[new] What is stock exchange and how does stock exchange work?

What is stock exchange and how does stock exchange work?




What is stock exchange, its functions and how stock exchange works?

Stock Exchange: Through this article of today, we will give you detailed information about the stock exchange of the stock market. In this article you will get to know what is stock exchange, how stock exchange works, what are the major stock exchanges of India and what is the function of stock exchange.


What we Learn Today?

1. What is Stock Exchange?

2. History Of Stock Exchange In India

3. How Stock Exchange Works?

4. Ways to Invest in the Stock Exchange

5. Major Stock Exchanges in India

6. Functions of Stock Exchange

7.  FAQs Related to Share Exchange

8.  Conclusion: What is stock exchange?


Stock Exchange is an organized market, where buyers and sellers are available at all times. Many companies are listed on the stock exchange and investors can invest in the shares or securities of the companies. 

To get complete information about stock exchange, definitely read this article till the end, because in this you are going to get many types of information related to stock exchange.

So let's start this article without wasting any time – what is share exchange?


What is Stock Exchange?

What is stock exchange and how does stock exchange work?


Stock exchange is made up of two words, one stock and the other exchange. The shares or bonds of a company are called stocks and exchange means to buy and sell. Stock exchange can be defined as follows.

A stock exchange is a place where investors or traders buy or sell shares, bonds or government securities.

Investors can buy or sell shares of only those companies which are listed on the stock exchange. SEBI is the regulator of the stock exchange. Stock exchanges work under SEBI regulations.

When a company has to raise money in the stock market to raise funds, then the company has to first get itself listed on the stock exchange so that the investor can invest in the company's shares.

When the company brings its shares to the stock market for the first time, it is called IPO (Initial Public Offering). Apart from shares, trading is also done in bonds, mutual funds, government securities etc. in the stock exchange.

An investor cannot buy shares directly from the stock exchange. To buy shares, the investor has to open his Demat Account and Trading Account from a broker, through which the investor can trade in the stock market. All stock brokers are members of stock exchanges.


History of Stock Exchange in India

The first stock exchange in the world was established in the year 1602 by the Dutch East India Company in the Netherlands. Today it is known as Euronext Amsterdam Stock Exchange. It is the oldest stock exchange in the world.

Talking about India, the oldest stock exchange in India is Bombay Stock Exchange, which was established in 1875 in Mumbai. BSE is also the oldest stock exchange in the whole of Asia.

In today's time the stock exchange is done through electronic system but in earlier times the stock exchange was done through paper. If an investor used to buy shares of a company, then he gets a certificate which was proof that the investor had shares of the company.

Although the paperwork used to take about 6 months to do the stock exchange, hence the introduction of electronic system. Now all the work of stock exchange is computerized.

With the stock exchange being computerized, many people started investing in the stock market, as electronic systems are safer than paper ones.


How Stock Exchange Works?

The stock exchange acts as an intermediary between the investor and the company. When the company needs money to raise funds, it makes some percentage of its shares public for the general public.

To make the shares public, the company first has to get itself listed on the stock exchange, once the company is listed on the stock exchange, investors can trade in the company's shares through the broker. A broker who is a member of the stock exchange. An investor cannot buy shares directly from the stock exchange. 

There are many people available to buy and sell shares in the stock market at all times. When an investor wants to buy or sell a share, he places his order. Then the trading system of the stock exchange automatically completes the order by matching the buyer and seller.


Ways to invest in stock exchange

There are two types of investment in the stock exchange –


#1 – Primary Market

When a company brings its shares to the market for the first time, it is called IPO. When the investor buys the company's IPO, he has to buy it in the primary market. Meaning that in the primary market, he is not buying the shares of the company from any other investor. The sale of shares or securities in the primary market itselfis created.


#2 – Secondary Market

In fact, the secondary market itself is called the stock market. In the secondary market, investors trade in shares without involving companies. That is, the secondary market is such a market where investors do not buy shares directly from the company, they have to buy shares of companies from other investors.


