The stock exchange is a development of the 19th century. In India, the first organised stock exchange was set up in Bombay in 1887 under the name of Native Share and Stock Broker’s Association.
It was followed by stock exchanges at Ahmedabad and other places, under the Securities Contracts (Regulation) Act, 1956. At present, there are 22 recognised stock exchanges at Mumbai, Kolkata, Chennai, Delhi, Ahmedabad, and Hyderabad. Bangalore, Indore, Kochi, Kanpur, Pune, Ludhiana, Guwahati, Mangalore, Patna, Jaipur, Bhubaneswar, Coimbatore, Rajkot Vadodara.
National Stock Exchange (NSE) and, Over the Counter Exchange of India (OTCEI) the rules, regulations and by-laws of different stock exchanges are by and large similar so as to conform to the draft rules framed under the Act.
From the point of view of the investment business, Mumbai (known as Dalai Street) and Kolkata (called Lyons Range) stock exchanges are prominent.
A stock exchange is organised either as a joint stock company or as a society. Every stock exchange is managed by a Board of Directors or an Executive Committee/Governing Board.
The members of this Board are elected from among the members of the stock exchange. The executive members elect from among themselves the President and the Vice-President.
The Board formulates and executives policies, rules and regulations. These rules and regulations should be in conformity with the laws governing stock exchanges.
Types of Operators
The operators who buy and sell securities on a stock exchange are of several types. Some of them are described below.
A broker is a member of the stock exchange. He buys and sells securities on behalf of outsiders who are not members. He charges brokerage for his services. He does not specialise in any particular security. He buys and sells all types of securities according to the orders placed by his clients.
A jobber is a member of the stock exchange but he buys and sells securities on his own behalf. He is a dealer in securities. He usually specialises in one type of security. His income comes from the profit or price difference in the purchase and sale of securities.
On the Mumbai Stock Exchange, a jobber is also known as tarawaniwala. A tarawaniwala normally deals for him but he is not prohibited from buying and selling securities on behalf of others.
A bull is a speculator who expects a rise in prices. Therefore, he buys securities with a view to sell them in future at a higher price and thereby make a profit. In India, a bull is also known as a tejiwala.
When the conditions in the stock exchange are dominated by bulls, it is called a bullish market. When the prices fall and bulls have to sell at a loss, it is called bull liquidation.
A bear is a speculator who expects a fall in prices. Therefore, he sells securities for future delivery. He sells securities which he does not possess. It is called short selling. He sells with the hope to buy the securities at a lower price before the date of delivery.
In India, a bear is known as a mandiwala. The efforts of bears to bring down the prices artificially are known as bear raids. When the market is dominated by bears, it is called a bearish market. When prices rise and bears have to make purchases to meet their commitments, it is called bear covering.
Brokers and jobbers buy and sell securities generally for investment purposes. On the other hand, bulls and bears are speculators. They do not want to invest money in securities. Rather they buy and sell with the purpose of making profits from fluctuations in prices.