14.2        ndian    onom
                                                                (ii) Makes available the prices of trading as
        Definition                                                    an important piece of information to the
     The segment of a financial market of an economy                  investors.
     from long-term capital is raised via instruments          (iii) By following institutionalised rules
     such as shares, securities, bonds, debentures,                   and procedures, it ensures that the
     mutual funds, and is known as the security market                participants in the stock market live up
     of that economy.                                                 to their commitments.
          A security market has components such as a           (iv) Passes updated informations to the
     security regulator (SEBI in India), stock exchanges,             enlisted companies about their present
     different share indices, brokers, FIIs, jobbers, etc.            stockholders (so that they can pass on
     There are different kinds of transactions which                  dividends etc., to them).
     take place in a security market such as badla,             (v) By publishing its ‘Index’, it fulfils the
     reverse badla, future trading, insider trading (not              purpose of projecting the moods of the
     allowed), private placement, etc.                                stock market.
                                                                 World’s first stock exchange was established in
        Primary anD SeconDary marketS                      Antwerp, Belgium (then part of the Netherlands)
     Every security market has two complementary           in 1631, the London Stock Exchange opened in
     markets—primary and the secondary. The market         1773 and then Philadelphia Stock Exchange (the
     in which the instruments of security market are       first in the New World) opened in 1790.1 The
     traded (procured) directly between the capital-       first stock exchange in India, the Bombay Stock
     raiser and the instrument purchaser is known as       Exchange known as The Native Share and Stock
     the primary market. As for example, a share being     Brokers’ Association was set up in 1870 (under a
     directly purchased by anybody from the issuer         tree!).2
     which may be the company itself. The person is              Top five largest stock exchanges (on the
     known as the primary shareholder. The market          basis of market capitalisation) of the world in
     where the instruments of security market are          their decreasing order are—the New York Stock
     traded among the primary instrument holders is        Exchange, the NASDAQ, the Tokyo Stock
     known as the secondary market. Such transactions      Exchange, the London Stock Exchange and the
     need an institutionalised floor for their trading     Bombay Stock Exchange.3
     which is made available by the stock exchanges.             Trading in the stock exchanges takes place via
                                                           the mediators known as the brokers, the jobbers,
        Stock exchange                                     the market-maker (discussed later in this chapter).
     A physically existing institutionalised set-up where         As per the latest information,4 presently,
     instruments of security stock market (shares,         there are a total number of 26 stock exchanges
     bonds, debentures, securities, etc.) are traded. It       1.   Marc Levinson, Guide to Financial Markets (London:
     serves the following major functions:                          The Economist, 2006), p. 152.
          (i) Makes a floor available to the buyers and        2.   V. Raghunathan, Stock Exchanges and Investments
                                                                    (New Delhi: Tata McGraw Hill, 1994).
              sellers of stocks and liquidity comes to
                                                               3.   Marc Levinson, Guide to Financial Markets, pp. 153–54;
              the stocks. It is the single most important           Ministry of Finance, Economic Survey 2005–06 (New
              institution in the secondary market for               Delhi: Government of India, 2006).
              securities.                                      4.   MoF, GoI, dated 22 April, 2013.