Stock exchanges are organized platforms where buyers and sellers trade shares in a fair, transparent, and regulated system. In India, the two main exchanges are the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
🔹 How Stock Exchanges Work (Step-by-Step)
1. 🧑💻 Investor Places an Order
You (investor) place a buy or sell order through a broker (like Zerodha, Groww, etc.).
2. 🔄 Order Goes to Exchange
The broker sends your order to NSE or BSE electronically.
3. ⚖️ Order Matching System
- Exchanges use an automated system to match buyers and sellers
- Example:
- Buyer wants to buy at ₹100
- Seller agrees to sell at ₹100
👉 Trade gets executed instantly
4. 📊 Price Discovery
Prices are decided by demand and supply:
- More buyers → Price goes up 📈
- More sellers → Price goes down 📉
5. 🤝 Trade Execution
Once matched:
- Shares are transferred to buyer
- Money goes to seller
6. 🏦 Settlement (T+1 System)
- In India, settlement happens in T+1 day
- Managed by organizations like National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL)
🔹 About NSE & BSE
🟢 National Stock Exchange (NSE)
- Established: 1992
- India’s largest exchange by volume
- Introduced fully electronic trading system
- Famous Index: Nifty 50
🔵 Bombay Stock Exchange (BSE)
- Established: 1875 (Asia’s oldest exchange)
- Known for large number of listed companies
- Famous Index: Sensex
🔁 Simple Flow Diagram (Understanding)
Investor → Broker → NSE/BSE → Matching → Trade → Settlement → Shares in Demat Account
🧠 Key Points to Remember
- Exchanges don’t buy/sell themselves → they facilitate trading
- Fully digital & transparent system
- Regulated by Securities and Exchange Board of India (SEBI)
- Ensures fair trading & investor protection