Role and Functions of Stock Exchange in India

A debut REPORT ON ROLE AND FUNCTIONS OF STOCK swop INTRODUCTION A inventory varyis a form of deputizewhich provides services for declivity brokersandtradersto trade crinkles,bonds, and othersecurities. line of products flips in any case provide facilities for domaination and repurchase of securities and other financial instruments, and capital events including the payment of income anddividends. Securities traded on a trite transfer includeshargonsissued by companies,unit trusts,derivatives, pooled enthronization products andbonds.To be qualified to trade a security on a certain melody veer, it must be listed there. Usually, there is a central location at least for record keeping, but trade is increasingly less think to such a physical place, as modern market place place places beelectronic networks, which gives them advantages of increased speed and reduced cost of transactions. Trade on an vary is by members lone(prenominal). The initial crannying of stocks and bonds toinvestorsis by definition done in theprimary marketand subsequent traffic is done in the subaltern market.A stock exchange is often the just ab divulge important component of astock market. Supply and demand in stock markets be drive by unhomogeneous factors that, as in allfree markets, touch the price of stocks (seestock valuation). There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be later traded on the exchange. Such duty is said to beoff exchangeorover-the-counter. This is the usual way thatderivativesandbonds atomic number 18 traded. Increasingly, stock exchanges are phonation of a global market for securitiesSTOCK step in DEFINITION According to maintain and Dockerary decline exchanges are privately organized markets which are used to comfort trading in securities. * According to securities contract ( regulation ) act of 1956 An association, constitution or luggage compartment of individuals, whether incorpora ted or not, established for the purpose of assisting, regularization and controlling business in profaneing, selling and dealing in securities. Features of old-hat replace 1. Market for securities spud exchange is a market, where securities of corporate bodies, government activity and semi-government bodies are bought and sold. . Deals in second hand securities It deals with shares, debentures bonds and such securities already issued by the companies. In short it deals with existing or second hand securities and hence it is called secondary market. 3. Regulates trade in securities Stock exchange does not bargain or sell any securities on its own account. It merely provides the obligatory infrastructure and facilities for trade in securities to its members and brokers who trade in securities. It regulates the trade activities so as to ensure free and fair trade 4.Allows dealing only in listed securities In fact, stock exchanges maintain an ex officio list of securities t hat could be purchased and sold on its basis. Securities which do not figure in the official list of stock exchange are called unlisted securities. Such unlisted securities cannot be traded in the stock exchange. 5. Transactions effected only by dint of members All the transactions in securities at the stock exchange are effected only by dint of its scoreic brokers and members. Outsiders or direct investors are not allowed to enter in the trading circles of the stock exchange.Investors have to buy or sell the securities at the stock exchange by means of the authorised brokers only. 6. Association of persons A stock exchange is an association of persons or torso of individuals which may be registered or unregistered. 7. Recognition from Central Government Stock exchange is an organised market. It requires recognition from the Central Government. 8. Working as per rules get and selling transactions in securities at the stock exchange are governed by the rules and regulations o f stock exchange as well asSEBI Guidelines.No bending from the rules and guidelines is allowed in any case. 9. Specific location Stock exchange is a particular market place where authorised brokers come together daylight-to-day (i. e. on working(a) eld) on the floor of market called trading circles and aim trading activities. The prices of different securities traded are shown on electronic boards. After the working hours market is closed. All the working of stock exchanges is conducted and controlled done computers and electronic system. 10. monetary Barometers Stock exchanges are the financial barometers and evelopment indicators of national economy of the country. Industrial ontogenesis and stability is reflected in the index of stock exchange. EXISTING STRUTURE OF STOCK EXCHANGE IN INDIA STOCK EXCHANGE OTHERS NSE BSE BOMBAY STOCK EXCHANGE The Bombay Stock trade is the oldest exchange in Asia. It traces its hi trading floor to the 1850s, when four Gujarati and one Parsi stockbroker would conform to low banyan trees in front of Mumbais Town Hall. The location of these meetings changed legion(predicate) times, as the number of brokers constantly increased.The group eventually moved to Dalal highroad in 1874 and in 1875 became an official organization known as The intrinsic Share & angstrom unit Stock Brokers Association. In 1956, the BSE became the first stock exchange to be recognized by theIndian Governmentunder the Securities Contracts Regulation Act. The Bombay Stock Exchange developed theBSE SENSEXin 