Full Form of BSE – Bombay Stock Exchange
The full form of BSE is the Bombay Stock Exchange. The BSE is the oldest stock exchange of Asia which was established in the year 1875 as Native Shares and Stock Broker’s Association and is the first exchange in India that was recognized as the exchange in the year 1957 under the Securities Contract (Regulation) Act by the government. Since then it is playing a pivotal role in the development of the capital market of the country.
- The Bombay Stock Exchange was established in the year 1875 and is also called the Stock Exchange Mumbai. Before establishing the BSE, the group of the five stockbrokers was there who used to conduct the different meetings in front of the Mumbai town hall under a banyan tree.
- But gradually, over time, the number of brokers in the meeting increases, and because of this, the venue of the meeting used to change frequently. After a few decades, in 1874, the group of brokers moved to Dalal Street for their meetings and made it their permanent location.
- It was then established in the year 1875 as Native Shares and Stock Broker’s Association in the following year, thereby providing it an official organization. After decades of its working, it became the first exchange in India that was recognized as the exchange in 1957 under the Securities Contracts (Regulation) Act by the government.
- After some years of its recognition, in the year 1986, a tool was developed to measure the Bombay stock exchange’s overall performance known as the SENSEX, which is the stock market index consisting of the 30 well established as well as financially sound companies that are listed on the Bombay stock exchange.
- In 1995, the Bombay stock exchange switched to the electronic trading system known as BOLT (BSE On-Line Trading). Also, it became the first stock exchange in the world, which introduced an internet trading system at a centralized level.
The following are the features of the Bombay Stock Exchange:
- It is the largest and the first securities market in India based in Mumbai, India. The securities that are listed at the BSE include stocks, stock options, stock futures, index optionsIndex OptionsIndex option refers to a financial derivative instrument that tracks the performance of an underlying index like DJX. The holder of this instrument bears the to exchange it for a predetermined exercise price at a future date but isn't obliged to do so., index futures, and weekly options.
- The SENSEX is the benchmark index of the BSE that consists of the 30 companies that are financially sound and well established from around 12 different sectors, which help measure the Bombay Stock Exchange’s overall performance.
- It has helped in the development of India’s capital marketCapital MarketA capital market is a place where buyers and sellers interact and trade financial securities such as debentures, stocks, debt instruments, bonds, and derivative instruments such as futures, options, swaps, and exchange-traded funds (ETFs). There are two kinds of markets: primary markets and secondary markets. and helped in the growth of India’s corporate sector.
Functions of BSE
The following are the main functions of the Bombay Stock Exchange:
#1 – Price Determination
The price determination in the secondary market depends upon the demand and supply of the securities. Bombay Stock Exchange helps in the process of valuation by constantly valuing all the listed securitiesListed SecuritiesListed security refers to a financial instrument such as stocks, bonds, derivatives, etc., registered with and readily tradable on the stock exchanges like NASDAQ and NYSE.. Such share prices can be easily tracked through the index that is popularly known as SENSEX.
#2 – Economical Contribution
Since the Bombay Stock Exchange deals with the securities listed and these securities are sold and re-sold continuously, it allows the funds to keep moving instead of remaining idle, which boosts the economy.
#3 – Marketability and Liquidity
They provide high liquidityLiquidityLiquidity shows the ease of converting the assets or the securities of the company into the cash. Liquidity is the ability of the firm to pay off the current liabilities with the current assets it possesses. as the listed securities can be sold at any point in time, converting it into cash. It works continually, and the investor can sell and purchase the security simply according to their wish.
Importance of BSE
The following are the main importance of the Bombay Stock Exchange:
- It is easy to sell and buy securities in the financial marketFinancial MarketThe term "financial market" refers to the marketplace where activities such as the creation and trading of various financial assets such as bonds, stocks, commodities, currencies, and derivatives take place. It provides a platform for sellers and buyers to interact and trade at a price determined by market forces. if the security is listed on the BSE, thereby meeting potential investor’s liquidity needs.
- It is easy to raise funds by issuing equity and debt securities through BSE as it is a trusted source from where the securities are traded in the financial market.
- They provide an open platform for speculation within a legal framework. Bombay Stock Exchange is the best platform for healthy speculative trading, which helps fulfill the requirement of liquidity of an investor.
Difference between BSE and NSE
The following are the main differences between BSE and NSE:Differences Between BSE And NSE:The BSE (Bombay Stock Exchange) is India's oldest stock exchange, founded in 1875, with a benchmark index of SENSEX, which gives top 30 stock indexes, and the NSE (National Stock Exchange), founded in 1992, with a benchmark index of Nifty, gives top 50 stock indexes.
- NSE stands for the National Stock Exchange, which is the largest stock exchange of the country and was founded in 1992, whereas BSE stands for the Bombay Stock Exchange, which is the oldest stock exchange of the country and was founded in the year 1875.
- The benchmark index of the NSE is Nifty, which consists of 50 companies that are most actively traded, whereas the benchmark index of the BSE is SENSEX, which is the stock market index consisting of the 30 well established as well as financially sound companies that are listed on the Bombay Stock Exchange.
The following are the benefits of the Bombay Stock Exchange:
- The securities exchange board of India governs the functions of BSE. Therefore the transactions that occur at the Bombay Stock Exchanges are regulated and governed strictly within the legal framework. Therefore it gives an assurance to the investor that there are dealing in a safe place, and their money is not wasted.
- They provide education about the benefits of investing in the stock market and ensures that there is the smooth functioning of the transactions.
- The securities listed on it can be kept as collateral by an investor while availing the loans from banks and other financial institutionsFinancial InstitutionsFinancial institutions refer to those organizations which provide business services and products related to financial or monetary transactions to their clients. Some of these are banks, NBFCs, investment companies, brokerage firms, insurance companies and trust corporations. .
BSE is the abbreviation used for the Bombay Stock Exchange. As the name implies, It is the stock exchange that was established in the year 1875. The benchmark index of the BSE is SENSEX that consists of the 30 companies that are financially sound and well established, which helps in measuring the Bombay Stock Exchange’s overall performance.
The transactions that occur at the BSE are regulated and governed strictly within the legal framework as India’s securities exchange board governs its functions. Thus it opens the platform for the speculation but within a legal framework.
This has been a guide to the Full Form of BSE, i.e. (Bombay Stock Exchange) and it’s meaning. Here we discuss the features and functions of BSE and its benefits and importance. You may refer to the following articles to learn more about finance –