INTRODUCTION securities from other governments. They would



The Real Merchants of Venice

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money lenders of Europe filled important gaps left by the larger banks.
Moneylenders traded debts between each other; a lender looking
to unload a high-risk, high-interest loan might exchange it for a different
loan with another lender. These lenders also bought government debt issues. As
the natural evolution of their business continued, the lenders began to sell
debt issues to customers – the first individual investors.

In the
1300’s, the Venetians were the leaders in the field and the first to start
trading the securities from other governments. They would carry slates with
information on the various issues for sale and meet with clients, much like a broker does today.

The First Stock Exchange – Sans the Stock

Belgium boasted a stock exchange as far back as 1531, in
Antwerp. Brokers and moneylenders would meet there to deal with business,
government and even individual debt issues. It is odd to think of a stock
exchange that dealt exclusively in promissory notes and bonds, but in the 1500’s there were no real
stocks. There were many flavors of business-financier partnerships that produced
income like stocks do, but there was no official share that changed hands.


Securities and Exchange Board of India (SEBI) was first
established in the year 1988 as a non-statutory body for regulating the
securities market.

of SEBI:

below SEBI’s important functions:

Capital Market

Checks Trading
of securities.

Checks the
malpractices in securities market.


What do you mean by stock market?

A share market only
allows trading of shares.
The key factor is the stock exchange
– the basic platform that provides the facilities used to trade company stocks
and other securities. A stock may
be bought or sold only if it is listed on an exchange. Thus, it is the meeting
place of the stock buyers
and sellers.


Trade in
stock markets means the transfer for money of a stock or security from a seller
to a buyer. This requires these two parties to agree on a price. Equities
(stocks or shares) confer an ownership interest in a particular company.

in the stock market range from small individual stock investors to larger traders
investors, who can be based anywhere
in the world, and may include banks, insurance companies or pension funds, and hedge funds. Their buy or sell orders
may be executed on their behalf by a stock exchange trader.

Some exchanges are physical locations
where transactions are carried out on a trading floor, by a method known as open
outcry. This method is used in some stock exchanges and commodity exchanges, and involves traders
entering oral bids and offers simultaneously. An example of such an exchange is
the New York Stock Exchange. The other type of
stock exchange is a virtual kind, composed of a network of computers where
trades are made electronically by traders. An example of such an exchange is

The purpose of a stock exchange is to
facilitate the exchange of securities between buyers and sellers, thus
providing a marketplace (virtual
or real). The exchanges provide real-time trading information on the listed
securities, facilitating price

The New York Stock Exchange (NYSE) is a physical exchange, with a hybrid
market for placing orders
both electronically and manually on the trading
floor. Orders executed on the trading floor enter by way of exchange
members and flow down to a floor
broker, who goes to the floor trading post specialist for that stock to trade the order. The
specialist’s job is to match buy and sell orders using open outcry. If aspread exists, no trade immediately takes
place—in this case the specialist should use his/her own resources (money or
stock) to close the difference after his/her judged time. Once a trade has been
made the details are reported on the “tape” and sent back to the brokerage
firm, which then notifies the investor who placed the order. Although there is
a significant amount of human contact in this process, computers play an
important role, especially for so-called “program


Market participants include individual retail investors,
institutional investors such as mutual funds, banks, insurance companies and
hedge funds, and also publicly traded corporations trading in their own shares.
Some studies have suggested that institutional investors and corporations
trading in their own shares generally receive higher risk-adjusted returns than
retail investors.

A few decades ago, worldwide, buyers and sellers were
individual investors, such as wealthy businessmen, usually with long family
histories to particular corporations. Over time, markets have become more
“institutionalized”; buyers and sellers are largely institutions
funds, insurance companies, mutual
funds, index funds, exchange-traded funds, hedge funds,
investor groups, banks and various other financial institutions).

The rise of the institutional investor has brought with it some improvements
in market operations. There has been a gradual tendency for “fixed”
(and exorbitant) fees being reduced for all investors, partly from falling
administration costs but also assisted by large institutions challenging
brokers’ oligopolistic approach to setting standardised fees. A current trend in stock market
investments includes the decrease in fees due to computerized asset management
termed Robo Advisers within the industry. The automation of
investment management has decreased how much human portfolio management costs
by lowering the cost associated with investing as a whole.



The National Stock Exchange (NSE) is
India’s leading stock exchange covering various cities and towns across the
country. NSE was set up by leading institutions to provide a modern, fully
automated screen-based trading system with national reach. The Exchange has
brought about unparalleled transparency, speed & efficiency, safety and
market integrity. It has set up facilities that serve as a model for the securities
industry in terms of systems, practices and procedures.

