bombay stovk ecxchange

8/13/2019 bombay stovk ecxchange

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Bombay Stock Exchange(BSE), (BombayhareBzar) is astock exchangelocated onDalalStreet, Mumbai, Maharashtra,India. It is the11th

largest stock exchangein the world bymarketcapitalisationas of 31 December2012.[2]Established in 1875, BSE Ltd. (formerlyknown as Bombay Stock Exchange Ltd.), is theIndia's second oldest Stock Exchange (Oldest beingthe Calcutta Stock Exchange (CSE) located at the

Lyons Range, Kolkata) and one of Indias leadingexchange groups. Over the past 137 years, BSE hasfacilitated the growth of the Indian corporate sectorby providing it an efficient capital-raising platform.Popularly known as BSE, the bourse wasestablished as "The Native Share & Stock Brokers'

Association" in 1875.

BSE is a corporatized and demutualised entity, witha broad shareholder-base which includes twoleading global exchanges, Deutsche Bourse, Fuseand Singapore Exchange as strategic partners. BSEprovides an efficient and transparent market fortrading in equity, debt instruments, derivatives,

mutual funds. It also has a platform for trading inequities of small-and-medium enterprises (SME).More than 5000 companies are listed on BSEmaking it world's No. 1 exchange in terms of listedmembers. The companies listed on BSE Ltd
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command a total market capitalization of USDTrillion 1.32 as of January 2013. BSE Ltd is world'sfifth most active exchange in terms of number of

transactions handled through its electronic tradingsystem. It is also one of the worlds leadingexchanges (3rd largest in December 2012) for Indexoptions trading (Source: World Federation ofExchanges).

BSE also provides a host of other services to capital

market participants including risk management,clearing, settlement, market data services andeducation. It has a global reach with customersaround the world and a nation-wide presence. BSEsystems and processes are designed to safeguardmarket integrity, drive the growth of the Indiancapital market and stimulate innovation and

competition across all market segments. BSE is thefirst exchange in India and second in the world toobtain an ISO 9001:2000 certification. It is also thefirst Exchange in the country and second in theworld to receive Information Security ManagementSystem Standard BS 7799-2-2002 certification for itsOn-Line trading System (BOLT).

It operates one of the most respected capital marketeducational institutes in the country (the BSEInstitute Ltd.). BSE also provides depository services


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through its Central Depository Services Ltd. (CDSL)arm.

BSEs popular equity index - the S&P BSE SENSEX

[Formerly SENSEX ] - is India's most widely trackedstock market benchmark index. It is tradedinternationally on the EUREX as well as leadingexchanges of the BRCS nations (Brazil, Russia,China and South Africa). On Tuesday, 19 February2013 BSE has entered into Strategic Partnership

with S&P DOW JONES INDICES and the SENSEXhas been renamed as "S&P BSE SENSEX".

History[edit]

ThePhirozeJeejeebhoy Towershouse the BombayStock Exchange since 1980.

The Bombay Stock Exchange is the oldestexchange in India. It traces its history to 1855, whenfour Gujarati and one Parsi stockbroker wouldgather under banyan trees in front of Mumbai'sTown Hall. The location of these meetings changedmany times, as the number of brokers constantly

increased. The group eventually moved to DalalStreet in 1874 and in 1875 became an officialorganization known as 'The Native Share & StockBrokers Association'.
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In 1958, the BSE became the first stock exchange tobe recognized by theIndian Governmentunder theSecurities Contracts Regulation Act. In 1980 the

exchange moved to the PhirozeJeejeebhoyTowersat Dalal Street,Fort area. In 1986 itdeveloped theBSE SENSEXindex, giving the BSEa means to measure overall performance of theexchange. In 2000 the BSE used this index to openits derivatives market, trading SENSEX futurescontracts. The development of SENSEX optionsalong with equity derivatives followed in 2001 and2002, expanding the BSE's trading platform.

Historically an open outcry floor trading exchange,the Bombay Stock Exchange switched to anelectronic trading system in 1995. It took theexchange only fifty days to make this transition. This

automated,screen-based tradingplatform calledBSE On-line trading (BOLT) had a capacity of 8million orders per day. The BSE has also introducedthe world's first centralized exchange-based internettrading system,BSEWEBx.co.into enable investorsanywhere in the world to trade on the BSEplatform.

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F i n a n c i a l i n t e r m e d i a r i e s c r e a t e a v a l

u a b l e l i n k between savers and

investors. Without financial intermediaries, societywould not be able to turn itssavings into profitable

investment projects.Financial intermediariesh e l p b r i n g s a v e r s a n d inves tors

toge ther . By us ing the i r exper t i se and

t he p o w e r s o f d i v e r s i f i c a t i o n , f i n a n c i a l i n t

e r m e d i a r i e s r e d u c e r i s k t o s a v e r s a n d

a l l o w i n v e s t o r s t o o b t a i n funds on better terms.

