History of NSE and BSE(Trading)
Posted On June 26, 2018
Where a few microseconds can seem longer than a blink of an eye, that is how long it takes for the share market to make or break you. The evolution of stock exchange has changed the way we think about stocks and the way we trade them. As once upon a time the shouting brokers, jarring investors and traders punching orders stood by the floors of the stock exchange. But as the times altered, the traders have moved to the online streaming electronic technique with the use of the visual images and the humongous screens. We have come to the age of ‘High-Frequency Trading’ and ‘Algorithm Trading’ today, but the question arises for how much do we remember about the past?
So, in the 1800’s when 22 traders sat under a banyan tree setting the pace for stock trading in India is where it all began, but the most decisive period or what we can call as a turning point came during the 90’s when the market saw a robust and rapid development away from the ‘outcry’ system, towards the electronic arrangement. The adoption of technology at this point made the system smooth and fast. This Pan-Indian movement from a centralized district to all of India registers as an important anecdote in the mechanization of the system.
NSE (National Stock Exchange) and BSE (Bombay Stock Exchange), which are one of the most significant and the most robust stock exchanges of India, and have been part of the ecosystem enabling the configuration of the new methods and means of working in the marketplace.
The maturer establishment that brought about a boom in the industry and paved way for the rest of the exchanges to follow is BSE. Established in 1875, with a 125-year-old history which started as the Native Shares Stock Brokers Association, the BSE is the oldest stock exchange of India. The narrative of BSE is the story of its people who took the institution where it is today. The institution is known for its dynamic saga which took off with merely six brokers and the little trading that was carried out in the open. What changed it all was the American Civil War, which led to the shortage of cotton and their turning to countries like India for the supply.
The designated visionaries such as Premchand Roychand, the first Indian broker who could read and write in English found himself eminently suitable to lead the exchange, in what we call today as Mumbai. With the cotton boom came a wave of brokers and others industries who became part of the exchange. As the civil war in America ended, the BSE had rooted itself deep into the Indian infrastructure leading to forming an association of 318 individuals, founding a formal membership committee at a payment of a princely sum of Rs.1. Sri Chunni Lal Motilal, a signatory to the trusty and as the first president of the BSE, saw the exchange into its golden years.
The second tale of the town began with the establishment of NSE the first demutualized electronic exchange in the country. With current market capitalization of more than 1.5 trillion US dollars, NSE was started by the leading Indian financial intuitions on the directive of the government of India in order to bring transparency to the stock market system. Soon after becoming India’s largest exchange in equity and global cash market trades, NSE seemed to be working ahead of its time when it classified the system by separating the management and the ownership under the SEBI supervision. The limited information available on ‘price information’ was now made open to everyone, even in the remotest of areas in the country.
A shift from the paper-based settlement to the electronically run accounts became a critical factor in provisioning risk management that protected investors against brokerage defaults. Another instrumental step was, creation of the National Securities Trade Ltd., which allowed the traders and investors wide range of advantages such as trade related, and as few as one single share and bond, reducing the incidence of forged documents and fraudulent transactions that were a consequence of paper trail. NSE had taken huge strides in technology in the past 20 years, during the 90’s when the exchange started. Then NSE was handling a few orders a second, today it has increased to 60,000 orders per second with the ability to scale at short notices on demand.
The two Indian exchanges, which have become incredibly inevitable to the stock market stand where they are today because of the advancement they have carried throughout the years. Electronic trading today defines the strength of the legacy that the two exchanges have taken forward. The vital role of technology that has played in keeping the ecosystem transparent is the reason the largest stock exchanges of India are contending for a top spot globally.