Function of Stock Exchanges of BSE, NSE, OTCI

24/11/2023 0 By indiafreenotes

Stock exchanges, including BSE (Bombay Stock Exchange), NSE (National Stock Exchange), and OTCI (Over-The-Counter Exchange of India), perform vital functions in the financial markets. Each exchange serves as a platform for buying and selling securities, contributing to market liquidity, price discovery, and overall financial market development.

BSE, NSE, and OTCI play integral roles in the Indian financial landscape, providing platforms for securities trading, capital formation, and investor participation. Each exchange has its unique features and functions, catering to different segments of the market and contributing to the overall development of the Indian securities market.

Bombay Stock Exchange (BSE):

  1. Listing of Securities:

BSE facilitates the listing of various securities, including stocks, bonds, and other financial instruments, allowing companies to raise capital from the public.

  1. Trading Platform:

BSE provides a robust trading platform where investors can buy and sell securities. The exchange employs an open outcry system and electronic trading mechanisms for efficient order matching.

  1. Market Indices:

BSE is home to several benchmark indices, including the Sensex (Sensitive Index). These indices reflect the overall market performance and serve as key indicators for investors and market participants.

  1. Market Surveillance:

BSE conducts market surveillance to detect and prevent market manipulation, insider trading, and other irregularities. The exchange ensures fair and transparent market practices.

  1. Listing and Delisting:

BSE establishes listing requirements for companies and has procedures for the delisting of securities if a company no longer meets the exchange’s criteria.

  1. Investor Education:

BSE plays a role in investor education by organizing seminars, workshops, and awareness campaigns to enhance financial literacy and educate investors about market dynamics.

  1. Corporate Governance Oversight:

The exchange monitors the corporate governance practices of listed companies, promoting transparency, ethical behavior, and accountability.

National Stock Exchange (NSE):

  1. Electronic Trading:

NSE is known for its electronic trading platform, providing a highly automated and efficient marketplace for securities trading.

  1. Market Indices:

NSE’s benchmark indices, such as the Nifty 50, are widely followed indicators of market performance. These indices represent the market capitalization-weighted performance of key stocks.

  1. Derivatives Trading:

NSE is a pioneer in derivatives trading, offering a platform for trading futures and options contracts on various securities, including equity indices and individual stocks.

  1. Listing and Trading of ETFs:

NSE facilitates the listing and trading of Exchange-Traded Funds (ETFs), allowing investors to participate in diverse portfolios with the convenience of stock trading.

  1. Market Surveillance and Risk Management:

NSE employs advanced market surveillance tools and robust risk management mechanisms to ensure the stability and integrity of the market.

  1. Investor Services:

NSE provides a range of services to investors, including educational initiatives, investor protection funds, and an investor grievance redressal mechanism.

Over-The-Counter Exchange of India (OTCI):

  1. Platform for Unlisted Securities:

OTCI serves as a platform for the trading of unlisted securities, providing a marketplace for securities that are not listed on traditional stock exchanges.

  1. Small and Medium Enterprises (SME) Exchange:

OTCI has a segment dedicated to SMEs, allowing smaller companies to raise capital by issuing securities to a wider investor base.

  1. Institutional Trading Platform (ITP):

OTCI’s ITP is designed for start-ups and small and medium-sized enterprises to raise capital through the issuance of specified securities.

  1. Private Placement Platform:

OTCI facilitates private placements, enabling companies to raise capital by offering securities to a select group of investors without a public offering.

  1. Market-Making:

OTCI allows for market-making activities, where entities can facilitate liquidity and trading in certain securities by quoting buy and sell prices.

  1. Ease of Access:

OTCI provides a platform that may be more accessible for certain companies, especially those in the unlisted or SME category, offering an alternative to traditional exchanges.

Common Functions across Exchanges:

  1. Clearing and Settlement:

All exchanges, including BSE, NSE, and OTCI, are involved in clearing and settlement processes to ensure the efficient and secure transfer of securities and funds.

  1. Market Surveillance and Regulation:

Each exchange regulates its marketplace, conducting market surveillance to monitor trading activities and enforcing regulations to maintain market integrity.

  1. Price Discovery:

Exchanges contribute to the process of price discovery, where the forces of supply and demand determine the fair market value of securities.

  1. Technology Infrastructure:

All exchanges utilize advanced technology infrastructure to support electronic trading, order matching, and real-time information dissemination.