NSE has played a catalytic role in reforming the Indian securities market in
terms of microstructure, market practices and trading volumes. The market today
uses state-of-art information technology to provide an efficient and
transparent trading, clearing and settlement mechanism, and has witnessed
several innovations in products & services viz. demutualisation of stock
exchange governance, screen based trading, compression of settlement cycles, dematerialisation
and electronic transfer of securities, securities lending and borrowing,
professionalisation of trading members, fine-tuned risk management systems,
emergence of clearing corporations to assume counterparty risks, market of debt
and derivative instruments and intensive use of information technology.

The National Stock Exchange of India (NSE) was
incorporated in November 1992 as a tax-paying company. In November of the same
year, the Capital Market (Equities) segment commenced operations and the
Derivatives segment in June 2000.

Enabling shorter
settlement cycles and book entry settlements and

international benchmarks and standards.



NSE offers trading in the following segments:




Mutual Funds

Exchange Traded Funds

Initial Public

Security Lending and
Borrowing Scheme



Equity Derivatives
(including Global Indices like CNX 500, Dow Jones and FTSE )

Currency Derivatives

Interest Rate Futures



Corporate Bond



Equity Derivatives

The National Stock Exchange of India
Limited (NSE) commenced trading in derivatives with the launch of index futures
on 12 June 2000. The futures and options segment of NSE has made a global mark.
In the Futures and Options segment, trading in NIFTY 50 Index, NIFTY IT index,
NIFTY Bank Index, NIFTY Next 50 index and single stock futures are available.
Trading in Mini Nifty Futures & Options and Long term Options on NIFTY 50
are also available. The average daily turnover in the F&O Segment of the
Exchange during the financial year April 2013 to March 2014 stood at ?1.52236 trillion (US$23 billion).

On 29 August 2011, National Stock
Exchange launched derivative contracts on the world’s most followed equity
indices, the S 500 and the Dow Jones Industrial Average. NSE is the first
Indian exchange to launch global indices. This is also the first time in the
world that futures contracts on the S 500 index were introduced and
listed on an exchange outside of their home country, USA. The new contracts
include futures on both the DJIA and the S 500, and options on the
S 500.

On 3 May 2012, the National Stock
exchange launched derivative contracts (futures and options) on FTSE 100, the
widely tracked index of the UK equity stock market. This was the first of its
kind of an index of the UK equity stock market launched in India. FTSE 100
includes 100 largest UK listed blue chip companies and has given returns of
17.8 per cent on investment over three years. The index constitutes 85.6 per
cent of UK’s equity market cap.

On 10 January 2013, the National Stock
Exchange signed a letter of intent with the Japan Exchange Group, Inc. (JPX) on
preparing for the launch of NIFTY 50 Index futures, a representative stock
price index of India, on the Osaka Securities Exchange Co., Ltd. (OSE), a
subsidiary of JPX.

Moving forward, both parties will make
preparations for the listing of yen-denominated NIFTY 50 Index futures by March 2014, the
integration date of the derivatives markets of OSE and Tokyo Stock Exchange, Inc.
(TSE), a subsidiary of JPX. This is the first time that retail and
institutional investors in Japan will be able to take a view on the Indian
markets, in addition to current ETFs, in their own currency and in their own
time zone. Investors will therefore not face any currency risk, because they
will not have to invest in dollar denominated or rupee denominated contracts.


In August 2008, currency derivatives
were introduced in India with the launch of Currency Futures in USD–INR by NSE.
It also added currency futures in Euros, Pounds and Yen. The average daily
turnover in the F&O Segment of the Exchange on 20 June 2013 stood at ?419.2616 billion (US$6.2 billion) in futures and ?273.977 billion (US$4.1 billion) in options,

Rate Futures

In December 2013, exchanges in India
received approval from market regulator SEBI for launching interest rate
futures (IRFs) on a single GOI bond or a basket of bonds that will be cash
settled. Market participants have been in favour of the product being cash
settled and being available on a single bond. NSE will launch the NSE Bond
Futures on 21 January on highly liquid 7.16 percent and 8.83 percent 10-year
GOI bonds. Interest Rate Futures were introduced for the first time in India by
NSE on 31 August 2009, exactly one year after the launch of Currency Futures.
NSE became the first stock exchange to get an approval for interest-rate
futures, as recommended by the SEBI-RBI committee.


On 13 May 2013, NSE launched India’s first
dedicated debt platform to provide a liquid and transparent trading platform
for debt related products.