1986, endowment the BSE a means to measure overall performance of the exchange. In 2000 the BSE used this index to open its derivatives market, trading SENSEX futures contracts.The development of SENSEX options on with justness derivatives followed in 2001 and 2002, expanding the BSEs trading course of study. Historically an open outcry floor trading exchange, the Bombay Stock Exchange switched to an electronic trading system in 1995. It t ook the exchange only litre days to make this transition. This automated, screen-based trading platform called BSE On-line trading (BOLT) currently has a capacity of 8 million orders per day. The BSE has likewise introduced the foundations first centralized exchange-based internet trading system, BSEWEBx. o. in to enable investors anywhere in the world to trade on the BSE platform. The BSE is currently folkd inPhiroze Jeejeebhoy TowersatDalal Street,Fort area. topic STOCK EXCHANGE TheNational Stock Exchange(NSE) isstock exchangelocated atMumbai,India. It is in the top 20 colossalst stock exchangesin the world bymarket capitalizationand largest in India by fooling turnover and number of trades, for both equities and derivative trading. NSE has a market capitalization of aroundUS$1trillionand over 1,652 listings as of July 2012.Though a number of other exchanges exist, NSE and theBombay Stock Exchangeare the two most significant stock exchanges in India, and between them are re sponsible for the immense majority of share transactions. The NSEs key index is theS&P CNX Nifty, known as the NSENIFTY(National Stock Exchange Fifty), an index of fifty major stocks weighted by market capitalization. NSE is mutually owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management operate as affiliate entities.There are at least 2 foreign investorsNYSE Euro nearandGoldman Sachswho have interpreted a stake in the NSE. As of 2006, the NSEVSATterminals, 2799 in total, cover more than 1500 cities across India. In 2011, NSE was the third largest stock exchange in the world in terms of the number of contracts (1221 million) traded in equity derivatives. It is the second fastest growingstock exchangein the world with a recorded growth of 16. 6%. ROLE OF STOCK EXCHANGE * Effective Mobilisation Of Savings Stock exchanges provide organised market for an individual as well as institu tional investors.They regulate the trading transactions with proper rules and regulations in order to ensure investors protection. This helps to consolidate the faith of investors and small savers. Thus, stock exchanges attract small savings especially of large number of investors in the capital market. * Promoting Capital formation The funds mobilised by dint of capital market are provided to the industries engaged in the production of various goods and services useful for the society. This leads to capital formation and development of national assets. The savings mobilised are channelised into appropriate routes of investment. Wider Avenues of investment Stock exchanges provide a wider avenue for the investment to the people and organisations with investible surplus. Companies from diverse industries like Information Technology, Steel, Chemicals, Fuels and Petroleum, Cement, Fertilizers, etc. suffer various kinds of equity and debt securities to the investors. Online trading facility has brought the stock exchange at the doorsteps of investors through computer network. Diverse type of securities is made uncommitted in the stock exchanges to suit the varying objectives and notions of different classes of investor.Necessary information from stock exchanges available from different sources guides the investors in the effective management of their investment portfolios. * Liquidity of investment Stock exchanges provide liquidity of investment to the investors. Investors can sell out any of their investments in securities at any time during trading days and trading hours on stock exchanges. Thus, stock exchanges provide liquidity of investment. The online trading and online settlement of demat securities alleviates the investors to sellout their investments and realise the proceeds within a day or two.Even investors can switch over their investment from one security to another according to the changing scenario of capital market. * Investment priorities Stock exchanges facilitate the investors to decide his investment priorities by providing him the basket of different kinds of securities of different industries and companies. He can sell stock of one company and buy a stock of another company through stock exchange whenever he wants. He can manage his investment portfolio to maximise his wealth. * Investment safetyStock exchanges through their by-laws, Securities and Exchange Board of India (SEBI) guidelines, transparent procedures try to provide safety to the investment in industrial securities. Government has established the National Stock Exchange (NSE) and Over The Counter Exchange of India ( over-the-counter(a)EI) for investors safety. Exchange authorities try to bind speculative practices and minimise the risk for common investor to preserve his confidence. * pecuniary resources for mankind and private sectors Stock Exchanges make available the financial resources available to the industries in human beings and private s ector through various kinds of securities. delinquent to the assurance of liquidity, market support, investment safety assured through stock exchanges, the public issues