What is Bombay Stock Exchange (BSE) ?

Stock market has seen a huge uptrend in trader/investor participation in last couple of years. Major credit goes to SEBI, who brought transparency and innovations to the system by enforcing bye-laws to financial intermediaries and addressing investor’s grievances.  

A stock exchange is the base of stock market eco-system. BSE Ltd. (formerly known as Bombay Stock Exchange Ltd.) took the initiative to organize brokers and holds the crown to be the first stock exchange in Asia. 

What is Bombay Stock Exchange

Tracing stock market back to 19th century, it didn’t actually exist as an organized system. It was East India Company who, in late 18th century started trading loan securities. Gradually by mid- 1850, a group of Indians used to meet and trade under a banyan tree, opposite Town Hall of Bombay. Brokers of this small trading group expanded and reached to 250. Due to the increasing number of the member, it was required to have some rules/guidelines and a well-established system. Thus, on 09 July 1875, this group established itself as “The Native Share and Stock brokers Association” and started functioning in more organized manner. On 31 August 1957, Union Government of India recognized BSE as the first stock exchange of India under the Securities Contracts Regulation Act. SEBI regulates BSE, just like it regulates any other financial intermediary.

In below image, you can have a glimpse of the incredible BSE timeline journey so far.

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BSE timings

BSE opens at 09:15 and closes at 15:30. There is a 15-minute pre-market session from 09:00 to 09:15. This pre-market session is provided to settle-down any over-excited market sentiments, resulted by any overnight news. You can know more about pre-market session.  

Apart from this everyday timing, BSE is closed on weekends and the declared holidays for the financial year.

BSE Address

BSE trading platform

BSE was functioning as a floor trading exchange, where trades were performed by shouting trades prices on a floor in the exchange. Technology development, more client base and the arrival of a competitor NSE with the electronic trading platform, led BSE to adopt the digital platform. In 1995, BSE switched to electronic trading platform developed by CMC Ltd. This trading platform is called BSE On-Line Trading (BOLT).

BSE Index

Currently, there are around 5788 companies listed on BSE. This figure keeps on changing as some companies get listed and some de-listed. 

An index of a stock exchange represents the amount of liquidity and market sentiments at a glance. This index is compiled by choosing some scrips who fulfil the criteria for the index. BSE index is called S&P BSE SENSEX. 

S&P BSE SENSEX is compiled by choosing 30 (currently 31) BSE listed companies from various sectors. It was first introduced in 1986 using Market Capitalization-Weighted methodology. The base year of S&P BSE SENSEX was taken as 1978-79. Since September 1, 2003, S&P BSE SENSEX is being calculated on a Free-Float Market Capitalization methodology. It is the oldest index in the country thus provides time series data over a fairly long period of time (from 1979 onwards).
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S&P BSE SENSEX Calculation

S&P BSE SENSEX is calculated using the ‘Free-float Market Capitalization’ methodology. In this methodology, the index at any point of time reflects the free-float market value of chosen scrips relative to a base period.

This base period year is 1978 – 1979. Base value for this period is 100 index point.

The market capitalization of a company is determined by multiplying its stock price by the number of shares issued by the company. This market capitalization is further multiplied by the free-float factor to determine the free-float market capitalization.

To calculate the S&P BSE SENSEX, the free-float market capitalization of 30 (currently 31) chosen companies of S&P BSE SENSEX index, is divided by a number. This number is called Index Divisor. This Index Divisor links to the original base (100), calculated during the period 1978-79. This divisor is the only key which enables historical index comparisons. 

Companies in S&P BSE SENSEX

As of December 2017, S&P BSE SENSEX is calculated using 31 companies. Tata Motors has two stocks on this list.

 
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Group Companies of BSE

BSE, apart from being a stock exchange has some group companies for various purposes. Let’s have a look at them.

BSE Institute Ltd

BSE Ltd. apart from being a financially active corporate entity has introduced a financial education platform called BSE Institute Ltd. It is a wholly owned subsidiary of BSE. Its main focus is to transfer the knowledge, technology and experience acquired by BSE, to the new generation. Its headquarter is located on Dalal Street, Mumbai.

CDSL

In 1996 shares were dematerialized and this dematerialized format is called DEMAT. These demat shares require an electronic place to be saved at. A depository is a financial intermediary, which provides this electronic platform to save the demat (dematerialized) shares.

Central Depository Services (India) Limited (CDSL), is one of the depositories in India. CDSL received the certificate of commencement of business from SEBI in February, 1999. It was initially promoted by BSE Ltd. which has thereafter divested its stake to leading banks as “Sponsors” of CDSL.

ICCL

ICCL is a wholly owned clearing corporation of BSE Ltd. It was established in 2007. A clearing corporation makes sure that every trade is closed successfully. Means, if there is a buyer who buys some shares at Rs x, there should be a seller selling the same amount of shares at Rs x.

ICCL carries out the functions of clearing, settlement, collateral management and risk management for various segments of BSE.

India INX

India INX is the abbreviation of India INternational eXchange. It is country’s first International Exchange at the international financial services centre (IFSC) GIFT city Gandhinagar. Indian INX is wholly owned by BSE Ltd. India INX got final approval of SEBI on December 30, 2016. It operates for 22 hours a day to allow international investors and Non-Resident Indians to trade from anywhere across the globe.

India ICC

India ICC is the abbreviation of India International Clearing Corporation. It was promoted by BSE Ltd to be the first international clearing corporation at GIFT city Gandhinagar. Currently, it is providing clearing & settlement, risk management and collateral management services to India INX. It started operations on 16 January 2017.

Marketplace Technologies

Marketplace Technologies Pvt. Ltd. facilitates e-enabling businesses in banking, commodities and financial sector. It has a team of 70 professionals who provide development and support to its clients.

Summarizing