A stock exchange is an entity which provides "trading" facilities for stock brokers and

traders, to trade stocks and other securities. Stock exchanges also provide facilities for the
issue and redemption of securities as well as other financial instruments and capital
events including the payment of income and dividends. The securities traded on a stock
exchange include: shares issued by companies, unit trusts, derivatives, pooled investment
products and bonds. To be able to trade a security on a certain stock exchange, it has to
be listed there. Usually there is a central location at least for recordkeeping, but trade is
less and less linked to such a physical place, as modern markets are electronic networks,
which gives them advantages of speed and cost of transactions. Trade on an exchange is
by members only. The initial offering of stocks and bonds to investors is by definition
done in the primary market and subsequent trading is done in the secondary market. A
stock exchange is often the most important component of a stock market. Supply and
demand in stock markets is driven by various factors which, as in all free markets, affect
the price of stocks (see stock valuation).

There is usually no compulsion to issue stock via the stock exchange itself, nor must
stock be subsequently traded on the exchange. Such trading is said to be off exchange or
over-the-counter. This is the usual way that derivatives and bonds are traded.
Increasingly, stock exchanges are part of a global market for securities.

The first stock exchanges

In 11th century France the courtiers de change were concerned with managing and
regulating the debts of agricultural communities on behalf of the banks. As these men
also traded in debts, they could be called the first brokers.

Some stories suggest that the origins of the term "bourse" come from the Latin bursa
meaning a bag because, in 13th century Bruges, the sign of a purse (or perhaps three
purses), hung on the front of the house where merchants met.

House Ter Beurze in Bruges, Belgium.However, it is more likely that in the late 13th
century commodity traders in Bruges gathered inside the house of a man called Van der
Burse, and in 1309 they institutionalized this until now informal meeting and became the
"Bruges Bourse". The idea spread quickly around Flanders and neighbouring counties
and "Bourses" soon opened in Ghent and Amsterdam.

In the middle of the 13th century, Venetian bankers began to trade in government
securities. In 1351, the Venetian Government outlawed spreading rumors intended to
lower the price of government funds. There were people in Pisa, Verona, Genoa and
Florence who also began trading in government securities during the 14th century. This
was only possible because these were independent city states ruled by a council of
influential citizens, not by a duke.

The Dutch later started joint stock companies, which let shareholders invest in business
ventures and get a share of their profits—or losses. In 1602, the Dutch East India
Company issued the first shares on the Amsterdam Stock Exchange. It was the first
company to issue stocks and bonds. In 1688, the trading of stocks began on a stock
exchange in London.

On May 17, 1792, twenty-four supply brokers signed the Buttonwood Agreement outside
68 Wall Street in New York underneath a buttonwood tree. On March 8, 1817, properties
got renamed to New York Stock & Exchange Board. In the 19th century, exchanges
(generally famous as futures exchanges) got substantiated to trade futures contracts and
then choices contracts.

There are now a large number of stock exchanges in the world.

[edit] The role of stock exchanges

Stock exchanges have multiple roles in the economy. This may include the following:[1]

[edit] Raising capital for businesses

The Stock Exchange provide companies with the facility to raise capital for expansion
through selling shares to the investing public.[2]

[edit] Mobilizing savings for investment

When people draw their savings and invest in shares, it leads to a more rational allocation
of resources because funds, which could have been consumed, or kept in idle deposits
with banks, are mobilized and redirected to promote business activity with benefits for
several economic sectors such as agriculture, commerce and industry, resulting in
stronger economic growth and higher productivity levels of firms.

[edit] Facilitating company growth

Companies view acquisitions as an opportunity to expand product lines, increase
distribution channels, hedge against volatility, increase its market share, or acquire other
necessary business assets. A takeover bid or a merger agreement through the stock
market is one of the simplest and most common ways for a company to grow by
acquisition or fusion.

[edit] Profit sharing

Both casual and professional stock investors, through dividends and stock price increases
that may result in capital gains, will share in the wealth of profitable businesses.

[edit] Corporate governance

By having a wide and varied scope of owners, companies generally tend to improve on
their management standards and efficiency in order to satisfy the demands of these
shareholders and the more stringent rules for public corporations imposed by public stock
exchanges and the government. Consequently, it is alleged that public companies
(companies that are owned by shareholders who are members of the general public and
trade shares on public exchanges) tend to have better management records than privately-
held companies (those companies where shares are not publicly traded, often owned by
the company founders and/or their families and heirs, or otherwise by a small group of
investors). Despite this claim, some well-documented cases are known where it is alleged
that there has been considerable slippage in corporate governance on the part of some
public companies. The dot-com bubble in the early 2000s, and the subprime mortgage
crisis in 2007-08, are classical examples of corporate mismanagement. Companies like
Pets.com (2000), Enron Corporation (2001), One.Tel (2001), Sunbeam (2001), Webvan
(2001), Adelphia (2002), MCI WorldCom (2002), Parmalat (2003), American
International Group (2008), Bear Stearns (2008), Lehman Brothers (2008), General
Motors (2009) and Satyam Computer Services (2009) were among the most widely
scrutinized by the media. However, when poor financial, ethical or managerial records
are known by the stock investors, the stock and the company tend to lose value. In the
stock exchanges, shareholders of underperforming firms are often penalized by
significant share price decline, and they tend as well to dismiss incompetent management
teams.

