What is Stock Exchange?
A stock exchange also called as securities exchange (for example, NYSE, BSE, NASDAQ, etc), is a facility where stockbrokers and traders can buy and sell securities, such as shares of stock and bonds and other financial instruments. Stock exchanges may also provide facilities for the issue and redemption of such securities and instruments and capital events including the payment of income and dividends. Securities traded on a stock exchange include stock issued by listed companies, unit trusts, derivatives, investment products and bonds.
Stock exchanges often function as “continuous auction” markets with buyers and sellers performing transactions via open outcry at a central location such as the floor of the exchange or by using an electronic trading platform (such as Zerodha, Upstox, Groww,etc) . To be able to trade a security on a certain stock exchange, the security or shares of that particular company must be listed on that stock exchange. Usually, there is a central location at least for record keeping, but trade is increasingly less linked to a physical place, as modern markets use electronic communication networks, which give them advantages of increased speed and reduced cost of transactions. There is usually no obligation for stock to be issued through the stock exchange itself, nor must stock be subsequently traded on an exchange. Such trading may be off exchange or over the counter. This is the usual way that derivatives and bonds are traded. Increasingly, stock exchanges are part of a global securities market.
How does a Stock Exchange Functions?
Stock markets are a bridge between the companies and the potential buyers. This can also be termed as a professional relation between a seller and a buyer. Giants list their stocks on the stock exchange thus allowing the market
buyers to invest in them with a probability of very lower risk in the purchase.
The purpose here is to raise money which can be further invested into the growth of their firms. That supply and demand help determine the price for each security, or the levels at which stock market participants — investors and traders are willing to buy or sell. Computer algorithms generally do most of those calculations. The stock purchase and selling these days works completely online and is a faster way of performing the tasks. There was a time in history when the trading used to go offline, and window purchase was the trend of the time.
What are benefits of Stock Exchange?
The few benefits of stock exhanges and how it alters or affects countries market scenario are as follows:
- Increased Evaluations – People tend to prefer the companies listed on the stock markets for their investments and returns.
- Deeper Profile Impact – Companies listed on the stock exchange have higher recognition than the privately held companies, which makes it the safer ground to play.
- Easy Access to Worthy Capitals – Companies listed here are more prone to being invested into. They can get access to a larger crowd if they want the shareholders to buy stakes.
- High Returns on Investment – This is an unarguable point for every investor. The game of investment is vested into larger returns.
- Enhances the brand value – The companies work, day and night for the market recognition. The stock exchanges provide them with the opportunity to get to the people.
- Lower risk on Cost Capital – Companies listed on exchange have a lower credit risk that helps the banks to provide for capitals on their name. Privately held companies are at a greater risk of diverging capitals.
Bombay Stock Exchange
The BSE, formerly known as the Bombay Stock Exchange Ltd. is an Indian stock exchange located at Dalal Street, Mumbai. As India’s largest exchange provider – and having a market capitalization of $218,730 billion – it is 9th largest stock exchanges in the world. The exchange also offers trading in equities, ETFs, mutual funds, fixed income
as well as currency and commodity derivatives.