactions.
There were numerous stock exchanges in India that were formed during the early 1990s. As of now, the most important stock exchanges in India are the Bombay Stock Exchange(BSE) and the National Stock Exchange(NSE). In this article, we will understand in detail the various stock exchanges registered with The Securities & Exchange Board of India.
Types of Stock Exchange
Bombay Stock Exchange (BSE)
Bombay Stock Exchange was formed in 1875 and is one of the two principal large stock exchanges in India. The major objective of BSE is to provide an efficient and transparent market for trading currencies, equities, mutual funds etc. As per the official website of BSE, its vision is to “Emerge as the premier Indian stock exchange with best-in-class global practice in technology, product innovation, and customer service.”
BSE has a wholly-owned subsidiary. Indian Clearing Corporation Limited acts as a central counterparty to all the trades that happen on the exchange and provides settlements of the trades executed. Another subsidiary of BSE Limited is BSE Institute Limited which serves as a capital market educational institution in our country.
In the 1850s, 5 stockbrokers would gather under a banyan tree in front of the Mumbai Town Hall. Due to the increase in the number of brokers, the place of meetings kept changing before finally moving to Dalal Street in the year 1874. In order to measure the overall performance of the exchange, in 1986, the BSE developed the S&P BSE SENSEX index.
Apart from the Sensex, BSE also has other important indices such as BSE100, BSE200, BSE MIDCAP, BSE SMALLCAP, BSEAuto, BSEPharma, BSEMetal, etc.
National Stock Exchange (NSE)
National Stock Exchange is the leading stock exchange in India. It was established in the year 1992 as the first dematerialized electronic exchange in the country. It was the first exchange to provide a fully-automated screen-based trading system to the investors to facilitate easy trading. In the year 1993, NSE registered itself as a stock exchange under the Securities Contract Regulations Act. It operates with a vision to “to continue to be a leader, establish a global presence, facilitate the financial well-being of people .”
The benchmark index of NSE, Nifty 50 is used extensively by investors around the world to keep track of the Indian capital market. NSE had also played an important role in the creation of the National Securities Depository Limited. (NSDL) allows the investors to hold and transfer their shares electronically without any hassle. This eventually leads to holding the financial instruments conveniently in electronic form thereby reducing the fake certificate issues.
The NSE commenced trading in derivatives with the launch of index futures in the year 2000. Since then, the futures & options have come a long way in becoming a popular financial product. In the Futures and Options segment, trading in the NIFTY 50 Index, NIFTY IT index, NIFTY Bank Index, NIFTY Next 50 index, and single stock futures is available.
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Calcutta Stock Exchange (CSE)
Calcutta Stock exchange is the second oldest stock exchange in Southeast Asia and was incorporated in the year 1908 with 150 members. Presently, CSE is located at the Lyons Range. It was granted recognition under the relevant provisions of the Securities Contract (Regulation) Act, 1956, and was replaced by the screen-based trading system only in the year 1997. The matter pertaining to the exit of the Calcutta stock exchange by SEBI is pending before the Calcutta High Court.
Metropolitan Stock Exchange (MSE)
The Metropolitan stock exchange was recognized as a “notified stock exchange” in the year 2012 by SEBI. MSE offers an electronic and hi-tech trading platform in Capital Markets, Debt Markets, Futures & Options.
MSE launched its SX40 index on February 9th, 2013, and commenced trading from February 11th, 2013. ‘SX40’, is a free-float based index consisting of 40 large-caps, liquid stocks representing diverse sectors of the economy.
MSE considers ‘Information, Innovation, Education and Research’ as its four cornerstones of the unique market development philosophy to support its mission of financial literacy across India.
India International Exchange (India INX)
India International Exchange Limited is India’s first International Financial Services Centre located in Gujarat. Its operations started in 2017 and is a subsidiary of BSE Limited.
The exchange offers a single segment approach for all asset classes such as equities, currencies, commodities etc. The exchange uses an advanced technology platform and is the fastest in the world with a turn-around time of 4 microseconds. For global experts and market participants, India INX offers to be an offshore exchange that provides innovative products and services along with competitive advantages in terms of the tax structure.
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NSE IFSC Limited
On November 26th, 2016, NSE IFSC Limited (NSE International Exchange) was incorporated by the Registrar of Companies, Gujarat. It is a fully owned subsidiary company of the National Stock Exchange of India Limited (NSE). It has received approval from the Securities and Exchange Board of India (SEBI) to establish an international exchange in Gujarat International Finance Tech City (GIFT) – International Financial Service Centre (IFSC) Gandhinagar.
