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India's stock market is primarily controlled by two big stock exchanges, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The four zones (North, South, East and West) have smaller exchanges, such as the Delhi, the Calcutta, and the Bangalore Stock Exchange. Investors are permitted to trade with any legal-entity stock exchange in India.
The services of a registered stockbroker must be used for all buys and sells, however. It doesn't matter which Indian stock exchange is involved, the broker must be registered with that particular exchange. Being registered as a broker with more than one exchange is permitted, but only stock brokers can directly buy and sell shares. All investors are limited to trading only through stockbrokers. These brokers' commissions (brokerages) are usually a percentage of the total amount of the trade, and may vary depending on the broker.
Until very recently orders for stock trading in India were handled in person or over the phone. As the number of investors continued to mount, certain physical limitations began significantly interfering with the profits of the stock exchanges, the brokers, and the investors. Inadequate office space, constantly busy telephone lines, and missed communications all demanded a more up-to-date approach to the business of stock investments.
Along came online stock trading. India's overwhelmed stockbrokers and impatient investors moved smoothly into the 21st century with the government's okay. Investors are now allowed to trade shares themselves online without stockbrokers. In essence, the online stock trading companies become the stock brokers and are generally registered with either the BSE, the NSE, or both. Online investors must provide standard documentation in order to begin online trading. These consist of proof of identity, proof of residence, two identifying photos, and a PAN (permanent account number) card.
Two different types of platforms support online stock trading in India. One is an installable, software-based Stock Trading Terminal. This is a trading environment tool, provided by the online brokerage, and requires a high-speed Internet connection before installation on the investor's computer. The second is an online, stock-based trading application which doesn't require any additional software installation.
As the number of investors in India continues to grow ever greater, it's possible that someday soon rural villages will boast an enviable number of water buffalo, plus one or two successful stock market investors sharing their wealth. |
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