Why Financial Intermediaries EmergeBypooling the

funds of savers and making loans


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toi n d i v i d u a l b u s i n e s s e s , f i n a n c i a l i n t e r

m e d i a r i e s reduce the costs of

negotiation. F i n a n c i a l i n t e r m e d i a r i e s a l s o a c q

u i r e e x p e r t i s e i n both evaluating and monitoringinvestments. S o m e f i n a n c i a l i n t e r m e d i a r i

e s a l s o p r o v i d e t h e liquidity households

demand.What is Investing?Criteria used to determine whether an

investmentof money is investing or something else,

including: Is it short-term or long-term? Is it

productive or unproductive? Is it legal or

illegal? Is it rational or irrational? Gambling occurs when Outcome is de termined

very qu ick ly ( a ro l l of the dice, for instance)

A source of entertainment O u t c o m e i s n o t b a s e d o n a

n e c o n o m i c endeavor, but, rather, random

outcomes

C r e a t e s r i s k w i t h o u t e x p e c t a t i o n o f e c o n o

m i c benefit


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Speculation occurs when An asset is purchased

with hope that pr ice willrise rapidly, leading to quick

profit Not based on random outcomes

Example: Buying an IPO of a stock on thefirst day

hoping to sel l it in severa l days ata higher priceMajor asset classes include

P r i m a r y s e c u r i t i e s s u c h a s c o

m m o n a n d preferred stock, government

bonds, corporate bonds, Treasury bills, commerce

al paper Derived instruments such as mutual

funds, putand call options, forward and futures

contracts Physical assets such as houses, land,

buildings,diamonds, gold

HISTORY

The Stock Market is a pivotal institution in

the financial system. Awell-ordered stockmarket performs several economic functions:

It ensures the measure of safety and fair

dealing


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It performs an actof magicby translatingshort-terminvestments into long-term funds

for companies.

I t d i rec t s the f l ow o f cap i ta l i n the

most p ro f i tab lechannels.

I t i n d u c e s c o m p a n i e s t o r a i s e t h

eir standard of performance.

It offers guidance to management aboutthe cost of capital.

Measure of Safety and Fair Dealing:The stock exchanges operate under a

regulatory framework whichseeks toprotect the interest of investors. The rules,regulations,and bye-laws of a stock exchange, which are approved by thecentra l gove rnment,a re meant to ensure tha t a reasona

b lemeasure of safety is provided to

investors and transactions takeplace incompetitive conditions which are fair to allconcerned.Act of Magic:


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Most of the investors are interested in short-

term investments. Therequirements ofcompanies are, however, long-term in

naturetheyrequire equity capital on a more o

r less permanent basis anddebenturecapital for 3 to 15 years. Thanks to the

negotiability andtransferability of securities,through the stock market, it is

possiblefor companies to obtain their l ong-te rm requ irements fr om inv es to r s w

i t h s h o r t -t e r m h o r i z o n s . W h i l e o n e i n v e s t o r i s substituted by another when a security

is transacted, the companyis assured ofavailability of funds.Flow of Capital in the Most Profitable

Channels:Companies which have more profitableinvestment opportunities arenormally able toraise substantial funds through the stockmarket,6


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whereas companies which do not havesuch opportun it ies arenormally not

able to do so. As a result, the stockmarket facilitatesthe direction of the flow ofcapital in the most profitable channels.I n d u c e m e n t t o C o m p a n i e s t o R a i s

e their Standard of Performance:W h e n t h e e q u i t y , c a p i t a l o f a c o m

pa ny i s l i s t e d o n a s t o ck exchange,the performance of the company is ref lected in themarket price of the equitystock, which is readily available forpublicconsumption. Put differently, thecompanysperformance is

more v is ible in the eyes of publ ic. Such a publ ic exposure normally inducescompanies to raise their standardof performance.Guidance of Cost of Capital:The market value of the securities of

company are required forcomputing its

cost of capital. Such values can beobtained fromstock market quotations.Hence the stock market offers guidanceoncost of capital


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large number of member participation, which

would help achieve a fairly vibrant trading

platform forSMEs.TOPObjectivesThe BSE

IndoNext Segment has the following

objectives:To allow companies listed only

with RSEs to raise fresh resources from the

capital market, given higherliquidity in their

shares.To create liquidity in all the scrips listedon the Exchanges.To provide an avenue for new

SMEs from various regions of the country to

raise fresh resources fromthe capital markets,

which would help, achieve balanced regional

growth.To harness the infrastructure at RSEs

BACKGROUND

BSE IndoNext was formed to benefit small and

medium size companies, the investors in

thesecompanies and the capital market as awhole.Investors and the companies, which are

listed only on Regional Stock Exchanges (RSEs)

have beenimpacted severely, as the RSEs are


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recording either nil or negligible trading volumes.

