In starting our journey towards investing, we have to understand how share markets work and the different parties involved in it. It is essential to understand this since at every step of your interaction with share markets, requires multiple entities to fulfil their roles. 

Stock Exchanges: NSE & BSE

Stock Exchanges are the platform where shares of publicly listed companies are traded on. The two main exchanges that exist in India are Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Initially, the stock exchange was an offline platform for trading shares in an open-call market where traders openly bid for buying and selling equities.

In 1992, NSE introduced the advanced electronic trading system and removed the existing paper trading settlement system. It was the start of electronic trading in India which made trading in securities a much better process. The system evolved with better technology over the years leading to the system currently in place which has allowed for seamless trading even during the pandemic. 

SEBI

The Stock Exchange Board of India is the securities regulatory body that looks after imposing rules to ensure fair trade practices and protect investor interests. SEBI maintains supervision over the trading activities in the share markets and prevents investors from losing money in trading due to fraudulent activities of other participants. 

SEBI is also responsible for ensuring that NSE and BSE fairly conduct business while also imposing strict regulations on companies that are listed on the exchanges. Companies have to follow specific guidelines with regards to reporting their performance, declaring dividends, stock splits, and communicating relevant information that affects the share price of a company. The enforcement of these guidelines goes a long way in maintaining investor confidence in the markets. 

Depositories

A depository is like a bank, but a bank for storing your shares. During the early years, companies used to issue share ownership certificates to its investors in a physical form. Those certificates needed to be held by the investor to claim ownership in the company, avail the dividends paid out and sell it off to other investors. In 1996, shares certificates could be stored in digital forms. Depositories were in charge of maintaining records of shares owned by individuals. The process of converting share certificates into a digital form is called DEMATERIALISATION. These shares are held in an account called the DEMAT account. An individual willing to trade in the share market is required to open a Demat account with a depository. 

National Securities Depository Limited and Central Depository Services Limited are the two depositories in India. They are authorised to hold securities and maintain records of digital shares held by an individual.

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Stock Broker

A Stock Broker is an entity that is registered as a trading member with a particular exchange and holds a stockbroking license. The stockbroker provides customised services to individuals to allow them to trade in the stock market through its own platform. It is like a gate to the stock exchange. Individuals have to open a trading account with a chosen stockbroker to allow them to trade securities on a stock exchange like NSE or BSE.

In essence, an individual is required to open a trading account and a Demat account to participate in the share market. 

We are the leading financial advisor and registered member of the stock exchanges. Contact today to open an account with us and start your share market journey.