Part of the objective of Securities and Exchange Board of India is to maintain standards for fair and orderly markets. In order to help achieve this goal, the Securities and Exchange Board of India regulates a number of stock market participants. These include the following:
Major Stock Market Participants
- Stock Exchange: A stock exchange is an organized marketplace that brings all the investors or traders together. It facilitates the sale and purchase of stocks by different buyers and sellers. Most of the trading in Indian stock market takes place on BSE and NSE. These stock exchanges enforce strict rules and regulations that listed companies and trading participants must follow.
- Listed Companies: Also known as issuers, these are the companies whose shares are traded on the stock exchange. All the listed companies go through Initial Public Offering (IPO) and register themselves with the stock exchange after abiding by all the prescribed regulations.
- Stock Brokers: Stock brokers are licensed by the Securities and Exchange Board of India and are entitled to trade at the stock exchange. They act as the middlemen or agents between the sellers and the buyers of stocks in the stock market. For providing these broking services, they receive buying or selling commission from their clients.
- Investors: Investors are also called stockholders or shareholders. These are the people who own the shares of companies that are listed on the stock exchange. They are entitled to receive dividends and other benefits due to shareholders.
- Clearing House: Clearing Houses are wholly owned subsidiaries of Securities and Exchange Board of India. They are formed to ensure the orderly settlement of trades executed on various stock exchanges. Clearing Houses settle the funds and transfer shares based on everyday transactions between sellers and buyers.
- Transfer Agents: Transfer Agents record changes of ownership of shares. They provide the listed companies with a list of its security holders. Transfer agents are also responsible for cancelling or issuing of certificates and distribute dividends.
- Settlement Banks: The settlement banks perform the function of accepting the deposit of funds for payment of stocks bought by an investor or confirm payment of funds when due. These banks debit or credit the investor’s account during settlement and also report balances and other information as may be required.
- Depository: A depository refers to an organization or an institution that assists in the trading of securities. This institution also holds securities in electronic form or in dematerialized form. One of the major functions of the depositories is to transfer the ownership of shares from one investor’s account to another when a trade takes place.
Thus, every stock market participant has a specific role to play in the proper and smooth functioning of the stock market. All of these participants are some or the other way interlinked to each other and must abide by the guidelines set by Securities and Exchange Board of India.
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