Meaning, features, functions of stock exchanges

1. GOVERNMENT NEW LAW COLLEGE, INDORE
Submitted To – Submitted By -
Prof. Jyoti Sharma Khyati Tongia
BBA.LL.B, VI Sem
ASSIGNMENT – II
STOCK EXCHANGES IN INDIA
SECURITY ANALYSIS AND PORTFOLIO
MANAGEMENT

2. STOCK EXCHANGE
The word “Stock Exchange” is made from two words 'Stock' and Exchange.
Stock means part or fraction of the capital of a company, and Exchange
means a transferring the ownership.
Thus, we can describe the stock exchange as a market or a place where
different types of securities are bought and sold. As the stock exchange deals
in all types of securities, it is known as 'securities market' or 'securities
exchange' also.
A stock exchange is a secondary market of securities because the trading
happens only for the securities that have already been issues to the public
and now being allowed to be traded on the stock exchange.

3. The Securities Contracts (Regulation) Act, 1956 has defined stock
exchange as an “association, organization or body of individuals,
whether incorporated or not, established for the purpose of assisting,
regulating and controlling business of buying, selling and dealing in
Securities.”
Stock exchange is an organized market for buying and selling corporate
and other securities. Here, securities are purchased and sold out as per
certain well-defined rules and regulations. It provides a convenient
and secured mechanism or platform for transactions in different
securities. Such securities include shares and debentures issued by
public companies which are duly listed at the stock exchange, and
bonds and debentures issued by government, public corporations and
municipal and port trust bodies.

4. FEATURES OF STOCK EXCHANGE
• ORGANIZED MARKET
• FORMATION AND MEMBERSHIP
• ONLY MEMBERS CAN TRADE
• LISTED SECURITIES
• OPERATES AS PER RULES
• MARKET FOR SECURITIES
• SECOND-HAND SECURITIES
• RECOGNITION FROM CENTRAL GOVERNMENT
• MEASURING DEVICE

5. FUNCTIONS OF STOCK EXCHANGE
• MARKETABILITY OF SECURITIES
• PRICE DETERMINATION AND CONTINUITY
• MOBILISING SURPLUS SAVINGS
• PROFIT SHARING AND RESOURCE ALLOCATION
• LIQUIDITY
• CORPORATE GOVERNANCE
• SAFETY OF TRANSACTIONS
• CONTRIBUTES TO ECONOMIC GROWTH
• BAROMETER OF ECONOMY

6. FACTORS AFFECTING STOCK MARKET
• ECONOMIC GROWTH
• INTEREST RATES
• STABILITY
• CONFIDENCE AND EXPECTATIONS
• RELATED MARKETS
• INVESTOR SENTIMENT
• DEVELOPMENT WITHIN COMPANIES
• POLITICAL
• ENVIRONMENTAL
• MARKET PSYCHOLOGY

7. BOMBAY STOCK EXCHANGE (BSE)
The Bombay Stock Exchange was founded on July 9, 1875. It is
Asia’s first stock exchange and the first stock exchange in the
country which obtained permanent recognition (in 1956) from the
Government of India under the Securities Contracts (Regulation) Act
1956.
It is the world’s fastest exchange with a median trade speed of six
microseconds.
The BSE joined the United Nations Sustainable Stock Exchange
initiative in 2012.
Approximately 5000 companies are listed in BSE. It's pivotal and
pre-eminent role in the development of the Indian capital market is
widely recognized.

8. • Investor Services: The Department of Investor Services redresses grievances of
investors. BSE launched a nationwide investor awareness programme- 'Safe
Investing in the Stock Market.
• The BSE On-line Trading (BOLT): It facilitates on-line screen-based trading in
securities. BOLT is currently operating in 25,000 Trader Workstations across 359
cities.
• BSEWEBX.com: In February 2001, BSE introduced the world's first centralized
exchange-based Internet trading system. This initiative enables investors anywhere
in the world to trade on the BSE platform.
• Surveillance: BSE's On-Line Surveillance System (BOSS) monitors on a real-time
basis the price movements, volume positions and members' positions and real-
time measurement of default risk, market reconstruction and generation of cross
market alerts.
• BSE Training Institute: BTI imparts capital market training and certification, in
collaboration with reputed management institutes and universities. It offers over
40 courses on various aspects of the capital market and financial sector.
SERVICES BY BSE

9. PROCES AND WORKING OF BSE
Financial transactions in BSE are done online through an electronic
trading system. Market orders can be directly placed in BSE online,
without the requirement of external specialists through direct market
access.
Trading in the BSE share market has to be done through a brokerage
agency, against a stipulated charge. However, direct investment access is
given to certain preferential investors making large transactions in the
BSE stock market.
BOLT-Bombay Online trading platform is used by this stock exchange for
efficient trading.
Transactions made in BSE online are done through T+2 rolling
settlement, wherein all transactions are processed within two days.
Securities and Exchange Board of India (SEBI) is responsible for the
regulation of stock exchange. continuously updating rules for its smooth
operation.

