Indian Stock Exchanges: History & Introduction to Beginners

Stock exchanges

Stock exchange means anybody of individuals, whether incorporated or not constituted for the purpose of regulating or controlling the business of buying selling or dealing in securities. The Stock exchanges deal with Securities which include:

i)                  Shares, scrips, stock, bonds, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate.

ii)                 Government Securities and

iii)               Rights or interest in securities

The Securities Contracts (Regulations) Act, 1956 defines stock exchange “as an association, organization or body of individuals, whether incorporated or not, established for the purpose of assisting, regulating and controlling the business of buying, selling and dealing in securities”.

Indian Stock Exchanges: History & Introduction to Beginners

History and Developments of Stock Exchanges

Towards the close of the 18^th century, the East India Company was the dominant institution to transact the loan securities. The beginning of the 19^th century saw a perceptible increase in the nature of business. During 1861-65 the number of brokers increases to about 200 to 250. All categories of people were engaged in dealing in papers.

The brokers organized a formal association in Bombay on 3^rd Dec 1887 as a Society called as “Native Shares and Stock Brokers Association”. The Ahmedabad Share and Stock Brokers Association was instituted in 1894. The Calcutta Stock Exchange were refused recognition under the provisions of the Bombay Securities Contracts Act of 1925.

Futile attempts were made to establish exchanges in Madras and Northern India. By 1923 the number of members declined from 100 to 30. In 1940 two stock exchanges were established viz., one at Kanpur known as UP Stock Exchange and Nagpur Stock Exchange at Nagpur. In 1944, the Hyderabad Stock Exchange was started. Before the control on securities trading became a central subject under the constitution in 1950, it was a state subject and the Bombay Securities Contract (Contract) act of 1925 used to regulate trading in securities. Later there was a mushroom growth of stock exchanges in India. Now the Securities Contracts (Regulation) Act 1956 operates and governs the stock exchange working in the country.

Regulation

The Securities Contracts (Regulation) Act is the basis for operations of the stock exchanges in India. No exchange can operate legally without the government permission or recognition. Stock exchanges are facilitated. Where there are no stock exchanges, the government can license some of the brokers (licensed dealers) to perform the functions of a stock exchange in its absence.

Recognition

A Stock Exchange is recognized only after the government is satisfied that its rules and bye-laws confirm to the conditions prescribed for ensuring fair dealings and protection to investors. Bombay, Calcutta, Delhi, Madras, Ahmedabad, Hyderabad, Bangalore and Indore have so far been granted permanent recognition. Others are granted temporary recognition for a period of 5 years at a time.

In general, India's two major stock exchanges which has large volumes of trade are

1)         the Bombay Stock Exchange, or BSE,

2)         the National Stock Exchange of India, or NSE

They are also one of the largest stock exchanges in the world on basis of listed companies and trading volumes.

Categories: History of Stock Indian Exchanges, Investment, Investment Planning, Stock Exchange, Stock Market, Tutorials