The city, which is a special economic zone, is India’s first IFSC. As a part of the advantages offered to the companies, Exchange and Financial Services units located in GIFT IFSC are offered a competitive tax structure and facilitative regulatory framework. It offers benefits such as exemptions from security transaction tax, commodity transaction tax, dividend distribution tax, capital gain tax waivers, and no income tax.
With an objective of increasing access to financial markets, NSE International Exchange has been launched to grow the financial market as well as expected to bring capital into India. Furthermore, Stock exchanges operating in the GIFT IFSC are permitted to offer trading in securities in any currency other than the Indian rupee.
Subject to the approval of SEBI, trading is permitted in:
- equity shares of companies incorporated outside of India,
- depository receipts,
- debt securities of eligible issuers, currency, index, interest rate,
- non-agriculture commodity derivatives,
- all categories of exchange-traded products
that are available for trading in stock exchanges in FATF/ IOSCO compliant jurisdiction. NSE IFSC Limited had launched the trading on 5th June 2017 and offers longer trading hours in various products including in Index Derivatives, Stock Derivatives, Currency Derivatives, Commodity Derivatives, and Debt Securities.
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Former Stock Exchanges in India
Below is a comprehensive list of all the stock exchanges in India. Out of the below, 20 regional stock exchanges have already exited the business:
|S.No||Former Stock Exchange||Closed in|
|1||Ahmedabad Stock Exchange||2018|
|2||Delhi Stock Exchange||2017|
|3||Guwahati Stock Exchange||2015|
|4||Jaipur Stock Exchange||2015|
|5||Madhya Pradesh Stock Exchange||2015|
|6||Madras Stock Exchange||2015|
|7||OTC Exchange of India||2015|
|8||Pune Stock Exchange||2015|
|9||UP Stock Exchange||2015|
|10||Vadodara Stock Exchange||2015|
|11||Bangalore Stock Exchange||2014|
|12||Cochin Stock Exchange||2014|
|13||Inter-connected Stock Exchange of India||2014|
|14||Ludhiana Stock Exchange||2014|
|15||Bhubaneswar Stock Exchange||2005|
|16||Coimbatore Stock Exchange||2009|
|17||Hyderabad Stock Exchange||2007|
|18||Magadh Stock Exchange||2007|
|19||Mangalore Stock Exchange||2004|
|20||Trivandrum Stock Exchange||2010|
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Frequently Asked Questions
There are eight active stock exchanges in India.
BSE Ltd., Calcutta Stock Exchange Ltd., Indian Commodity Exchange Limited, Metropolitan Stock Exchange of India Ltd., Multi Commodity Exchange of India Ltd., National Commodity & Derivatives Exchange Ltd., National Stock Exchange of India Ltd. and NSE IFSC Ltd. are the current active stocks exchanges in India.
There are more than 2 stock exchanges in India. Since NSE and BSE are the largest stock exchanges they are more popular and traded platforms in India. The other stock exchanges in India are BSE Ltd., Calcutta Stock Exchange Ltd., Indian Commodity Exchange Limited, Metropolitan Stock Exchange of India Ltd., Multi Commodity Exchange of India Ltd., National Commodity & Derivatives Exchange Ltd., National Stock Exchange of India Ltd., and NSE IFSC Ltd.
The BSE Bombay Stock Exchange and NSE National Stock Exchange are the best shares or stock markets in India. Most of the stock market trading takes place on NSE and BSE in India. BSE was established prior to NSE. BSE was established in the year 1875 while NSE was launched in 1992. Both the stock exchanges in India provide an electronic trading system, follows a similar listing mechanism, trading hours, transaction initiation, and settlement process. Almost all of India’s top companies are listed on both the stock exchanges. No doubt BSE is an older stock exchange than NSE but NSE leads in terms of the daily trading volume. Since both the stock exchanges compete with each other to get a purchase or sell order the cost is similar and effective. Moreover, both the exchanges are market efficient, innovative, and digitized. The price difference on both the stock exchanges is very marginal leading to a very low or negligible chance of arbitrage. NSE has more liquidity than BSE, which makes it a better choice. However, keeping other factors in mind it can be concluded that both are best. An investor may consider any or both the stock exchanges.
