The document compares the functioning of Indian stock exchanges like BSE and NSE to major international exchanges. It provides details on the history and development of BSE and NSE in India. Key points include that BSE was the first stock exchange recognized in India while NSE was set up later to increase transparency. NSE also introduced electronic trading and reduced settlement cycles. The document also notes that India's free float market capitalization is lower than other countries due to large promoter holdings.

1. Financial Markets and
Institutions Project
Admin Group 8:
• Nikhil Chug (36)
• Parth Dhakad (37)
• Prateek Upadhyay (38)
• Preeta Kudalkar (39)
• Raghav Agarwal (40)

2. Comparison of functioning of
Indian Stock Exchanges and major
stock exchanges around the world.

3. What is a ‘Stock Exchange‘?
An exchange is a marketplace in which securities,
commodities, derivatives and other financial instruments
are traded. The core function of an exchange is to ensure
fair and orderly trading, as well as efficient dissemination
of price information for any securities trading on that
exchange. Exchanges give companies, governments and
other groups a platform to sell securities to the investing
public.

4. Importance of stock exchange in the economy
• Stimulates the economy by attracting capital (domestic
and foreign) by attracting capital for investments in
projects.
• Channelizes savings of investors into productive areas.
• Speeds up economic growth.
• Considered to be the barometer of economic growth
of a country.

7. Only 16 exchanges have market capitalizations over $1 trillion. Here are
those visualized by market cap :

10. Apart from the above two major exchanges, India has a number of regional stock
exchanges and The India International Exchange (INX), India's first international
stock exchange, opened in 2017. It is a wholly owned subsidiary of BSE.

12. BSE
In 1957, BSE was recognised by the Central
Government of India as the premier Stock Exchange
of the country. Sensex is the oldest market index for
equities; it includes shares of 30 firms listed on the
BSE, which represent about 45% of the index's free-
float market capitalization. It was created in 1986
and provides time series data from April 1979,
onward. In the year 1995, BSE Online Trading
System (BOLT) was started. The Association of
persons was converted to a separate legal entity
with the name of Bombay Stock Exchange Limited,
in 2005.

13. NSE
NSE was mainly set up to bring in transparency in the
markets. Instead of trading membership being confined to
a group of brokers, NSE ensured that anyone who was
qualified, experienced and met minimum financial
requirements was allowed to trade. In this context, NSE
was ahead of its times when it separated ownership and
management in the exchange under SEBI's supervision.
The price information which could earlier be accessed only
by a handful of people could now be seen by a client in a
remote location with the same ease. The paper-based
settlement was replaced by electronic depository-based
accounts and settlement of trades was always done on
time. One of the most critical changes was that a robust
risk management system was set in place, so that
settlement guarantees could protect investors against
broker defaults.

14. NSE is one of the first de-mutualised stock
exchanges in the country, where the ownership
and management of the Exchange is completely
divorced from the right to trade on it. It has
been set up as a public limited company, owned
by the leading institutional investors in the
country.

15. NSE’s trading system, is a state of-the-art application. It
has an up time record of 99.99% and processes more
than 450 million messages every day with sub millisecond
response time.
NSE has taken huge strides in technology in these 20
years. In 1994, when trading started, NSE technology was
handling 2 orders a second. This increased to 60 orders a
second in 2001. Today NSE can handle 1, 60,000
orders/messages per second, with infinite ability to scale
up at short notice on demand, NSE has continuously
worked towards ensuring that the settlement cycle comes
down. Settlements have always been handled smoothly.
The settlement cycle has been reduced from T+3 to
T+2/T+1.

22. India’s free-float market capitalization as a percentage of its full market cap is
among the lowest in developed and emerging markets because of large
shareholdings of promoters. This is one of the reasons for the country’s
comparatively low share in the global indices.

23. The government is looking at divesting stake in
companies as there are a number of state-owned
firms where the government owns more than 80%
of the stake. This will increase the free-float, which
will lead to better liquidity in the market and more
efficient price discovery of the stock, besides
helping the government meet its fiscal deficit
target.
It should also help in increasing India’s weightage in
global indices.

24. Listing Requirements

30. The proportion of retail investors in India’s equities
markets is strikingly low. Less than 1.5% of the
population invests in securities, compared with
almost 10% in China and 18% in the US. Just 2% of
India’s household savings are exposed to equity; in
the US, the long-term average is 45%.
This is ultimately bad news for India’s economy. The
country desperately needs to channel more
household savings into equities—which are a vital
source of corporate finance—and away from
unproductive investments in gold and real estate.
India also needs more local funds if it’s to sustain
the strength in its equities market while avoiding
macroeconomic imbalances. At the moment,
around 70% of the market is dominated by foreign
institutional investors.