What is BSE or Bombay Stock Exchange?

The abbreviation BSE stands for Bombay Stock Exchange, the oldest stock exchange in both India and Asia. Founded in 1875 by Premchand Roychand, it is currently led by Shri Sundararaman Ramamurthy, serving as the Managing Director and CEO.

What is Bombay Stock Exchange

The Bombay Stock Exchange, situated on Dalal Street, Mumbai, is a major hub for securities trading, listing over 6000 companies. It plays a vital role in shaping India's capital markets by offering trading opportunities in various financial instruments like stocks, mutual funds, and debt securities. Additionally, BSE provides essential services like investor education, risk management, and clearing and settlement facilities.

Key Features of Bombay Stock Exchange (BSE)

The features of Bombay Stock Exchange (BSE) are manifold, offering a range of services to investors, traders, and listed companies in the Indian market. Here are some notable characteristics:

• Equity Trading: As a primary marketplace, BSE facilitates the exchange of equities, including stocks and shares, of publicly listed Indian corporations. Investors can buy and sell these securities during specified trading hours.

• Listing Services: BSE aids companies in getting listed on the stock market through initial public offerings (IPOs) and follow-on public offerings (FPOs). This process enables companies to raise capital by issuing shares to the public and becoming listed entities.

• Commodities Trading: In addition to equities, BSE provides a platform for trading derivatives of commodities such as gold, silver, and agricultural products.

• Regulatory Compliance: BSE ensures that listed companies adhere to regulations established by regulatory bodies like the Securities and Exchange Board of India (SEBI), particularly concerning disclosure requirements and other regulatory standards.

• Corporate Governance: The exchange promotes principles of good corporate governance and transparency among listed companies, fostering investor confidence and trust in the market.

How does the Bombay Stock Exchange operate?

Financial transactions on the Bombay Stock Exchange (BSE) are conducted electronically through its BSE online trading system. Market orders can be placed directly on the BSE platform without the need for external specialists, providing direct market access. This eliminates the need for limit orders, shifting the focus to the total value of daily transactions.

 

Trading in the share market Bombay is typically facilitated through brokerage agencies, albeit with associated charges. However, certain privileged investors conducting large transactions in the BSE stock market are granted direct investment access. The BSE utilizes the Bombay Online Trading (BOLT) system for efficient trading operations.

 

Transactions conducted on the BSE online platform follow a T+2 rolling settlement, where all transactions are processed within two days. The Securities and Exchange Board of India (SEBI) oversees the regulation of the BSE, ensuring smooth operation by continuously updating rules and regulations.

History of Bombay Stock Exchange

BSE history has a fascinating origin. Back in the 19th century, traders, along with businessman Premchand Roychand, would gather under a Banyan tree on Dalal Street. This informal gathering, known as the Native Share and Stockbrokers Association, was where buying and selling of stocks took place. Eventually, this association evolved into the Bombay Stock Exchange (BSE).

 

Initially, BSE operated on a floor trading system, where a licensed broker would stand in a ring and announce the changing prices. Investors who were not present at the exchange would rely on newspapers to learn about stock prices. However, with the advent of digitalization, the National Stock Exchange (NSE) transitioned to a digital platform, making stock prices accessible to all investors. This shift made NSE a preferred destination for investing.

 

Observing this trend, the board of BSE decided to modernize their system. In 1995, BSE received technological assistance from CMC Ltd and transitioned to a digital platform. Today, the BSE trading area is known as BSE online trading, reflecting its embrace of digital technology.

Advantages Of Listing on BSE

Benefits for Companies Listed on Bombay Stock Exchange (BSE):

• Hassle-free Capital Generation: Listed companies gain trust and attract various investors, facilitating capital generation.

• Enhanced Liquidity: Being listed on BSE allows easy selling of market securities, meeting liquidity needs for both businesses and investors.

• Efficient Trading: Securities purchased can be swiftly sold through BSE's electronic trading settlement, ensuring quick encashment.

• Legal Oversight: BSE-listed companies undergo strict SEBI regulations, reducing risks associated with fraudulent activities.

• Timely Information Disclosure: Companies must annually disclose financial data, dividends, and other details, ensuring transparency.

• Pricing Integrity: Share prices in BSE reflect real market demand, affecting market capitalization and fund procurement ease.

• Collateral Assurance: BSE-listed equity shares serve as collateral for loans, widely accepted by financial institutions.

The Bombay Stock Exchange (BSE) is crucial for several reasons:

• Liquidity and Investment Opportunities: BSE provides a liquid market for trading equities and other financial instruments, offering investment opportunities for investors.

• Economic Indicator: BSE's performance reflects the state of the Indian economy, serving as an indicator of economic growth and stability.

• Financial Inclusion: BSE promotes financial inclusion by enabling a wider population to invest in the stock market, fostering wealth creation and economic development.

• Market Benchmark: BSE's primary index, the S&P BSE Sensex, is widely used to evaluate market trends and performance by investors and analysts.

• Corporate Governance and Transparency: Listed companies on BSE adhere to strict regulatory and reporting standards, promoting transparency and corporate governance, which is vital for investor confidence.

 

In summary, BSE plays a pivotal role in capital formation, investment opportunities, transparency, and economic growth in India. It serves as an important barometer of the economy's health and facilitates wealth creation through profitable investments.

 

Frequently Asked Questions

1. What is BSE known as?

BSE Ltd., formerly known as Bombay Stock Exchange Ltd., is Asia's first stock exchange. Established in 1875, it is one of India's leading exchange groups and has played a significant role in developing the Indian capital market.

 

2. Define BSE and how does it work?

BSE stands for Bombay Stock Exchange. It was established with several key objectives: firstly, to make public capital accessible to entrepreneurs; secondly, to ensure attractive returns on investment; thirdly, to foster the growth of a robust market for buying and selling securities; and lastly, to promote ethical practices within the financial industry.

 

3. What is the Bombay Stock Exchange and where is it located?

The Bombay Stock Exchange (BSE) is an Indian stock exchange that enables investors to trade in stocks, equities, mutual funds, commodities, derivatives, and more.Itis situated in Dalal Street, Fort, Mumbai – 400001.

 

4. What is the BSE online trading system?

The Bombay Online Trading System (BOLT) allowed India's oldest stock exchange to extend trading operations to 118 cities nationwide. Currently, BOLT has the capacity to process 500,000 trades during a seven-hour trading session per day.

 

5. What is the history of BSE (Bombay Stock Exchange)?

BSE, Asia's inaugural stock exchange founded in 1875, holds the distinction of being the first in India to receive permanent recognition under the Securities Contract Regulation Act, 1956. Its journey to prominence spans 143 years of financial evolution.