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Types of Stock Exchanges in India


Posted Date: 13-Jun-2010  Last Updated:   Category: Education    
Author: Member Level: Gold    Points: 25


Read this article to know information on various types of Stock Exchanges in India.



Introduction:


At present there are only two nation wide Stock Exchanges. They are (A) OTCEI and NSEI. All other stock exchanges are regional. These two exchanges are totally computerized and totally dependent on telecommunication links.

(A) OTCEI (Over the Counter Exchange of India):


It was incorporated in October, 1990. The Government has conferred on it the status of a recognized stock exchange. It has been promoted jointly by the following financial institutions:-
  • UTI - Unit trust of India
  • ICICI - Industrial Credit and Investment Corporation of India
  • IDBI - Industrial Development Bank of India
  • IFCI - Industrial Finance Corporation of India
  • LIC - Life Insurance Corporation of India
  • GIC - General Insurance Corporation
  • SBI Capital Market Limited
  • Canbank Financial Services Limited

Features of OTCEI:


(i) Floor less Exchange: All the activities of OTCEI are computerized.
(ii) Promoters Designation: The promoters have been designated as sponsor members, and they alone are entitled to sponsor a company for listing here.
(iii) Network spread all over: OTCEI network is spread all over India through members, dealers and representative office counters.
(iv) Use of Computers and telecommunications: It uses computers and telecommunications to bring members and dealers together electronically enabling them to trade with one another over the computer.

Advantages of OTCEI:


(i) Easily Accessible: OTCEI counters are easily accessible.
(ii) Best Prevailing Quotation: Its system ensures that trades are done at the best prevailing quotation in the market. The investor can view the quotation on the computer screen at the dealer's office before placing an order. There is total transparency and fairness so far as deals are concerned. This improves the confidence of investors.
(iii) Fast and Completed quickly: At OTCEI transactions are fast an completed quickly. The transaction is settled within 7 days for listed securities.
(iv) Single Platform: It provides a single platform for investors throughout the country.
(v) Raising of Funds Easier: The company has the option of allotting all the shares to a sponsor. In this case, the company has only to negotiate the issue price with the sponsor who finally markets he issue. This ensures swifter availability of funds to companies for timely completion of projects.

(B) NSEI (National Stock Exchange of India):


NSEI was incorporated in November, 1992 and become a recognized stock exchange from April 26, 1993.
Promoters of NSEI:
  • IDBI – Industrial Development Bank of India
  • IFCI - Industrial Finance Corporation of India
  • ICICI - Industrial Credit and Investment Corporation of India
  • LIC - Life Insurance Corporation of India
  • GIC - General Insurance Corporation
  • SBI - Capital Market Limited
  • Stock Holding Corporation of India Limited
  • Infrastructure Leasing and Financial Services Limited

Features of NSEI:


(i) Operation in Wholesale Debt Market: NSEI commenced trading operations in Wholesale Debt Market (WDB) segment in June 1994, and later in November in the same year, introduced trading in equity segment.
(ii) No Trading Floors: NSEI does not have trading floors as in conventional stock exchanges. It has fully automated screen based trading system. The screen provides entire market information at the press of a button.
(iii) Trading through Computer: Each trading member trades on the NSEI with other members through a computer located at the trading member's office any where in India. Satellite links are established using VSATS (Very Small Aperture Terminals) at the office of the trading members.
(iv) Entry into Listing Agreement: A company desiring to get listing at the NSEI has to enter into a listing agreement and is required to pay the specified listing fee.

Advantages of NSEI:


(i) Stock Exchange Reforms: NSEI encourages stock exchange reforms through modernization and competition.
(ii) Extends operation: It extends operations to cities which do not have stock exchange of their own.
(iii) Equal Access and Equal opportunities: Members have equal access and equal opportunities of trading, irrespective of their location in different parts of the country, as they are connected through a satellite network.
(iv) Transparency in Deals: NSEI system of working shows transparency in deals. It provides a complete audit trial of all transactions. Date and Time of the transactions are indicated. Price and brokerage are shown separately on the contract notes.
(v)Meets Current International Standards: NSEI meets current international standards of securities market.


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