What is the Bombay Stock Exchange (BSE)?
The Bombay Stock Exchange (BSE) is the oldest securities market in India, founded in 1875 as the Native Share and Stock Brokers’ Association. Based in Mumbai, it lists more than
more than 5,000 companies across multiple segments, including equity (shares), debt (bonds), derivatives (futures and options), mutual funds, and currency products. Its flagship index is the SENSEX, a market-capitalization-weighted benchmark composed of 30 large, well-established companies; market participants use the SENSEX as a shorthand for Indian large-cap performance.
Key functions of the BSE
– Price discovery: an electronic, order-driven market aggregates buy and sell interest into prices.
– Liquidity: by concentrating buyers and sellers, exchanges make it easier to convert securities to cash.
– Capital formation: companies raise funds by listing shares or issuing bonds to the public.
– Risk management and settlement: standardized contracts, clearing members, and a central counterparty (clearing corporation) reduce counterparty risk and manage settlement.
How trading on BSE works (high level)
– Trading platform: Brokers connect to BSE’s electronic trading system (BOLT — BSE On-Line Trading) and submit orders for clients.
– Order types: Typical order instructions include market (execute at best available price), limit (execute at a specified price or better), and stop-loss orders.
– Matching: The system matches buy and sell orders using price-time priority (higher bid prices match lower ask prices; if prices are equal, earlier orders get priority).
– Settlement: After a trade is executed, securities are transferred through depositories in electronic (dematerialized or “demat”) form and payment is settled via the clearing corporation. India has moved to a T+1 settlement cycle for most equity trades (trade date plus one business day) — confirm current status with your broker and regulator, as rules can change.
Listing and regulation
– Eligibility: To list, a company must meet prescribed financial, governance and disclosure standards, maintain minimum public float, and pay listing fees. The exchange enforces these requirements.
– Regulator: The Securities and Exchange Board of India (SEBI) is the primary regulator for Indian securities markets, supervising exchanges, brokers, and listed companies and issuing rules to protect investors.
Typical trading day (summary)
– Pre-open/auction sessions (order entry and price discovery)
– Normal trading session (generally around 09:15–15:30 IST for main equity trades; confirm current session times on
on the exchange website or with your broker.
– Post-close / closing auction — exchanges run a closing price discovery auction to determine the official closing price used for index calculations and settlement. After the auction there may be a short post-close or closing session for order modifications/cancellations; check live rules with BSE.
– Post-market (after-hours) / block deals — limited windows exist for negotiated block trades and certain order types after the main session; these are not the same as continuous trading and can have lower liquidity.
Market controls and risk management
– Circuit breakers (market-wide) — automatic halts that pause trading if the benchmark index moves by predefined percentages to limit panic selling. Levels and halt durations are set by SEBI and the exchange and can change.
– Price bands (stock-specific) — many stocks trade within percentage bands from the previous close to contain extreme intraday moves. Bands vary by stock and may widen after consecutive limits are hit.
– Margin requirements — brokers require margins (cash or collateral) for leveraged or derivative positions. Margins are set by the exchange, clearing corporation and broker; they can change intraday.
Order types (common)
– Market order — execute immediately at prevailing price; risks slippage in illiquid markets. Use for fast execution, not guaranteed price.
– Limit order — execute only at the set price or better. Use for price control but not guaranteed to fill.
– Stop-loss / stop-limit — conditional orders used to limit losses or trigger entries; implementation differs by broker.
– IOC (Immediate-or-Cancel), AON (All-or-None) and other specialized order flags — availability depends on the broker/exchange interface.
Clearing, settlement and depositories
– Clearing corporation — a central counterparty that nets trades, manages counterparty risk and guarantees settlement. For BSE the clearing and settlement infrastructure operates under the exchange and its designated clearing entity; confirm current clearing entity and rules on BSE’s website.
– Settlement cycle — India has moved to T+1 for most equity trades (trade date plus one business day) for in-market trades; confirm current status with your broker and regulator.
– Depositories and Demat accounts — securities settle into dematerialized (Demat) accounts maintained by depositories such as NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Ltd). You need a Demat plus a linked trading account to buy/sell equities.
Participants and roles (brief)
– Retail traders & institutional investors — buyers and sellers.
– Brokers — accept orders from clients, provide access to exchange, and may offer margin and research.
– Exchanges (BSE) — provide trading platform, rules, and surveillance.
– Regulator (SEBI) — sets market rules, investor protection measures and supervises exchanges/brokers.
– Clearing corporation & depositories — handle settlement, custody and record-keeping.
Costs and taxes (how to estimate)
Common components you may pay on an equity trade:
– Brokerage to your broker (flat fee or percentage)
– Securities Transaction Tax (STT) — applied to equity transactions per applicable rules
– Exchange transaction fees / GST (tax on services)
– Clearing and settlement charges
– Stamp duty (varies by state)
Always confirm current rates with your broker and official sources.
Worked numeric example (illustrative only; use current rates for real trades)
Assumptions: buy 100 shares at INR 500 each → trade value INR 50,000.
Assumed fees (hypothetical for illustration):
– Broker fee: 0.03% of trade value = INR 15
– GST: 18% on broker fee = INR 2.70
– Exchange + clearing fees: INR 10
– Stamp duty: 0.003% of trade value = INR 1.50
– STT (if applicable on sell side; depends on transaction type) = see regulator rules
Net cash required on buy = trade value + broker fee + GST + exchange/clearing + stamp duty
= 50,000 + 15 + 2.70 + 10 + 1.50 = INR 50,029.20
Note: This example uses illustrative fee rates. Actual fees, taxes and who pays STT depend on trade type and current regulations.
How to get started — checklist
1. Choose a registered broker with a trading platform and clear fee schedule.
2. Complete KYC (Know Your Customer) and open:
– Trading account (for placing orders)
– Demat account (for custody of shares)
3. Link a bank account for funds transfer and settlement.
4. Learn the platform: order entry, order types, margin, and limits.
5. Start small; use limit orders in illiquid stocks; monitor settlement and contract notes.