The Bombay Stock Exchange (BSE) Essay Example

became an official organization known as 'The Native Share & Stock Brokers Association'. In 1956, the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act.

The Bombay Stock Exchange developed the BSE Sensex in 1986, giving the BSE a means to measure overall performance of the exchange. In 2000 the BSE used this index to open its derivatives market, trading Sensex futures contracts. The development of Sensex options along with equity derivatives followed in 2001 and 2002, expanding the BSE's trading platform.

Historically an open outcry floor trading exchange, the Bombay Stock Exchange switched to an electronic trading system in 1995. It took the exchange only fifty days to make this transition. This automated, screen-based trading platform called BSE On-line trading (BOLT) currently has a capacity of 8 million orders per day. The BSE has also introduced the world's first centralized exchange-based internet trading system, BSEWEBx.co.in to enable investors anywhere in the world to trade on the BSE platform.

For the premier stock exchange that pioneered the securities transaction business in India, over a century of experience is a proud achievement. A lot has changed since 1875 when 318 persons by paying a then princely amount of Re. 1, became members of what today is called Bombay Stock Exchange Limited (BSE). Over the decades, the stock market in the country has passed through good and bad periods. The journey in the 20th century has not been an easy one. Till the decade of eighties, there was no measure or scale that could precisely measure the various ups and downs in the Indian stock market. BSE, in 1986, came

out with a Stock Index-SENSEX- that subsequently became the barometer of the Indian stock market.

The launch of SENSEX in 1986 was later followed up in January 1989 by introduction of BSE National Index (Base: 1983-84 = 100). It comprised 100 stocks listed at five major stock exchanges in India - Mumbai, Calcutta, Delhi, Ahmedabad and Madras. The BSE National Index was renamed BSE-100 Index from October 14, 1996 and since then, it is being calculated taking into consideration only the prices of stocks listed at BSE. BSE launched the dollar-linked version of BSE-100 index on May 22, 2006. With a view to provide a better representation of the increasing number of listed companies, larger market capitalization and the new industry sectors, BSE launched on 27 May 1994 two new index series viz., the 'BSE-200' and the 'DOLLEX-200'.

Since then, BSE has come a long way in attuning itself to the varied needs of investors and market participants. In order to fulfill the need for still broader, segment-specific and sector-specific indices, BSE has continuously been increasing the range of its indices. BSE-500 Index and 5 sectoral indices were launched in 1999. In 2001, BSE launched BSE-PSU Index, DOLLEX-30 and the country's first free-float based index - the BSE TECk Index. Over the years, BSE shifted all its indices to the free-float methodology (except BSE-PSU index). BSE disseminates information on the Price-Earnings Ratio, the Price to Book Value Ratio and the Dividend Yield Percentage on day-to-day basis of all its major indices.

The values of all BSE indices are updated on real time basis during market hours and displayed through the BOLT system, BSE website and news wire agencies.

All BSE Indices are reviewed periodically by the BSE Index Committee. This Committee which comprises eminent independent finance professionals frames the broad policy guidelines for the development and maintenance of all BSE indices. The BSE Index Cell carries out the day-to-day maintenance of all indices and conducts research on development of new indices.

The following are some of the facts and figures that can help you get a better feel for the volume of trading that occurs on the Bombay Stock Exchange:

• In 2010, the average volume of business conducted on the BSE was approximately $23 billion each month.
• The number of shares traded each month on the BSE is in the range of 40 to 50 million.
• The total market capitalization for the companies traded on the BSE is in the area of $1.6 trillion.

All of the above dollar values are stated in USD. A very common name for all traders in the stockmarket, BSE, stands for Bombay Stock Exchange. The oldest market not only in the country, but also in Asia. In the early days, BSE was known as "The Native Share & Stock Brokers Association." It was established in the year 1875 and became the first stock exchange in the country to be recognised by the government. In 1956, BSE obtained a permanent recognition from the Government of India under the Securities Contracts (Regulation) Act, 1956.

In the past and even now, it plays a pivotal role in the development of the country's capital market. This is recognised worldwide and its index, SENSEX, is also tracked worldwide. Earlier it was an Association of Persons (AOP), but now it is a demutualised and corporatised entity

incorporated under the provisions of the Companies Act, 1956, pursuant to the BSE (Corporatisation and Demutualisation) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI).

BSE Vision

The vision of the Bombay Stock Exchange is to "Emerge as the premier Indian stock exchange by establishing global benchmarks." BSE Management Bombay Stock Exchange is managed professionally by Board of Directors. It comprises of eminent professionals, representatives of Trading Members and the Managing Director. The Board is an inclusive one and is shaped to benefit from the market intermediaries participation.

The Board exercises complete control and formulates larger policy issues. The day-to-day operations of BSE is managed by the Managing Director and its school of professional as a management team.

Bombay Stock Exchange – Origins

Bombay Stock Exchange, originally named as “The Native Share ; Stock Brokers’ Association”, was established in 1875. This makes BSE the oldest stock exchange in the Asian economic region. It is also the biggest South Asian stock exchange in terms of market capitalization (NSE is the second largest!), and the 11th largest on a global level (August 2009). When the government passed the Securities Contracts (Regulation) Act in 1956, the BSE was the first stock exchange in India to be recognized under the Act.

Originally mooted as an AOP (Association of Persons), BSE was demutualised and corporatized in 2005, and now functions as a company. The BSE is a potent symbolism of the Indian capitalist economy, and is an important landmark in the financial domain. Till the National Stock Exchange was found in 1992, the BSE continued to be the center of the Indian corporate world. Its traditional “open outcry” system of trading, with a milling

crowd of brokers jostling with each other to make deals, inspired many an aspiring entrepreneur. Over the years, BSE has been pivotal in providing the Indian business in that most vital of resources – Capital.

Every Indian corporate worth its salt has tapped the Indian capital market through the exchange, and every major company ha its shares listed on the BSE. A listing on the BSE was considered as the ‘holy grail’ in the Indian corporate and business world. BSE lost a substantial amount of reputation after the securities scam perpetrated by Harshad Mehta, and various scams in the following years have continued to pound its goodwill. Yet, the BSE continues to move from strength to strength, and continues to be the flagship of the Indian capital markets. The location of BSE – Dalal Street – has become the Indian equivalent of Wall Street.

Functionality and Role

BSE has pioneered various innovations into the Indian capital market. The BSE Index – called the SENSEX – is considered the pulse of the Indian capital system and industry. In addition to the main index – the Sensex – BSE also offers several sub-indices and sectoral indices. BSE has also introduced ETF (An Exchange Traded Fund) in collaboration with Hong Kong based Barclays Global Investors. The ETF enables foreign investors to invest in the Indian stock market.

BSE has been at the forefront of introducing transparency and successful-investors/”title=”investor ” ;investor friendliness in the trading of various instruments such as stocks, derivatives and debt instruments. It is a global pioneer in achieving the coveted ISO 9001:2000 certification, and the introduction of BOLT – BSE Online Trading System. BOLT is currently available to thousands

of traders across the country, and provides access to markets from the computer screens.

A service introduced in 2001, was first of its kind in the world – and enabled investors to deal in shares and stocks from the comfort of their computers. In addition to the equity market, BSE is also taking important steps to develop the retail debt market. This step will help the common investors to gain access to an alternative investment option, and provide greater diversification opportunities. BSE is also involved in a number of initiatives to educate the investors, monitor the markets and provide training and education on various aspects related to the Indian capital markets.