Major Stock Exchanges in India (Stocks Exchange in India)

There are mainly two stock exchanges in India –


BSE (Bombay Stocks Exchange)

NSE (National Stocks Exchange)


#1 – BSE (Bombay Stocks Exchange)

BSE i.e. Bombay Stock Exchange is the oldest stock exchange not only in India but all over Asia. BSE is the tenth largest stock exchange in the world.

BSE was established in 1875. BSE was started under a banyan tree in Mumbai, which is called the financial capital of India. Under that tree some people used to gather and exchange shares. 

Gradually the number of people started increasing, then a new place was discovered for the exchange of shares which became famous as Dalal Street. BSE was established by Premchand Raichand with 300 people.

The index of BSE is Sensex, which was started in 1986. The performance of BSE is measured only by the Sensex. If the Sensex rises, it means that the shares of companies registered in BSE are performing well. 

And if the Sensex declines, it means that the performance of companies registered in BSE has declined. The performance of Sensex is determined on the basis of top 30 companies registered in BSE.


About Bombay Stock Exchange

Main Point

Description

Full Form

Bombay Stock Exchange

Location

Dalal Street Mumbai, Maharashtra

Establishment Year

In 1875

Benchmark Index

Sensex

Current Chairman

Vikramjit Sen

Posture

Indian Rupee (INR)


#2 – NSE (National Stock Exchange)

The National Stock Exchange is the largest stock exchange in India and the world's 11th largest stock exchange, which was established in 1992. With the advent of NSE, the electronic exchange system started in place of the paper exchange system.

In 1992, in order to bring transparency in the stock market, the Government of India established an institution called SEBI (Securities and Exchange Board of India), whose main objective is to protect the interests of investors and the Indian stock market by implementing new rules from time to time. was to be developed.

Before the NSE, the trading of shares in the BSE was done through paper, which used to take about 5-6 months for the documents to reach the investors. SEBI requested for computerization of BSE in 1992 but the investors of BSE did not like it, hence the second stock exchange NSE was established.

In 1995, BSE had to get its companies listed in SEBI. And now both these stock exchanges work under the rules of SEBI.

NSE started Nifty in 1996. Nifty is the Benchmark Index of NSC in which the top 50 companies registered in NSE are listed and on the basis of their price the value of NSE is determined. If Nifty falls then NSE will also fall and if Nifty performs well then NSE will also rise.


About NSE

Main Point

Description

Full Form

National Stock Exchange

Location

Mumbai, Maharashtra

Establishment Year

In 1992

Benchmark Index

Nifty 

Current Chairman

Girish Chandra Chaturvedi

Posture

Indian Rupee (INR)


Work of Stock Exchange

Following are the main functions of stock exchange –


1. The stock exchange allows all investors to invest in the stock market.

2. Stock exchanges provide liquidity to capital. Shares can be bought or sold at any time on the stock exchange.

3. Stock exchanges provide a ready market for various securities which have continuity. There are sellers and buyers present in the stock exchange all the time.

4. Stock exchanges fix a fair value of the shares.

5. Stock exchanges are the measure of economic progress of a country because the economic progress of the country is estimated by looking at the country's stock exchange.


FAQs related to share exchange


Q. What do you understand by stock exchange?

Ans. stock exchange is a platform where investors buy and sell shares, bonds or government securities.


Q. What are the names of the stock exchanges of India?

Ans. The two major stock exchanges in India are BSE (Bombay Stock Exchange) and NSE (National Stock Exchange).


Q. Which is the oldest stock exchange in the world?

Ans. The world's oldest stock exchange, the Amsterdam Stock Exchange, was established in 1602 by the Dutch East India Company to sell written stocks and bonds. It is now known as Euronex Amsterdam. The Dutch East India Company is also known as the "crown" of the world's first public trading company.


Q. Which is the oldest stock exchange in India?

Ans. The oldest stock exchange in India is the Bombay Stock Exchange which was established in 1875 in Mumbai.


Conclusion: What is stock exchange and how does stock exchange work?

In this article, we have given you information about What is stock exchange and how does stock exchange work? and the functions of Stock Exchange. Also in this article we have given you how stock exchanges work, types of stock exchanges in India, and their status.

Information about the history of stock exchange is also provided to you. We sincerely hope that you must have liked this article written by us.

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