4.5 What is a stock exchange?

Hanumant Dhokle


We have seen how the private companies initially sell their stocks to the public through a process called the initial public offering (IPO). But what if you want to buy and sell shares of a company that is already public? How would you go about finding someone who owns the stock that you wish to buy? And when you are ready to sell, how would you find someone who wants to buy the stock that you own? Obviously, buying and selling public stocks would be very difficult without a centralised system for buyers and sellers.

Stock exchanges are structured marketplaces for the proper conduct of trading in company stocks and other securities. There are 19 stock exchanges in India recognised by SEBI, including the Over The Counter Exchange of India for providing trading access to small and new companies. There are two derivative exchanges also. The stock exchanges are supposed to provide nationwide services to investors and to facilitate the issue and redemption of securities and other financial instruments. It is a form of stock market which is organised, structured and it provides a platform for trading (buying and selling) shares in a systematic manner, thus providing assurance, safety and security for trade (buy or sell).

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