NSE National Stock Exchange was launched in 1992. NSE is the largest stock exchange in India. Most of the stock market trading takes place on NSE and BSE in India. NSE has a higher daily trading volume and hence provides higher liquidity. NSE provides a digitized electronic trading system to its investors. As of 2020, the market capitalization of NSE was $2.27 trillion. With all these factors NSE is the largest stock exchange in India.
Limit Price is a kind of purchasing order for securities. Limit price or order allows the investor to specify a price at which the trade will be executed whether it is buying or selling securities. Once the securities hit the specified price or better, the trade will be executed against the investor.
The limit price guarantees the investor that the trade will be performed once securities reach the desired price and the opportunity will not be missed. However, on the other hand, good trading opportunities might be missed if the shares never reach the price requested. Hence, the limit must be decided after a thorough and detailed analysis. No doubt the limit price controls the execution but it might also lead to an opportunity loss. An investor can miss opportunities in a fast-moving market.
There are different types of stocks based on ownership, market capitalization, dividend payments, risk, and price trends.
Stocks based on ownership- Common stocks, preference stocks, Hybrid stocks, Stocks with embedded-derivative options. Common stocks and preference shares differ from each other on the parameter of priority. Preference stocks get a priority on the distribution of surplus on the occasion of distribution of profits and dividends. Hybrid Stocks are also known as convertible preferred shares. These are the preference shares that carry an option to be converted into common stocks at a specified time. The stocks embedded with a derivative option carry both callable and putable options. Under this option, the company can call or buy and the investor can put or sell the shares. These are not very commonly available.
Stocks based on market capitalization- The classification of these depend on the market value of the total shareholding of a company. Market capitalization is the share price multiplied by the number of shares. These stocks are large cap stocks, mid cap stocks, and small cap stocks. Large cap stocks are leading companies like Reliance, TATA. These are often blue-chip stocks. Mid cap stocks are companies with a market capitalization in the range of Rs. 250 crore and Rs. 4,000 crore. Small cap stocks are companies with a market capitalization of less than Rs 250 crores.
Stocks based on dividend payments- These are income stocks and growth stocks. The income stocks pay a dividend higher than their share price. These are also known as dividend-yield or dog stocks. These stocks are preferred by investors who are seeking a regular income. On the other hand, growth stocks usually provide lower dividends. These stocks prefer reinvesting their income into their operation to grow the company. With the growth of the company, its share price also grows.
Stocks based on risk- These stocks are relatively riskier than others due to frequent fluctuations in the share price. Blue-chip stocks are well-established companies that have lower liabilities and higher growth potential. Beta stocks are stocks with a higher risk. A higher beta means higher volatility. A beta greater than 1 is considered riskier than other stocks.
Yes, you can buy on NSE and sell on BSE. However, you need to take the delivery of the shares. You cannot simply square off a transaction by involving both the exchanges.
NSE National Stock Exchange is regulated by the Ministry of Finance, Government of India. NSE is not a privately owned company. The shares of NSE are held by the general public and Trading Members and Associates of Trading Members. Among the general public holding, the shares are majorly held by FDI, corporates, Financial Institutions/ Banks, Insurance Companies, Venture Capital Funds, individuals, etc Shri Ashishkumar Chauhan is the MD & CEO of BSE Bombay Stock Exchange. He joined BSE in the year 2009 as a Deputy CEO. In the year 2012, he was appointed as the CEO of the Bombay Stock Exchange. Mr. Chauhan is one of the founders of the NSE National Stock Exchange. He worked from the year 1992 to 2000 at the National Stock Exchange. He is popularly known as the father of modern financial derivatives in India. His contribution to the derivatives market is commendable. The shareholding of BSE comprises banks and mutual fund companies, foreign financial institutions, the general public, and financial institutions.
BSE Bombay Stock Exchange is the oldest exchange in India. BSE was established in the year 1875 by Premchand Roychand. In 1957 the Bombay Stock Exchange was recognized by the Government of India under the Securities Contracts Regulation Act. In 1986 BSE introduced its first benchmark S&P BSE Sensex index. The S&P BSE Sensex index is used as a benchmark for measuring the overall performance of the stock exchange. In 1995, BSE adopted a fully electronic trading system which was developed by CMC Limited. In 2000, BSE introduced its derivatives market with the S&P BSE SENSEX futures contracts. In 2012 the Bombay Stock Exchange partnered and became a partner exchange under the United Nations Sustainable Stock Exchanges Initiative.
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