From BSE To NSE: Understanding The Concept Of Stock Exchanges In India

The stock market is full of a plethora of terms that we often hear but do not understand in totality. Just like Sensex and Nifty, bull or bear market, stock market crash, etc., another commonly heard term that turns out to be a financial jargon for many, is the stock exchange.

So let us deep dive and help you decode the concept of stock exchanges and also unfold which all stock exchanges are present in India.

What Is The Stock Exchange?

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The stock exchange is like an organized marketplace that works as a facilitator of these transactions and enables the buying and selling of shares and other securities.

To be precise, it is a platform that conducts the trading of financial instruments like stocks and derivatives. The activities on this platform in India are regulated by SEBI. Trading activities in the stock market include brokering, issuing of shares by companies, etc.

So, how many stock exchanges are there in India?

Contrary to what most people believe, the most commonly heard stock exchanges NSE and BSE are not the only stock exchanges in India. While there is no doubt that these two are primarily the two major stock exchanges in India, overall at present there are a total of seven recognized stock exchanges in India, as per SEBI.

Let's deep dive and know more about the seven stock exchanges in India.

1. BSE

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BSE (Bombay Stock Exchange) is not only India¡¯s but, in fact, Asia¡¯s first-ever stock exchange which was established in the year 1875, initially under the name ¡®The Native Share & Stock Broker's Association¡¯. It was founded by cotton merchant Premchand Roychand, who was also known as the 'cotton king¡¯ and the ¡®bullion king¡¯.

In the year 1957, it became the first stock exchange in the country to be granted permanent recognition under the Securities Contract Regulation Act, 1956.

BSE is considered the fastest Stock exchange in the world with a speed of 6 microseconds. In Feb 2017, BSE became the first listed stock exchange of India. Till January 2022, BSE¡¯s market cap was ?276.713 lakh crore (US$3.7 trillion), with 5439 listings on the exchange.

The stock exchange provides an efficient and transparent market for trading in equity, currencies, debt instruments, derivatives, mutual funds. Indian Clearing Corporation Limited, which is a wholly-owned subsidiary of BSE, acts as the central counterparty to all trades executed on the BSE trading platform and provides full novation, guaranteeing the settlement of all bonafide trades executed.

BSE Institute Ltd, another fully owned subsidiary of BSE runs one of the most respected capital market educational institutes in the country.

BSE has also launched BSE Sammaan, the CSR exchange, which is a first of its kind initiative which aims to connect corporate with verified NGOs

Also, BSE's popular equity index, i.e. the S&P 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).

Besides Sensex, other important indices of BSE include BSE 100, BSE 200,BSE 500, BSE MIDCAP,BSE PSU,BSE SMLCAP,BSE Auto,BSE Pharm,BSE FMCG and BSE Metal.

Moreover, BSE had launched India INX, India's 1st international exchange, located at GIFT CITY IFSC in Ahmedabad. For the uninitiated, India International Exchange (IFSC) Limited (India INX), commenced its operations from Jan 16, 2017. The Exchange is regulated by the IFSC Authority and facilitates trading, clearing and settlement of the widest range of global benchmark products across all major asset classes, including securities, equity derivatives, precious metals, base metals, energy and bonds.

Indian Clearing Corporation Limited, a wholly owned subsidiary of BSE, acts as the central counterparty to all trades executed on the BSE trading platform and provides full novation, guaranteeing the settlement of all bonafide trades executed.

Also Read: What Is Sensex And What Does It Mean For Your Investments

2. NSE

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NSE (National Stock Exchange) was incorporated in the year 1992. It was recognized as a stock exchange by India¡¯s market regulator SEBI in April 1993, and NSE commenced operations in 1994 with the launch of the wholesale debt market, shortly followed by the launch of the cash market segment.

