stock exchange

MEANING OF STOCK EXCHANGE

A stock exchange is a market for dealing in listed securities by members. Members conduct transactions on their behalf or on behalf of others. Functions as an organized association for purchasing and selling of securities.

FEATURES OF STOCK EXCHANGE

Organized Market: Facilitates the buying and selling of existing (second-hand) securities. Listed Securities: Only those securities that are listed on the exchange can be traded. Member Transactions: Transactions can only be executed by members and their authorized agents. Governance: There is an organized governing body, often a company, that supervises operations. Regulation Compliance: All transactions adhere to prescribed rules and regulations.

FUNCTIONS OF STOCK EXCHANGE

Ready Market: Provides a regular market allowing daily buying and selling of securities, ensuring liquidity and marketability.

Price Determination: Engages in continuous transactions helping to appraise and set prices for securities. Investor Protection: Adheres to SEBI regulations to prevent overtrading and price manipulation. Capital Formation: Encourages public investment in securities leading to capital appreciation and savings. Channel for Investment: Directed investment of public funds into industries, aiding companies in capital acquisition based on their performance. Economic Barometer: Reflects the overall economic condition of a country, indicating trade cycles such as boom and recession.

SERVICES OF STOCK EXCHANGE Services to Corporate Sector Wider Market: Acts as a platform for securities issuing new companies, increasing capital accessibility. Prestige: Enhances a company's goodwill and credit by thorough scrutiny before listing. High Share Prices: Increased demand for listed securities enhances their market value, benefiting company mergers and acquisitions. Price Stability: Helps minimize price fluctuations via demand and supply.

Services to Investors Liquidity of Investment: Facilitates easy conversion of securities into cash, ensuring liquidity. Safety: Ensures secured and regulated trading under established rules. Loan Facility: Securities can serve as collateral for loans, thus enhancing their utility. Publicity: Market values and prices are publicly available, informing investors. Investment Guide: Provides a valuable resource for informed decision-making based on market quotations. Better Bargains: Trading through professionals provides inexperienced investors' access to better investment options.

Services to the Community Financing: Mobilizes public savings for economic development by encouraging investment. Channel for Profitable Investment: Offers professional evaluations of securities, guiding investment decisions. Public Finance: Aids government in raising funds for development through bonds and securities. Economic Mirror: Reflects the socio-political and economic conditions visibly through share price changes.

MAJOR STOCK EXCHANGES IN INDIA Historical Context: First organized stock exchange established in Bombay in 1887. Current Landscape: India has 24 stock exchanges, each governed by elected members or committees.

TYPES OF OPERATORS Brokers: Execute trades on behalf of individuals not registered as members; earn commission. Jobbers: Trade on their own account; specialize in specific securities, also known as tarawaniwala. Bull: Anticipates price increases; buys securities for future profit (tejiwala). Bear: Predicts price declines; sells securities not currently owned (mandiwala), engaging in short selling.

TERMS USED IN STOCK EXCHANGE Ex-Dividend: Excludes the right to receive dividends for the seller. Cum-Dividend: Includes the right to dividends for the buyer. Spot Delivery: Immediate delivery of securities post-transaction. Forward Delivery: Settlements on pre-defined dates, typically for speculation.

SENSEX Definition: Market capitalization weighted index of 30 significant companies on the BSE. Function: Acts as a benchmark for the Indian market, indicating overall economic performance. Objectives: Measures market movements, reflecting investor sentiment. Serves as a benchmark for mutual fund performance.

NIFTY Definition: Index representing 50 diverse companies from various sectors on the NSE. Utility: Reflects the state of the economy and stock market performance. Allows investors to compare individual stocks against the broader market.

SEBI OBJECTIVES AND FUNCTIONS Establishment: Founded in April 1988 for investor protection and market supervision. Objectives Facilitate fair dealings and cost-effective fundraising. Protect investor rights, ensuring steady investments. Develop fair practices among intermediaries like brokers. Functions Regulate stock exchange business. Supervise intermediaries in the securities markets. Promote and regulate self-regulatory organizations. Combat fraudulent market practices and insider trading.