BSE Industrial Visit
Unitedworld School of Business PGPM Batch 2011-13 had their BSE Industrial visit on 10th January, 2012. We would like to thank Jayanta Sir & Madhu Ma’am for giving us this opportunity to visit the Mecca of Asia’s oldest Stock Exchange.
INTRODUCTION OF BSE
The Bombay Stock Exchange is the oldest exchange in Asia. It traces its history to the 1850s, when four Gujarati and one Parsi stockbroker would gather under banyan trees in front of Mumbai’s Town Hall. The group eventually moved to Dalal Street in 1874 and in 1875 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.
At the BSE, Mr. Purav explained to us how the stock market functioned back then, and now. He frequently compared the stock market with a vegetable market as it was easier for us to understand on how it works. Many in the crowd were totally new to this and by making this comparison, it turned out to make the subject a lot more interesting.
The initial trading procedure was explained in 3 stages. The first one being the Order stage. Here, the parties involved meet each other and negotiate the terms and conditions of the contract. This is the stage where the buyer and the seller discuss their choices et al.
After this comes the second stage which he said was the Agreement stage. This was the point of time where the order was converted into an agreement. If there was no agreement, the trade or transaction would have no meaning and there would be no settlement made.
Thirdly, as the agreements are made, the traders needed a place to finally convert their previous actions. This he said was the Trading stage. This is when the final trading of the respective securities was made where money and the securities changed hands.
Earlier, there was a lot problems faced by many investors due to the lack of communication and the lack of transparency in the whole procedure. But with the advent of technology, all these problems have faded away and it has created an increase in the number of the investor base. More people turn to the securities markets to invest their money. This was created with the introduction of De-Mat account, which is an electronic storage and transfer facility for securities. Another technological advancement was the introduction of BOLT (BSE Online Trading System).
BOLT too has a number of functions where it receives a number of orders. It then arranges the orders according to many factors like Scrip to Scrip, Buy orders, Sell orders, and the preferences of the investor which mainly included the time, price and quantity of the security. Finally it did the work of matching orders where it would find an ideal match between the buy and seller based on the above mentioned parameters.