NSE was established as the first dematerialized electronic exchange in the country and is considered the first exchange in the country to provide a modern, fully automated screen-based electronic trading system that offered easy trading facilities to investors spread across the length and breadth of the country. NSE's flagship index, the NIFTY 50, which was launched in 1996, is used extensively by investors in India as well as around the world as a barometer of the Indian capital market.

In 2021, NSE was the world's largest derivatives exchange in terms of the number of contracts traded, based on the statistics maintained by the Futures Industry Association (FIA), a derivatives trade body. NSE is ranked fourth in the world in cash equities by the number of trades as per the statistics maintained by the World Federation of Exchanges (WFE) for the calendar year 2021.

NSE market cap was US$3.4 trillion (as of Aug 2021), with 2,002 listings on the exchange, as of October 2021.

In 2021, NSE launched its new initiative called NSE EMERGE, for Small and medium-sized enterprises (SME) & Startup companies in India. These companies can get listed on NSE without an Initial public offering (IPO). This platform aims to help SMEs and startups connect with investors and help them with raising funds.

NSE offers trading and investment in equity, indices, mutual funds, ETFs, IPOs, security lending and borrowing, equity derivatives, currency derivatives, commodity derivatives, interest rate futures, and corporate bonds.

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3. Calcutta Stock Exchange Ltd.

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Not many are aware that stockbroking was practised in Calcutta as early as 1836, although initially the members of the broking profession neither had any code of conduct for their guidance, nor any permanent place for congregation. At one time, the brokers had no shelter and business was carried on in the open place,which prompted brokers to organize themselves and then in May 1908, an association was formed under the name and style of the Calcutta Stock Exchange Association at 2, China Bazar Street.

And on June 7, 1923, the association was registered as a limited liability concern. The Calcutta Stock Exchange (CSE) was later granted permanent recognition by the Central Government with effect from April 14, 1980, under the relevant provisions of the Securities Contracts (Regulation) Act, 1956, with a view to render useful service to investors.

In the year 1997, the Calcutta Stock Exchange ushered in a new era by replacing the old manual trading system with a completely computerized online trading & reporting system known as C-STAR (CSE Screen-Based Trading And Reporting).

Also, CSE is the oldest government-owned stock exchange in Asia. After being initially founded on 1 December 1863 by sixteen of Calcutta's leading stockbrokers, it was later reconstituted in its current form in 1908. But since 2013, there has been no trading on the CSE trading platform following a ?120-crore scandal involving the notorious stockbroker Ketan Parekh.

However, as per the CSE's website, it's taking steps for revival. According to the website, 'CSE is throbbing again with life. Resurrected by sustained efforts of some leading citizens, the CSE is now a totally demutualized and professionally run stock exchange. Its arrangements with BSE and NSE enable its members to trade on these national exchanges as well'

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4. Indian Commodity Exchange Limited

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ICEX (Indian Commodity Exchange Limited) is a SEBI regulated online commodity derivative exchange headquartered in Mumbai. It provides a nationwide trading platform through appointed brokers. ICEX had launched the world¡¯s first ever diamond derivatives contracts, and aims to provide futures trading products in India¡¯s all economically relevant commodities.

The core aim of ICEX is to provide the desired price risk hedging solution to the trade through innovative contract design. ICEX is ideally positioned to leverage the huge potential of the commodities market and also encourage the participation of actual users to benefit from the opportunities of hedging, risk management and supply chain management in commodities markets.

And that's not all.

ICEX is the first exchange in India to adopt a global hi-tech platform that ensures automatic and seamless switch-over from its Data Center (DC) to the Disaster Recovery (DR) site with zero data loss in case of emergencies. The technology platform of ICEX has highly optimized processing techniques, which enables the system to handle very large orders with latencies under 300 microseconds.

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5. Metropolitan Stock Exchange of India Ltd.

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Another stock exchange in India is the Metropolitan Stock Exchange of India Limited (MSE). It is recognized by SEBI under Section 4 of Securities Contracts (Regulation) Act, 1956. It was notified as a recognized stock exchange" under Section 2(39) of the Companies Act, 1956 by the Ministry of Corporate Affairs, Govt. of India, on December 21, 2012.