Investors in suchsmall and medium companies are

therefore unable to find an exit route and realizefair market value of their investments. The

companies listed only at RSEs find it extremely

difficult, if not impossible, to raisefresh

resources from the capital markets in the

absence of price discovery of their securities in

thesecondary market. New small and mediumenterprises (SMEs) have also been unable to

tap the marketsto raise equity and debt, to fund

their plans.Bombay Stock Exchange Ltd. (BSE)

and the Federation of Indian Stock Exchanges

(FISE) believe in ignitinggrowth by putting thesmile back on the SMEs and also allow new SMEs

to bloom. Small businessescould become the

backbone of our economy, and an avenue for

massive employment generation.BSE and FISE

(which represents 20 RSEs), have jointly created

an alternate national platform namedBSEIndoNext, to enable SMEs to raise equity and

debt, and facilitate trading in such companies,

both oldandnew.The BSE IndoNext would help


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the investors to reach the BSE IndoNext traded

scrips in addition to thenetwork of BSE, also

through the network of about 7,000 members ofRSEs, who cater to the investors inthe far -

flung areas of the country and, thus, contribute

to the development of the capital market.

BSEIndoNext thus, envisages harnessing

advantages of creating a single national trading

platform, with a

large number of member participation, which

would help achieve a fairly vibrant trading

platform forSMEs.

INVORSERSTInvestment means the use of

money for the purpose of makingmore

money, to gain income or increase capital, or

both.

Short Term Investment

Long Term InvestmentShort Term Investment:


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It is more

riskyA success ful shor t term t rad ing mindset instead requires irondiscipline,

intense focus and steely devotion.Short termtrading can be divided in 3 sections

Day Trading

Swing Trading

Position TradingDay TradingDay traders buy and sell stocks throughoutthe day in the hopethatthe pr i ce of the st oc ks wi l l f luc t

ua te in va lu e du r i ng th e day, allowingthem to earn quick profits. A day trader

will hold a stockanywhere from a fewseconds to few hours, but will always sell

allof those stocks close of the day. Theday trader will thereforenotown any po s i t i o n a t t h e c l o s e o

f the each day , and there i sovern ight risk. The objective of day trading is to

quickly get in andout of any particularstock for profits anywhere from few cents


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toseveral points per share on an intra-day

basis. Day trading can befurther sub-divided into number of styles, including.

Scalpers:This style of day trading involves therapid and repeatedbuyin g and se l l ing o f a l a rge vo lume o f s tocks w i th in

s ec onds orminutes. The object ive isto earn a small

per share prof it on eachtransaction whileminimizing the risk.12

Momentum Traders:This style of day trading involvesidentifyingandtrad ing stocks that are in a moving pattern during the day, in anattemptto buy stocks at bottoms and sell at tops.

Swing Trading

The principal difference between daytrading and swing trading is thatswingtraders will normally have a slightly longertime horizon than daytraders for holding a


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position in a stock. As is the case with day

traders,swing traders also attempt topredict the short term fluctuation in

astocksprice. However swing traders arewilling to hold the stocks formore than

one day, if necessary, to give to stockprice some time tomove or to capture

additional momentum in the stocksprice. Swingtraders will generally hold on

to their stock positions anywhere fromafew hours to several days.Swing tradinghas the capability of providing higher

returns than daytrading. However, unlikeday traders who liquidate their positions attheend of each day, swing traders assume

overnight risk. There aresomesign if icant r isks in carrying positions overnight. For example newseven

ts and earnings warnings announced after the closing bell canresult in large,unexpected and possibly adverse changesto a stock'spricePosition Trading

Posit ion trading is similar to swing trading, but with a longer timehorizon.