of securities by these industries receive strong public response (resulting in oversubscription of issue). * Funds for learning Purpose Stock exchanges enable the government to mobilise the funds for public utilities and public undertakings which take up the developmental activities like power projects, shipping, railways, telecommunication, dams & roads constructions, etc.Stock exchanges provide liquidity, marketability, price continuity and constant evaluation of government securities. * Indicator of Industrial Development Stock exchanges are the symbolic indicators of industrial development of a nation. Productivity, efficiency, economic-status, prospects of each industry and every unit in an industry is reflected through the price fluctuation of industrial securities on stock exchanges. Stock exchange sense x and price fluctuations of securities of various companies tell the entire story of changes in industrial sector. Barometer of National Economy Stock exchange is taken as a Barometer of the economy of a country. Each economy is economically symbolized (indicators) by its most significant stock exchange. New York Stock Exchange, capital of the United Kingdom Stock Exchange, Tokyo Stock Exchange and Bombay Stock Exchange are considered as barometers of U. S. A, United Kingdom, Japan and India respectively. At both national and outside(a) level these stock exchanges represent the progress and conditions of their economies. Functions FUNCTIONS OF STOCKEXCHANGE * Continuous and ready market for securitiesStock exchange provides a ready and continuous market for purchase and deal of securities. It provides ready outlet for buying and selling of securities. Stock exchange also acts as an outlet/counter for the sale of listed securities . * Facilitates evaluation of securities Stock exch ange is useful for the evaluation of industrial securities. This enables investors to know the true worth of their holdings at any time. Comparison of companies in the same industry is possible through stock exchange quotations (i. e price list). * Encourages capital formationStock exchange accelerates the go of capital formation. It creates the habit of saving, investing and risk taking among the investing class and converts their savings into profitable investment. It acts as an instrument of capital formation. In addition, it also acts as a channel for right (safe and profitable) investment. * Provides safety and security in dealings Stock exchange provides safety, security and equity (justice) in dealings as transactions are conducted as per well defined rules and regulations. The managing body of the exchange keeps control on the members.Fraudulent practices are also checked effectively. Due to various rules and regulations, stock exchange functions as the custodian of funds o f honest-to-goodness investors. * Regulates company management Listed companies have to comply with rules and regulations of concerned stock exchange and work under the vigilance (i. e supervision) of stock exchange authorities. * Facilitates public borrowing Stock exchange serves as a platform for merchandise Government securities. It enables government to raise public debt easily and speedily. * Provides unclutter house facilityStock exchange provides a clearing house facility to members. It settles the transactions among the members quickly and with ease. The members have to pay or receive only the net dues (balance amounts) because of the clearing house facility. * Facilitates healthy guesswork Healthy shot, keeps the exchange active. Normal speculation is not dangerous but provides more business to the exchange. However, excessive speculation is undesirable as it is dangerous to investors & the growth of corporate sector. * Serves as Economic BarometerStock exchange in dicates the state of health of companies and the national economy. It acts as a barometer of the economic situation / conditions. * Facilitates Bank Lending Banks easily know the prices of quoted securities. They offer loans to customers against corporate securities. This gives convenience to the owners of securities. List of Stock Exchanges In India Bombay Stock Exchange National Stock Exchange Regional Stock Exchanges Ahmedabad Bangalore Bhubaneshwar Calcutta Cochin Coimbatore Delhi Guwahati Hyderabad Jaipur Ludhiana Madhya Pradesh Madras Magadh Mangalore Meerut OTC Exchange Of India Pune Saurashtra Kutch UttarPradesh Vadodara CONCLUSION Stock exchange is indispensible for the smooth and hospital attendant functioning of corporate sector in a free market economy. A stock exchange need not be hardened as a place for speculation or a period of play den. It should act as a place for safe and profitable investable. , for this effective control on the working of stock exchange is necessary. This will repeal misuse of this platform for excessive speculation, scams and other undesirable and anti tender activities.Thus, stock exchange serves the nation in several ways through its diversified economic services which include imparting liquidity to investments, providing marketability, modify evaluation and ensuring price continuity of securities. Thus we can say that Stock exchange is the mirror of economy REFERENCES * Financial Management I. M Pandey * Financial Management Prasanna Chandra * Business studies B. S Raman * Business studies P. K Lasar * http//moneycontrol. com * http//investopedia. com * http//wikipedia. com * http//kalyan-city. blogspot. in