At present, the clearing and settlement of trades at MSE can be conducted through any of the National Clearing Corporations i.e. Metropolitan Clearing Corporation (MCCIL), Indian Clearing Corporation (ICCL) and National Securities Clearing Corporation (NSCCL).

MSE offers an electronic, transparent and hi-tech platform for trading in Capital Market, Futures & Options, Currency Derivatives and Debt Market segments. MSE has also received in-principle approval from SEBI for operationalizing the SME trading platform.

Also, it is worth noting that MSE had commenced operations in the Currency Derivatives (CD) Segment on October 7, 2008, under the regulatory framework of SEBI and RBI. It later launched the Capital Market Segment, Futures and Options Segment and flagship index ¡®SX40¡¯ on February 9, 2013, and then commenced trading from February 11, 2013.

A few months later, the Debt Market Segment of MSE was launched and trading commenced in June 2013. MSE started live trading in cash-settled Interest Rate Futures (IRF), on Government of India security, in its Currency Derivative Segment from January 20, 2014.

Also Read: Does It Make Sense To Cash Your Investments When The Market Crashes?

6. Multi Commodity Exchange of India Ltd.

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The Multi Commodity Exchange of India Limited (MCX), is a commodity derivatives exchange that facilitates online trading of commodity derivatives transactions, hence providing a platform for price discovery and risk management. MCX started operations in November 2003 and operates under the regulatory framework of SEBI.

The stock exchange offers trading in commodity derivative contracts across varied segments including bullion, industrial metals, energy and agricultural commodities. It is India¡¯s first exchange to offer commodity options contracts, bullion index futures and base metals index futures contracts. MCX focuses on providing commodity value chain participants with neutral, secure and transparent trade mechanisms, and formulates quality parameters and trade regulations, in conformity with the regulatory framework.

As on December 31st 2021, the stock exchange has an extensive national reach, with 597 registered members and 49,999 Authorized Persons with its presence in around 1,103 cities and towns across India. MCX is also India¡¯s leading commodity derivatives exchange with a market share of 92.9% in terms of the value of commodity futures contracts traded in the financial year 2021-22 (Apr-Dec), as per MCX¡¯s website.

Also, MCX¡¯s flagship index series, MCX iCOMDEX, is a series of real-time commodity futures price indices, which provides information on market movements in key commodities/ segments traded on MCX.

Over the years, MCX has forged strategic alliances with leading international exchanges such as CME Group and London Metal Exchange (LME). It has also signed MOUs with renowned global exchanges like Dalian Commodity Exchange (DCE), Taiwan Futures Exchange (TAIFEX), Zhengzhou Commodity Exchange (ZCE) and European Energy Exchange AG (EEX) to facilitate cooperation in areas of sharing knowledge, expertise, education and training, etc.

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7. National Commodity & Derivatives Exchange Ltd.

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Last but not least is the NCDEX. National Commodity & Derivatives Exchange Limited (NCDEX) is a leading agricultural commodity exchange in India. As per its website, NCDEX has maintained its leadership position since the year 2005, in the agricultural commodity derivatives market, in terms of ADTV.

This exchange has a wide array of permitted commodities aggregating to a total of 23, including pulses, spices and guar, which are not traded on any other platforms in the global scenario and are also economically relevant to India, forming an important component of India¡¯s global trade.

NCDEX was incorporated as a public limited company on April 23, 2003, and later got a certificate of incorporation and commenced its business pursuant to a certificate for commencement of business dated May 9, 2003, each granted by the Registrar of Companies, Maharashtra.

With effect from September 28, 2015, the exchange became a deemed recognized stock exchange under the Securities Contracts (Regulation) Act, 1956 in terms of Section 131(B) of Finance Act, 2015. NCDEX is regulated by SEBI.

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