11. MAJOR INDICES OF BSE
A stock index or stock market index is a measurement of a section of
the stock market. From among the stocks listed on the exchange, some
similar stocks are selected and grouped together to form an index.
The values of the grouped stocks are used to calculate the value of the
index (typically a weighted average). Any change in the price of the stocks
leads to a change in the index value. An index is thus indicative of the
changes in the market.
SENSEX
The BSE SENSEX also-called the BSE 30 is a free float market weighted
stock market index of 30 well established and financially sound companies
listed on Bombay Stock Exchange . The 30 component companies which
are some of the largest and most actively traded stocks, are representative
of various industrial of the Indian economy

12. Other than the benchmark index, several other sectoral indices are also provided by
BSE, such as:
• S&P BSE Auto
• S&P BSE bankex
• S&P BSE Capital Goods
• S&P BSE Consumer Durables
• S&P BSE Consumer Discretionary Goods & Services
• S&P BSE Fast moving consumer goods
• S&P BSE Basic Materials
• S&P BSE LargeCap
• S&P BSE AllCap
• S&P BSE MidCap
• S&P BSE SmallCap

13. BENEFITS OF BEING LISTED IN BSE
Stock exchange allows businesses to access capital and boosts their public
image. The knowledgeable businesses are able to harness stock exchange
control to heighten and develop their companies. The benefits that most
companies listed in the stock exchange are –
• Legal Supervision
• Increased Value
• Easy access to Capital
• Enhanced Visibility and Prestige
• Enables Liquidity for Shareholders
• Efficient Risk Distribution
• Employee Incentives

14. NATIONAL STOCK EXCHANGE
Set up in November 1992, NSE was India's first fully automated electronic
exchange with a nationwide presence. The exchange was the result of the
recommendations of a high-powered group set up to study the
establishment of new stock exchanges, which would operate on a pan-
India basis. Its shareholders consist of 20 financial institutions including
state-owned banks and insurance companies.
Headquartered in Mumbai, NSE offers capital raising abilities for
corporations and a trading platform for equities, debt, and derivatives --
including currencies and mutual fund units. It allows for new listings,
initial public offers (IPOs), debt issuances and Indian Depository Receipts
(IDRs) by overseas companies raising capital in India.

15. FEATURES OF NATIONAL STOCK EXCHANGE
• NSE is a fully automated screen-based trading system, thus, transparency
maintained.
• NSE provides the service of trading securities at the same price at any stock
exchange in India.
• There is no trading floor for the National Stock Exchange.
• Confidential trading in NSE as transactions and orders are entered only through
code numbers.
• Effective matching of order in NSE
• Borrowings made easy in NSE
• Settlement of transactions
• It is the first stock exchange in India to provide web-based access to investors to
trade directly on the exchange. The investors place orders through internet
through the terminals of the designated brokers

16. NSE INDICES
The NIFTY 50 index is National Stock Exchange of India’s benchmark stock
market index for Indian equity market. Nifty is owned and managed by India
Index service & products (IISL) .The NIFTY 50 covers 13 sectors of the
Indian economy and offers investment managers exposure to the Indian
market in one portfolio. It ideally is a collection of 50 stocks. Some are-
Nifty 50 index
Nifty 100 index
Nifty Next 50 index
Nifty Midcap 50 index
Nifty Auto Index
Nifty Bank Index
Nifty Consumer Durables Index
Nifty Financial Services Index
Nifty FMCG Index
Nifty IT Index
Nifty Media Index

17. INVESTMENT SEGMENTS IN NSE
Equity –
This comprises of a volatile class of assets which helps investors to maximise
the returns from investments. It consists of Mutual Funds, equities, indices,
Exchange Traded Funds, Security Lending and Borrowing Scheme, Initial Public
Offerings, etc.
Equity Derivatives –
Derivatives traded under this stock exchange includes Global indices like Dow
Jones, CNX 500, etc., commodity derivatives, currency derivatives, interest
rate futures, etc.
Debt –
This type of investment pool consists of various Mutual Funds, Exchange
Traded Funds, etc. where the core asset holdings comprise of different long
and short-term bonds, corporate bonds, securitised products, etc.

18. BENEFITS OF BEING LISTED IN NSE
• Comprehensive visibility
• Makes for a premier marketplace
• Biggest exchange in the country
• Fast transactions
• Trade statistics
Thus, with the above benefits, NSE National Stock Exchange
makes for a favorable facility to conduct market transactions.

19. INTER-CONNECTED STOCK EXCHANGE
It is a stock exchange of stock exchanges, members of the stock exchanges
being traders on the ISE.
In 1997, SEBI granted approval to the proposal of the ISE to set up a national
level stock exchange promoted by 14 regional stock exchanges. The
participating exchanges of ISE have about 4,500 members and a large number
of listed securities.
ISE was launched with an objective of converting small, fragmented and
illiquid markets into a large, efficient and liquid market.
It provides its trading members a facility to trade on the national market in
addition to the trading facility at the regional stock exchanges.

20. OBJECTIVES OF ISE
• Create a single integrated national-level solution with access to multiple
markets by providing high cost-effective service to investors across the
country.
• Create a liquid and vibrant national-level market for all listed companies in
general and small capital companies in particular.
• Optimally utilising the existing infrastructure and other resources of
Participating Stock Exchanges, which are under-utilised now.
• Provide a level playing field to small Trading Members by offering
opportunity to participate in a national market for investment-oriented
business.
• Provide clearing and settlement facilities to the Trading Members across the
country at their doorstep in a decentralised mode.
• Spread demat trading across the country.

22. THANK YOU!
- KHYATI TONGIA