Which Are the Major Stock Exchanges to Trade Equities?
A stock exchange is a place where financial instruments like equities, futures, and options are bought and sold. In short, these equity and other financial products are traded real-time on the stock exchange. Globally, some of the top stock exchanges in the world are the NYSE, the American Stock Exchange, NASDAQ, London Stock Exchange, Amsterdam Stock Exchange, Tokyo Stock Exchange, Shenzhen Stock Exchange, etc. There are also other major stock exchanges across the world like in South Korea, Singapore, Saudi Arabia, Taiwan, etc.
There are two major stock exchanges in India viz NSE and BSE. Apart from these major stock exchanges in India, there are also other stock exchanges we will discuss. This is not to forget about the 20 plus regional stock exchanges that have already shut operations or merged out in the last few years due to steep capital requirements.
The major Stock Exchanges to Trade Equities
The Stock Exchange facilitates the smooth trading, clearing, and settlement of equity and derivative trades. For any growing economy, a roust stock exchange is central as it ensures that capital is allocated efficiently, businesses can raise capital and investor can create long-term wealth.
We focus on the major stock exchanges that are still functioning in India and then on some of the emerging stock exchanges and also stock exchanges that do not exist any longer. Here is a quick take.
Here are some of the major functional stock exchanges in India
- We start with the oldest stock exchange, not only in India but also in Asia. Yes, we are referring to the Bombay Stock Exchange more popularly known as simply BSE or more colloquially as Dalal Street. The BSE was formed in 1875 by a group of brokers in Mumbai. The BSE currently provides an efficient and transparent mechanism for trading in currencies, equities, mutual funds, futures, options, and even commodities. BSE has also adopted state-of-the-art technology in its day-to-day operations. BSE has its own Indian Clearing Corporation Limited which acts as a central counterparty for all BSE trades. BSE is also known for its popular benchmark index, the BSE Sensex.
- The stock exchange that started operations in 1993 and almost change the rules of the stock trading game was the National Stock Exchange or the NSE. It has the distinction of being the first dematerialized electronic exchange in India. NSE was also the pioneer in offering a fully-automated screen-based trading system to investors. This not only simplified trading but gave a transparent mechanism where traders were assured of getting the best possible price. While NSE started much after BSE, it assumed leadership in the futures and options segment and now accounts for a bigger chunk of the volumes in futures and options in India. The NSE was also instrumental in the creation of the National Securities Depository Limited (NSDL) which facilitates Demat holding of shares in electronic form. Some of the popular indices of the NSE are the Nifty-50 and the Bank Nifty. NSE also trades the volatility index, VIX.
- Among the few regional stock exchanges that still exist is the Calcutta Stock Exchange better known as CSE or Lyons Range. Interestingly, after BSE, the Calcutta Stock exchange is the second oldest in Southeast Asia and was incorporated in the year 1908. That was the time when Kolkata was still a very major trading center for the British. However, Calcutta Stock Exchange also eventually plans to exit from the exchange business with the consolidation of business at an all-India level with the NSE and BSE.
- The Metropolitan Stock Exchange or MSE had a rather volatile history since it was recognized as a “notified stock exchange” in 2012 by SEBI. The MSE intended to offer an electronic and hi-tech trading platform in equity, debt, and F&O. It launched the SX40 index in the year 2013 and commenced trading from February 11th, 2013. However, the exchange had a rather shaky start. It began as MCX Stock Exchange but had to face its first hurdle in July 2013 when the NSEL Spot Exchange scam broke outputting the future of the MCX Stock Exchange in jeopardy. The exchange did manage to salvage the situation later by changing its entire erstwhile management and also by inducting new institutional investors and a professional management team.
- India International Exchange or the India INX was one of the dream projects of the Modi government. The India International Exchange (INX) is located at the International Financial Services Centre or IFSC in Gandhinagar, the capital city of Gujarat. It commenced operations in 2017 and is currently a subsidiary of the BSE. The INX offers a single segment approach for all asset classes ranging from equities, currencies, derivatives, and commodities. The biggest attraction is the competitive tax structure that it offers to global investors. Along similar lines, the NSE also floated its own NSE IFSC in 2016. Here also, the attractions include exemptions from security transaction tax (STT), commodity transaction tax (CTT), dividend distribution tax, capital gain tax, and income tax.
It needs to be noted that based on approval received from SEBI, such exchanges based in the IFSC are eligible to offer to trade in foreign companies, equity shares of companies incorporated outside India, Indian ADRs, global currencies, global interest rates, interest rate swaps, non-agriculture commodity derivatives, etc. It will only offer products from FATF-compliant jurisdictions.
In the past, India had several regional stock exchanges like the stock exchanges of Ahmedabad, Vadodara, Hyderabad, Cochin, Magadh, Delhi, Pune, Bangalore, Coimbatore, etc. Most of these exchanges have either wound up operations or have merged out with other exchanges or are just operating as a platform offering connectivity to the NSE and the BSE. Regional stock exchanges largely lost their relevance after national trading was introduced in India with the advent of the NSE.
How to Invest in Equity Shares
The first step to investing in equity shares is to open your trading account and Demat account. Normally, both these accounts are opened with the same broker for ease of operation. The trading account facilitates trades while the Demat account is the repository that holds your trades. Once the account is activated, you are ready to trade. Then the requirement is that you do your research on companies and trade with proper risk control checks like stop-loss, profit targets, etc.
Why Invest in Equities
Equities help investors to participate in the long-term growth of the companies and also of the Indian economy. It has been observed with empirical data that it is only quality equities that generate maximum wealth in the long run.
Frequently Asked Questions Expand All
In terms of active stock exchanges, apart from the NSE and BSE, there is the Metropolitan Stock Exchange and the two exchanges at the IFSC.
There is nothing like the best stock exchange as each stock exchange has its own niche. For example, BSE offers cash market trading in over 4200 stocks and has a strong coverage of mid cap and small cap companies. NSE has the advantage of larger volumes in equity and also in futures and options trading.
A stock exchange is where stocks as well as stock futures, stock options, index futures and index options are trade. A commodity exchange typically trades in commodity futures and options and are spread across agricultural commodities, metals, oil, natural gas and precious metals like gold and silver. In terms of volumes, while NSE is the largest stock exchange, MCX is the largest commodity exchange.