STOCK EXCHANGE

A physically existing institutionalised set-up where instruments of security stock market (shares, bonds, debentures, securities, etc.) are traded. It serves the following major functions:

(i) Makes a floor available to the buyers and sellers of stocks and liquidity comes to the stocks. It is the single most important institution in the secondary market for securities.

(ii) Makes available the prices of trading as an important piece of information to the investors.

(iii) By following institutionalised rules and procedures, it ensures that the participants in the stock market live up to their commitments.

(iv) Passes updated informations to the enlisted companies about their present stockholders (so that they can pass on dividends etc., to them).

(v) By publishing its ‘Index’, it fulfils the purpose of projecting the moods of the stock market.

World’s first stock exchange was established in Antwerp, Belgium (then part of the Netherlands) in 1631, the London Stock Exchange opened in 1773 and then Philadelphia Stock Exchange (the first in the New World) opened in 1790.1 The first stock exchange in India, the Bombay Stock Exchange known as The Native Share and Stock Brokers’ Association was set up in 1870 (under a tree!).2‌

Top five largest stock exchanges (on the basis of market capitalisation) of the world in their decreasing order are—the New York Stock Exchange, the NASDAQ, the Tokyo Stock Exchange, the London Stock Exchange and the Bombay Stock Exchange.3

Trading in the stock exchanges takes place via the mediators known as the

brokers, the jobbers, the market-maker (discussed later in this chapter).

As per the latest information,4 presently, there are a total number of 26 stock exchanges operating in India—7 at the national level and rest 19 at the regional level (one of it, Coimbatore Stock Exchange recently sought for withdrawal of recognition, the matter is sub-judice under SEBI). A brief account of the ‘national level stock exchanges’ is given below.