A stock exchange, share market or bourse is a corporation or mutual organization which provides facilities for stock brokers and traders, to trade company stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities, as well as, other financial instruments and capital events including the payment of income and dividends.
The securities traded on a stock exchange include: shares issued by companies, unit trusts and other pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there. Usually there is a central location at least for recordkeeping, but trade is less and less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of speed and cost of transactions. Trade on an exchange is by members only.
The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. Supply and demand in stock market is driven by various factors which, as in all free markets, affect the price of stocks.
The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai; popularly called The Bombay Stock Exchange, or BSE) is the oldest stock exchange in Asia. It is located at Dalal Street, Mumbai, India.
Bombay Stock Exchange was established in 1875. There are around 3,500 Indian companies listed with the stock exchange, and has a significant trading volume. As of July 2005, the market capitalization of the BSE was about Rs. 20 trillion. The BSE SENSEX (SENSitive indEX), also called the BSE 30, is a widely used market index in India and Asia. As of 2005, it is among the 5 biggest stock exchanges in the world in terms of transactions volume. Along with the NSE, the companies listed on the BSE have a combined market capitalization.
The National Stock Exchange of India (NSE), is one of the largest and most advanced stock markets in India. The NSE is the world's third largest stock exchange in terms of transactions. It is located in Mumbai, the financial capital of India. The NSE VSAT terminals, 2799 in total cover 320 cities in India.
The Role of the Stock Exchange
Raising capital for businesses: The Stock Exchange provides companies with the facility to raise capital for expansion through selling shares to the investing public.
Mobilizing savings for investment: When people draw their savings and invest in shares, it leads to a more rational allocation of resources because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized and redirected to promote business activity with benefits for several economic sectors such as agriculture, commerce and industry, resulting in a stronger economic growth and higher productivity levels.
Facilitate company growth: Companies view acquisitions as an opportunity to expand product lines, increase distribution channels, hedge against volatility, increase its market share, or acquire other necessary business assets. A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways to company growing by acquisition or fusion.
Corporate governance: By having a wide and varied scope of owners, companies generally tend to improve on their management standards and efficiency in order to satisfy the demands of these shareholders and the more stringent rules for public corporations by public stock exchanges and the government
Barometer of the economy: At the stock exchange, share prices rise and fall depending, largely, on market forces. Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth. An economic recession, depression, or financial crisis could eventually lead to a stock market crash. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy.
Raising capital for businesses: The Stock Exchange provides companies with the facility to raise capital for expansion through selling shares to the investing public.
Mobilizing savings for investment: When people draw their savings and invest in shares, it leads to a more rational allocation of resources because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized and redirected to promote business activity with benefits for several economic sectors such as agriculture, commerce and industry, resulting in a stronger economic growth and higher productivity levels.
Facilitate company growth: Companies view acquisitions as an opportunity to expand product lines, increase distribution channels, hedge against volatility, increase its market share, or acquire other necessary business assets. A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways to company growing by acquisition or fusion.
Corporate governance: By having a wide and varied scope of owners, companies generally tend to improve on their management standards and efficiency in order to satisfy the demands of these shareholders and the more stringent rules for public corporations by public stock exchanges and the government
Barometer of the economy: At the stock exchange, share prices rise and fall depending, largely, on market forces. Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth. An economic recession, depression, or financial crisis could eventually lead to a stock market crash. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy.
