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Stock Exchanges in India and Trading in Unlisted Securities


Indian Premier League 2020 is finally taking place and it will be organized in the United Arab Emirates in the month of September to November. After this news, tournament heat is picking up in the hearts of the IPL's fan and so does in the shares of Chennai Super Kings. Yes Dhoni's CSK, it is not any other company but the IPL team. A Chennai Super king's share is trading in the range of 28 to 35 in the unlisted security market or the over the counter market (OTC Market). More about it later. The trading of CSK's share brings us with a question that how the share trading works in India?


Most of the people will be familiar with the two exchanges that account for most of the share trading done in India, these are the National Stock Exchange (NSE) and BSE Ltd. formerly known as Bombay Stock Exchange. These stock exchanges provide good liquidity and services for trading, especially in Blue Chip companies. Thus, most of the Indian Investors and brokers prefer to trade in these exchanges but there are seven other active exchanges registered with Security Exchange Board of India and allowed to operate in India.


Stock Market and Stock Exchange

The stock market refers to the market where a corporation or an entity or a company issues securities like shares or bonds and sell them to the taker of those securities. This selling and buying can be done privately or through a formal and established exchange.


When it is done in the private market via brokers then this market is called over the counter market. In these private placements, you can buy and sell those securities which are not listed on the Stock Exchanges like CSK, Paytm, OYO, HDB Financial, Jio and many others. These shares are mostly sold by the employees who have ESOPs of these company. Unlisted security markets are less liquid and have more risks than the market on the exchanges.


The stock exchange is the subset of the stock market which facilitate and regulate the transactions between the buyers and sellers of the security. Stock exchange helps in providing better liquidity and other services like derivative trading, constructions of indices, reduction of the counter party and other risks, and many more. They are mostly regulated and keep a watch on the companies listed on them. In India, the stock exchanges are registered and regulated under the Securities and Exchange Board of India Act, 1992.


Inactive Stock Exchanges

There can be many stock exchanges in one jurisdiction.

At one point of time, India was home to about 30 stock exchanges in which most were regional stock exchanges which gradually closed due to stringent amendments in the Securities and Exchange Board of India Act, 1992 overtime.

Here is the list of 20 regional stock exchanges that do not operate anymore:


Among all the regional stock exchanges only Calcutta Stock Exchange (CSE) was able to survive the tight rules and regulations of the security exchange board of India.


Active Stock Exchanges

Currently, India has 9 stock exchanges that are active and provide trading services in many domains like currencies, equities, bonds, commodities, derivatives etc. They are all work under the scrutiny of the Security Exchange Board of India (SEBI). Discrepancies are sent to the SEBI and SEBI ensures that all of the stock exchanges work fairly and in the interest of the investors.



National Stock Exchange (NSE)

National Stock Exchange was launched in 1992 as a rival of the Bombay Stock Exchange which was the only stock exchange in India at that time. Trading in NSE started on 4 November 1994 and in the span of just one year, the NSE surpasses the turnover of Bombay Stock Exchange and became the largest in India. In 1996 NSE started to provide trading services online and transformed the trading scenario in India. By 2000, NSE opened itself to derivatives trading and grabbed the large portion of trading and leaving BSE far behind.

BSE slowly picked up and now there is a great tussle between NSE and BSE over the position of largest stock exchanges. According to turnover, NSE is the 11th largest stock exchange in the world just shy to BSE's turnover.


BSE Ltd.


BSE Ltd. formerly known as Bombay Stock Exchange is the oldest, fastest and largest stock exchange of India. It was founded in 1875 by the businessman Mr Premchand Roychand, famously known as the cotton king and became the first stock exchange of Asia. Currently, it has around 5000 companies listed on it which makes it 10th largest stock exchanges in the world as per total market capitalisation.


Calcutta Stock Exchange

Located in Kolkatta, CSE is the second oldest stock exchange in Asia founded in 1908 and only regional stock exchange dared to survive even after the notice to close by SEBI. This matter is under judicial consideration in the Calcutta High Court. The major index of Calcutta stock exchange is CSE40.


Multi Commodity Exchange

Multi Commodity Exchange was established in 2003 and It is India's largest commodity derivatives exchange. MCX offers options trading in gold and futures trading in non-ferrous metals, bullion, energy, and a number of agricultural commodities (mentha oil, cardamom, crude palm oil, cotton, and others).


Metropolitan Stock Exchange

It was founded in 2008 and based in Mumbai. MSE offers an electronic, transparent and hi-tech platform for trading in Capital Market, Futures & Options, Currency Derivatives and Debt Market segments. The Exchange has also received in-principle approval from SEBI for operationalizing SME trading platform. I can't find much about this exchange and don't know why SEBI is allowing it to operate. There is news that it will merge with the MCX later in future.


India International Exchange (India INX)

The India International Exchange Limited (India INX) is India's first international stock exchange. It is located at the International Financial Services Centre (IFSC), GIFT City in Gujarat. It is a subsidiary of BSE Limited. It was inaugurated by our Prime Minister Narendra Modi on 9 January 2017. It is the world's fastest exchange, with a turn-around time of 4 microseconds.


NSE IFSC Ltd.

NSE IFSC is a fully-owned subsidiary company of National Stock Exchange of India, a stock exchange launched as a global trading platform in the International Financial Service Centre (IFSC) in Gujarat International Finance Tech (GIFT) city.


National Commodity & Derivatives Exchange

National Commodity & Derivatives Exchange Limited is an online commodity exchange based in India. It has an independent board of directors and provides a commodity exchange platform for market participants to trade in commodity derivatives.


Indian Commodity Exchange

ICEX was the fourth exchange commodities exchange to open in India, launching in 2009 but it closed in 2014. NMCE and ICEX agreed to merge in July 2017 and were to close the deal by December 2017.


Fin.

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