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
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.
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
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
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 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.
Related: Portfolio management services for a secure future
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.