According to the Securities Contracts (Regulation) Act 1956, the term stock exchange is defined as, “An association, organization or body of individuals, whether incorporated or not, established for the purpose of assisting, regulating and controlling of business in buying, selling and dealing in securities.”
Husband and Dockerary have defined stock exchange as “Stock exchanges are the privately organized market which is used to facilitate trading in securities.”
The important features of a stock exchange are as follows:
(i) Market for Securities: The stock exchange is a place where all types of corporate securities, as well as securities of government and semi-government bodies, are traded.
(ii) Second Hand Securities: Securities traded in the Stock exchange are those securities that are already issued by the companies. In other words, second-hand securities are bought and sold among investors in a stock exchange.
(iii) Listed Securities: Only securities that are listed with the stock exchange can be traded on a stock exchange. Listing of securities helps in protecting the interest of investors as companies have to strictly comply with the rules laid down by the stock exchange.
(iv) Organised and Regulated Market: All Listed Companies have to comply with the guidelines of SEBI. Companies will also have to function as per the rules and regulations laid down by the Stock exchange.
(v) Specific Location: The stock exchange is a specific physical place where securities are traded. It is a marketplace where brokers and intermediaries meet to conduct dealings in securities. Today, all trading is done electronically on a stock exchange.
(vi) Trading only through Members: Securities in a Stock exchange can be traded only by the members of the exchange on their own behalf or through authorized brokers.