Position traders hold stocks for a time


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period anywhere fromone day to several

weeks or months. These traders seek toidentifystocks where the technical trends

suggest a possible large movement inprice islikely to occur, but which may not be fully

played out for severalweeks or months.Long Term Investment:A successful long term trading mindsetrequires, above all, patience

andperseverance. These are more diff icult attributes to develop in the 13

average trader. Too often the averageshort-term trader succumbs tothe marketslure and develops a frantic, get-it-now

mindsetbelievingevery price blip represents a tr

ading opportunity. As this attitude isfanned by the media and brokerage industry,more and more longtermtraders have become aggress ive swing traders and swing tradersbeco m

e rab id day t raders -


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more o f ten than no t w i th d i sas t rou

sconsequences.Long term trading results inless trades with fewer mistakes and

lowercommission and slippage costs becauseovertrading is one of the biggestsources of

losses facing both new and establishedtraders. Why is thisso? Obviously, more

trades mean more commissions andmore slippage.Few short-

term traders realize, however, that theirtotal commissionand slippage costs inany year often exceed their total losses

fortheyear. In other words, many losingshort -term traders would haveactually

made money on an annual basis hadthey not incurredtheexorbitant commission and slippage

costs of trading throughout theyear.Fewer trades mean fewer mistakes.Long termtrading unlike short term requiresdramatically reduced timefor analysis andtrading. If you are trading using weekly

data, only oneto two hours each weekendare required to implement a

sophisticatedlong term trading system for 21


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or more commodities. This includes thetime

to completely download your quotes andupdate your data files,verify which are the

correct months to trade for each commodity,figureout if you have any positions to rollover,

generate your tradingsignals,and write down orders to you

r b roker . On the con t ra ry a typ i ca l successful day trader literally becomes a

slave to their quote machinesduring markethours

aCONCLUSION

With the increasing Global ization, the

Stock Exchanges havetremendouslyaffected the financial conditions of India.18

The stock markets of the future will have aredefinedpuposeandreinvented

architecture due to the advent andwidespread useof technology. Information and stock pri


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ce quotations are availablealmost

instantaneously, and, more importantly,investors can act onthis data by executing a

trade from anywhere at anytime. Thisnewmarket will bring benefits to investors,

the listed companies, andthe economies ofthe company. Trading will become

cheaper,fasterand settlement will besimpler wit reduced risk. Raising capital

forcompanies will become easier, therebycontributing directly to theEconomicGrowth.Already, BSE has shown its proac

tive response by increasinglyusingleading edge to technologies toeffectively compete in theglobal

environment. In the not too distant future,once full capitalaccount convertibility ispermitted in India, one could well

witnessan expansion of trading volumesand its resultant economic benefitsto thethriving and ever young metropolis ofMumbai.In sp it e of al l t he se po si t iv epred i c t i o ns , the f u ture o f S to ckExch

anges is likely to be uncertain and eventheir survival is amajor question mark.

==========================


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MEMBERSHIP

The change in the name of Asia's oldest stock exchange,from the Stock Exchange, Mumbai to the Bombay Stock

Exchange Ltd., (BSE Ltd.) is of more than cosmetic

significance. Along with the change in name comesa new

perspective, one brought about by a comprehensive

change in itsownership and management. Until now, the

BSE like most otherexchanges in India was owned andmanaged by brokers, who also hadthe sole right to trade

in the exchanges. Conflicts of interest were bound


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Bombay Stock Exchange45

to arise in such situations. Until the advent of the NationalStock Exchange in 1994, the BSE was India's pre-eminent

exchange,accounting for an overwhelmingly large

proportion of the share markettransactions of the country.

Companies wherever located were advisedto seek a listing

of their shares on the BSE so that they could haveaccess

to its large reservoir of capital and investor base.

Legallyspeaking, it was enough if they listed their shares

on any one of theregional stock exchanges, closest to their

registered office. This lastrule, like so many others

connected with the securities market, had tobe discarded

in the wake of the sweeping changes in the

financialmarkets since the 1990s. Perceptions of both

investors and regulatorschanged dramatically forcing thestock exchanges to overhaulthemselves.A series of

securities scams through the 1990s in which

brokerswereinvariably held accountable, the inability of

the broker-dominatedexchanges to check malfeasance,

and a vastly expanding role for thecapital market in the

national economy necessitated a thorough reviewof the

age-old stock market structure. In the newdemutualisedandcorporatised exchanges that came about

as part of a major capitalmarket reform a time-bound

program for 10 other exchanges has sincebeen announced


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the right to trade is segregated from the right toown and

manage the exchange. The transition is not going to be

easy asit involves the imparting of a much greater degree

of professionalism.Stock market professionals fromoutside the broking community arereportedly in short

supply. By far the biggest unknown factor relates tothe

future ownership of the exchange. Brokers will cede

control andinvestors including retail ones will hold a

substantial portion of theexchange's equity. Apart from

this being totally new to India, it doesraise the possibility

of other conflicts of interest including the oneconnected

with the listing of its own shares.

bombay stovk ecxchange

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