What is Stock Exchange?

A stock exchange is a regulated marketplace where individuals can buy and sell shares and other securities. It acts as a platform to connect various market participants like companies issuing stocks, buyers, sellers, etc. It also ensures that transparency, standardisation and efficiency are maintained in these transactions, to maintain investor trust. In this article, we explain what stock exchange is, its function, benefits, and its types. 

Definition of Stock Exchange

Learning stock exchange definition is essential for individuals who want to start their investment journey. A stock exchange can be defined as a centralised platform that facilitates capital formation, promotes transparent transactions and supports economic growth. In simple terms, a stock exchange connects companies that need funds and individuals who want to invest in these companies. In India, it is governed by rules set by the Securities and Exchange Board of India (SEBI) to provide individuals with a secure trading environment.     

How Does a Stock Exchange Work?

To understand the functioning of a stock exchange, here are the key activities that take place within the system.  

• Listing of Companies: Companies get listed on the stock exchange through an Initial Public Offering (IPO). 

• Transaction of Securities: Investors and traders place buy/sell orders through brokers and their trading platforms. 

• Stock Exchange Matches Orders: Based on the price and quantity, the exchange’s system matches the buy and sell orders. The price of the stock is then determined by the market’s demand and supply. 

• SEBI’s Surveillance: Each trade is monitored by the regulatory body to prevent manipulation and ensure that trades are executed following the compliance framework. 

After the trades are executed, shares and funds are transferred by following the T+1 (Transaction Day + 1) settlement rules. Currently, SEBI has also introduced the T+0 settlement rules. 

What are the Benefits of a Stock Exchange?

Apart from providing a regulated trading environment, a stock exchange offers various benefits. 

• Increased Public Awareness: Exchanges provide information about securities investment that encourages individuals to participate in the stock market. 

• Alternate Investment Options: Exchanges allow individuals to diversify their portfolio by including various types of securities.  

• Liquidity and Fair Price Discovery: Based on the transparent market valuation provided by the demand and supply, investors can easily convert their shares into capital on the exchange. 

• Access to Capital: Companies get an opportunity to raise funds from a large number of investors. 

• Transparency for Investor Protection: Exchanges maintain a record of trades and conduct surveillance as per the regulations of SEBI to ensure investor protection. This encourages increased investor participation in the capital markets. 

What are the Major Stock Exchanges in India?

India hosts various stock exchanges, some of which are as follows. 

National Stock Exchange (NSE) 

Founded in 1992 and headquartered in Mumbai, NSE is one of India’s leading financial exchanges. It was the first exchange in the country to introduce electronic or screen-based trading, making transactions faster and more transparent. NSE offers trading across equities, derivatives, and currency futures. As of March 31, 2025, companies listed on its NSE Emerge (SME) platform had a total market capitalisation of around ₹1.8 lakh crore (approximately $20.8 billion) in FY25. The NIFTY 50 index, which tracks 50 leading companies from 13 key sectors, serves as a major benchmark for the Indian equity market. 

Bombay Stock Exchange (BSE) 

Established in 1875, the BSE is Asia’s oldest stock exchange and is located on Dalal Street, Mumbai. It ranks among the largest exchanges globally, with an estimated market capitalisation of around ₹1,000 trillion as of October 2025. The BSE became the world’s fastest exchange in 2015, recording a median trade speed of 6 microseconds. Over 5,000 companies are listed on the exchange, and its Sensex Index tracks 30 established and financially strong firms in India. 

List of Stock Exchanges in India

Other stock exchanges in India includes the following. 

• The Bombay Stock Exchange Ltd 

• National Stock Exchange of India Ltd 

• Metropolitan Stock Exchange of India Ltd 

• India International Exchange (India INX)

• NSE IFSC Ltd. 

• ICXL (Indian Commodity Exchange Ltd.) 

Trading Sessions of Indian Stock Exchanges

There are mainly three sessions in Indian stock exchanges. They are as follows. 

Pre-opening Market Session: 

This session starts at 9:00 AM and ends at 9:15 AM. Investors can place orders in this session. While orders are not executed, it is used to analyse opening prices of various stocks. 

Normal or Regular Trading Session: 

This session starts at 9:30 and ends at 3:30 PM. Various types of orders can be placed and executed in this session. Majority of trading occurs in this session. 

Closing Session: 

This session starts at 3:30 PM and ends at 4:00 PM. This session is used for specific institutional trades. The closing prices of stocks is also determined in this session. 

Conclusion

A stock exchange is a platform that offers a structured and secure way for individuals to invest their capital by purchasing stocks of listed companies. It also allows companies to raise funds. It follows the guidelines laid down by SEBI, the Indian securities market regulator. Before participating in the stock market, knowing how these exchanges operate can help you make informed investment decisions.