The Debt segment provides an opportunity
to retail investors to invest in corporate bonds on a liquid and transparent
exchange platform. It also helps institutions who are holders of corporate
bonds. It is an ideal platform to buy and sell at optimum prices and help
Corporates to get adequate demand, when they are issuing the bonds.



The Bombay Stock Exchange (BSE) is an Indian stock exchange located at Dalal Street, Kala Ghoda, Mumbai, Maharashtra, India. Established in 1875,
the BSE is Asia’s first stock exchange. It claims to be the world’s fastest
stock exchange, with a median trade speed of 6 microseconds. The BSE is the world’s 11th largest
stock exchange with
an overall market
capitalization of
$1.7 trillion as of January 23, 2015. More
than 5500 companies are publicly listed on the BSE.

The Bombay is the oldest exchange in
Asia. Its history dates back to 1855, when five stockbrokers would gather under
banyan trees in front of Mumbai’s Town Hall. The location of these meetings
changed many times to accommodate an increasing number of brokers. The group
eventually moved to Dalal Street in 1874 and in became an official organization
known as “The Native Share & Stock Brokers Association” in 1875.

On August 31, 1957, the BSE became the
first stock exchange to be recognized by the Indian
Government under the
Securities Contracts Regulation Act. In 1980, the exchange moved to the Phiroze Jeejeebhoy Towers at Dalal
Street, Fort area. In 1986, it developed the BSE SENSEX index, giving the BSE a means to
measure the 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 along with equity derivatives followed in 2001
and 2002, expanding the BSE’s trading platform.

Historically an open outcry floor
trading exchange, the Bombay Stock Exchange switched to an electronic trading
system developed by CMC Ltd. in 1995. It took the exchange only 50 days to make
this transition. This automated, screen-based trading platform called BSE On-Line Trading
(BOLT) had a capacity of 8 million orders per day. The BSE has also introduced
a centralized exchange-based internet trading system, to enable
investors anywhere in the world to trade on the BSE platform.

BSE also provides a host of other services to capital market
participants including risk management, clearing, settlement, market data
services and education. It has a global reach with customers around the world
and a nation-wide presence. BSE systems and processes are designed to safeguard
market integrity, drive the growth of the Indian capital market and stimulate
innovation and competition across all market segments. BSE is the first
exchange in India and second in the world to obtain an ISO 9001:2000
certification. It is also the first Exchange in the country and second in the
world to receive Information Security Management System Standard BS 7799-2-2002
certification for its On-Line trading System (BOLT). It operates one of the
most respected capital market educational institutes in the country (the BSE
Institute Ltd.). BSE also provides depository services through its Central
Depository Services Ltd.  
BSE’s popular equity index – the S BSE
SENSEX – is India’s most widely tracked stock market benchmark index. It is
traded internationally on the EUREX as well as leading exchanges of the BRCS
nations (Brazil, Russia, China and South Africa). 


An application by a stockbroker shall be
made in Form A and submitted to the stock exchange in which he is admitted as a
member. Before issuing the certificate of Registration, the Board shall take
into account all matters relating to buying, selling or dealing in securities
and in particular verify that the stockbroker –

Is eligible to be admitted as a member of a stock exchange,

Has the necessary infrastructure like adequate office space, equipments and
manpower to effectively discharge his activities,  



Commission brokers
are members who execute buy and sell orders received from their individual and
institutional clients on the floor of the exchange. They charge commission or
brokerage at rates not exceeding the ceiling, which is presently 2.5% of the
value of the contract.

dealers are those members who specialize in buying and selling
odd lots. They either buy odd lots and convert them into marketable lots that
can be sold or sell odd lots by buying and splitting marketable lots. The
marketable lot is 100 shares where the face value of the share is Rs.10 and 10
shares where the face value is Rs.100. Now with increasing number of dematerialized
stocks, the scope for odd-lot business is limited.

in non-cleared securities are a kin to taravniwallas in their
role but they specialize in buying and selling securities, which are not on the
active list.


A stock broker or share broker is a
regulated professional broker who buys or sells shares and other securities
through market makers or agencies on behalf of investor. A broker may be
employed by a brokerage firm. The functions of stock broker are as follows.

on commission: Individual brokers are paid on
commission usually as a percentage of the value of the trade. Commissions and
fees vary.

Most of the individual broker charges a certain percentage of the transaction
of buying and selling of stock. There are two types of brokers, one is discount
and another one is full service broker. Discount broker mostly is individual
broker who won’t
give advice and simply does the transaction. On the other hand, full service
broker actually help the investors to choose the stock for investment by giving
advice, and charges
some additional amount along with their regular commission.

Brokers offer many different types of products besides stock. Often, packaged
products such as mutual funds and annuities are important parts of the