Stock exchange

Stock exchanges are defined by the Securities Contract (Regulation) Act, 1956 [SCRA]. As per this act, any body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities, is called Stock Exchange. Stock exchange may be a regional stock exchange whose area of operation/jurisdiction is specified at the time of its recognition or national exchanges, which are permitted to have nationwide trading since inception. Examples are Delhi Stock Exchange and National Stock Exchange respectively.

Who owns the Stock Markets

Please note that broker members of the exchange are both the owners and the traders on the exchange and they further manage the exchange as well. However, there can be two cases viz, Mutualized and demutualized exchanges. In a mutual exchange, the three functions of ownership, management and trading are concentrated into a single Group. This at times can lead to conflicts of interest in decision making. A demutualised exchange, on the other hand, has all these three functions clearly segregated, i.e. the ownership, management and trading are in separate hands.

Stock Market Index

A share market Index shows how a specified portfolio of share prices is moving in order to give an indication of market trends. It is a basket of securities and the average price movement of the basket of securities indicates the index movement, whether upwards or downwards. BSE Sensex is one index. The BSE SENSEX is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on Bombay Stock Exchange. The 30 component companies which are some of the largest and most actively traded stocks, are representative of various industrial sectors of the Indian economy. Published since January 1, 1986, the SENSEX is regarded as the pulse of the domestic stock markets in India. The base value of the SENSEX is taken as 100 on April 1, 1979, and its base year as 1978-79. On 25 July, 2001 BSE launched DOLLEX-30, a dollar-linked version of SENSEX.