[edit] Creating investment opportunities for small investors

As opposed to other businesses that require huge capital outlay, investing in shares is
open to both the large and small stock investors because a person buys the number of
shares they can afford. Therefore the Stock Exchange provides the opportunity for small
investors to own shares of the same companies as large investors.

[edit] Government capital-raising for development projects

Governments at various levels may decide to borrow money in order to finance
infrastructure projects such as sewage and water treatment works or housing estates by
selling another category of securities known as bonds. These bonds can be raised through
the Stock Exchange whereby members of the public buy them, thus loaning money to the
government. The issuance of such bonds can obviate the need to directly tax the citizens
in order to finance development, although by securing such bonds with the full faith and
credit of the government instead of with collateral, the result is that the government must
tax the citizens or otherwise raise additional funds to make any regular coupon payments
and refund the principal when the bonds mature.

[edit] Barometer of the economy

At the stock exchange, share prices rise and fall depending, largely, on market forces.
Share prices tend to rise or remain stable when companies and the economy in general
show signs of stability and growth. An economic recession, depression, or financial crisis
could eventually lead to a stock market crash. Therefore the movement of share prices
and in general of the stock indexes can be an indicator of the general trend in the
economy.

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Bangalore Stock Exchange Stock Exchange Towers, No 51 1st Cross, J C Road,

Bangalore 560027. Tel: (91-80) 2995233 / 5225.

Bangalore Stock Exchange (BgSE) is a public stock exchange based in Bangalore,

India. It was founded in 1963 and currently has 595 regional and non-regional companies
listed. In September 2005, the BgSE announced plans to go public by divesting at least
51% of its ownership. The stock exchange is managed by a Council of Management,
consisting of members appointed by the Securities and Exchange Board of India. First
stock exchange in South India to start electronic trading of securities in 1996.

Some of the companies that trade on the BgSE include Infosys, Wipro, United Breweries
and Bharat Electronics Limited.

The Bangalore Stock Exchange Limited (BgSE) is a self regulatory organisation located
in the garden city of India. The Exchange is managed by the Governing Board consisting
of members nominated by Securities Exchange Board of India (SEBI), Public
Representatives, Elected members and an Executive Director. The Exchange has been
serving the investor community continuously since its inception in the year 1963.

Over the decades, it has been a journey of progress to the Exchange from the pith to the
pinnacle, from the alcove to the acme and, has emerged as a premier Exchange in India.

The continuous change alone is the changeless law.

As the saying goes, to keep pace with the fast changing technology and financial system,
the Exchange went On-line in 1996. The Exchange has come a long way since the launch
of BEST (Bangalore Electronic Securities Trading), its On-line trading system on 29 July
1996.

Empowerment of the investors in the market has been the focus of the Exchange.
Information needs of market participants are met through the Service Centres established
by the Exchange at various places in Karnataka. In addition to this, Investment Education
Centre at Bangalore plays a vital role in enhancing the knowledge base of the participants
through several short and long duration programmes.

Members The Exchange has 241 members serving the diverse needs of investors. The
corporate members constitute more than 25% of the total membership of the Exchange.
Members operate within the overall framework of policies and practices developed over a
period of time by the Exchange.
Listing The securities listed at the Exchange includes a number of innovative and
seasoned corporates from different sectors of industry. As on 31 March 2006, the number
of companies listed on the Exchange are 384 consisting of 186 regional and 198 non
regional companies.

Investor Services Centre With a view to support the investors to resolve their grievances
expeditiously, Exchange has established a Investor Services Committee comprising of
Public Representatives, members and Executive Director, who oversee the functioning of
the Cell and they take appropriate steps for amicable settlement.

To enable the investors at other places to have access to various services, Centres have
been set up at Davangere, Hassan, Hubli, Mysore, Madkeri, Mangalore Shimoga and
Tumkur.

Investor Information Centre The Exchange has established a well equipped Library and
Investor Information Centre to cater to varied information needs of investors, corporates
members and others. The Centre has a collection of wide range of books, periodicals,
journals, annual reports, prospectus and research publications relating to Capital markets.
Circulars, notifications issued by authorities are available. Draft prospectus, offer
documents and other related information are displayed regularly.

In addition, information on over 4000 companies is available in the Corporate data-bank

for investors, corporates and members to help them in investment decision making
process. This data bank consists of details of promoters, previous public issues, track
record, digital form annual reports, financial performance of companies. Fundamental
analysis and Technical analysis, other general information on industry, sector and
economic scenario etc., are available.

Investment Education Centre Empowerment of investors through education is the focus

of the Exchange. The Exchange has established an exclusive investment education centre
to cater to the needs of the market participants. This Centre conducts regular and
intensive training sessions, seminars and workshops. In addition to this, the Exchange
continuously holds monthly Investors’ Meet at Bangalore on last Sunday of every month
on various current topics and issues