Excited about National Stock Exchange (NSE)-BSE (Bombay Stock Exchange) & how NSE/BSE performs on the exchange’s automated trading system.
Table of Contents
What is NSE or National Stock Exchange
NSE is Stock Exchange located in Mumbai, Maharashtra. It was founded in 1992 and the key people in National Stock Exchange are Girish Chandra Chaturvedi as Chairperson and Vikram limaye as MD&CEO. NSE works under the supervision of SEBI.
National Stock Exchange was the first exchange in the country to provide a modern, fully automated screen-based electronic trading system that offered easy trading facilities to investors. The benchmark index of NSE is Nifty. An index is important to measure the performance of investments against a relative market index.NSE allows international investments. National Stock Exchange offers trading, clearing and settlement services in equity, equity derivative, debt, commodity derivatives and currency derivatives segments. NSDL (National Securities Depository Limited ) works for National Stock Exchange.
What is NSDL? How does NSDL work for NSE ??
NSDL
National Securities Depository Limited is created to hold securities such as bonds, shares etc. Simply NSDL allows traders and investors to open Demat accounts so their shares and securities can be held electronically through the Demat accounts.
Demat account
A Demat account is a necessary account to hold financial securities in a digital form and to trade in the share market. In India, Demat accounts are maintained by Depositories. Thus for NSE, National securities Depository Limited was the Depository.
Role of NSDL in NSE
National Securities Depository Limited acts as an intermediary between the investors and the Depositories. Simply, If an investor Buys shares from a company, then those bought shares are transferred to the Demat account from the company and vice versa.
Working of National Stock Exchange
National Stock Exchange performs on the “National exchange automated trading system”. NSE works on weekdays i.e from Monday to Friday except for special sessions. In NSE No inside trading was allowed which makes it more reliable. It enables shorter settlement Cycles since it was operated in an automated trading system.
The benchmark index of NSE is Nifty. Around 1600 companies are under NSE. The index Nifty shows the performance of the top 50 Companies. If the top 50 companies show the best performance then the Nifty will rise otherwise fall.
National Stock Exchange has indices that show the performance of the market and allow investors to understand the status of the stock market and also allows the investors to invest in stocks in a more reliable manner.
Index in Stock Exchange
A Stock Index that measures the stock market and helps the investors to understand the performance of the market in a computed manner.
What is BSE/Bombay Stock Exchange
BSE is a Stock Exchange. It was the oldest Exchange in Asia located in Mumbai, Maharashtra. It was founded in 1875 by Premchand Roychand. The Key people in BSE are Vikramajit Sen as Chairman and Ashish Chouhan as MD&CEO. Bombay Stock Exchange works under the supervision of SEBI. There are around 6000 companies under BSE. The Benchmark Index of BSE was Sensex. In BSE Securities such as Equity, Derivatives, futures and options are traded.
The Index Sensex shows the performance of the top 30 companies. Any Stock Exchange must use the Index since any Investor Cannot examine all 6000 companies’ performance. Hence using these indices Investors can Understand the performance of the Market. CDSL is the Depository for BSE.
CDSL
Central Depository Services ( India ) Limited is a type of Depository. In India, there are two types of Depositories
- NSDL (National Securities Depository Limited)
- CDSL ( Central Depository Services Limited)
National Securities Depository Limited is the Depository for National Stock Exchange and Central Depository Services Limited is the Depository for the Bombay Stock Exchange. The working Principle of both Depositeries is the same that is Both act as an intermediary between investors and companies. The only difference between both Depositeries is their operating Markets i.e one is for NSE another is for BSE.
How does BSE/Bombay Stock Exchange work?
In the early stages of BSE uses an Open floor system for trading that is all the investors and stock Brokers are gathered in one place and using Voice stock orders will be placed. But using this system so many drawbacks exist. Thus after 1995, The Bombay Stock Exchange came with a Modern Electronic Trading System which overcomes the drawbacks of an open floor trading system. The Modern Electronic Trading System is also More Reliable, Fast and More efficient to use than the open floor trading system.
Under This Electronic Trading System, the securities were traded in electronic form, There is No need to gather and place orders like an open floor trading system. Now The Updated trading system used by BSE is Called BOLT which has the acronym BSE online Trading. On 30th December 2016, BSE launched INX which is the first international exchange in India.
Background of BSE
The BSE was founded in 1875 in Mumbai. In the 1850s, Five stock Brokers started the journey of trading. As the number of Investors and Stock Brokers increased rapidly makes the existence of an official organization named ” The native share & Stock Brokers Association” in 1875. The street where the Stock Exchanges occur came to be called ‘Dalal Street’ which means ‘Brokers street ‘.
On 31, August 1957, The Bombay Stock Exchange became the first Exchange recognised by the Indian Government under the securities contracts regulation act.
The BSE developed the s&p BSE Sensex index in 1986.BSE majorly uses 5 Indices. Those are
- BSE Sensex
- S&P BSE Small-Cap
- S&P BSE Mid Cap
- S&P BSE Large Cap
- BSE 500.
What are the investment method available on BSE?
Trading Securities in BSE uses various investment Methods majorly depending on the volume of transactions made. Primary trading was done by registered brokerage agencies and for the organizations making Bulk Transactions.
Major Investment Segments
- Equity.
- Debt instruments and Government Securities.
Benefits of Listing on BSE
A company listed on the Bombay Stock Exchange can enjoy several benefits such as
- Hassle-free capital generation.
- Legal supervision.
- Enough pricing rules.
- Punctual information display.
- Secured Guarantee.
Benefits of trading Shares on BSE
- BSE on a Daily basis displays the data in the form of price quotations and others.
- BSE provides valuable Information to the public which can be used for Research on their shares.
- The stock Exchange prices can be an index of the state of the Economy.
- Having a positive attitude and self-confidence an investor can analyze the listed stocks and invest according to their future prospects.
By analysing the information provided by the BSE. An Investor can Make wise decisions before Making Trading shares.
Conclusion
National Stock Exchange is a fully automated trading system. It helps investors to access remotely which was a major advantage for investors. NSE shows the performance of the top 50 companies by the index Nifty. BSE/Bombay Stock Exchange shows the performance of the top 30 companies by the SENSEX.