The stock market is an arrangement where shares of publicly listed companies are traded. here buying and selling of shares are done by the traders through a recognized broker. buying and selling of shares seem to be a straightforward process. but it is not. there are many participants are there who make the function of stockmarket make perfect. as a trader and investor, we know only participants like brokers, investors, etc only, but there are more participants in the stock market than we think. we must know, who are all participating in the stock market. all these participants are making the smooth functioning of the stock market. more importantly, these participants make the stock market complete. without these participants. stock market cant function.
List of stock market participants
- Publicly listed companies.
- Stock exchange.
- Financial intermediaries
Publicly listed companies
Private companies become public by issuing shares to the secondary market. this public listing process is called IPO.after listing in the secondary market through IPO, people are investing and trading in the companies share.
The stock exchange
A stock exchange is a facility where investors can buy and sell securities. retail investors cannot do direct trading in exchanges. there must be a broker in between retail investors. there are 9 active stock exchanges that are functioning and registered under Sebi. however, NSE and BSE are the most popular Stock exchanges in India.
Also read: World’s largest stock exchanges
Stockbrokers are the persons/firms who buy and sell the securities on behalf of the clients. you can open an account in any of the leading stock brokers in India. there are two types of brokers, Full-service brokers, and Discount brokers. you can open any of the types according to your purpose. modern brokers provide both web and mobile platforms for their clients. you can easily put your orders through any of these platforms. your broker will send those orders to the stock exchange. you can see all and track all orders and positions on your brokers terminal. mobile applications make things easier these days. you can buy and sell shares through your broker’s mobile application in seconds. Zerodha, Upstox, ICICI direct, etc are some of the leading stock brokers in India.
fraudsters and malpractices are found in the stock market from its inception. this makes a bad image on the stock market as well as loses trust among investors. the stock market is an important part of the economy, every country treats its stock market with the highest priority.so it is necessary to control and regulate the stock market and keep it as a scam-free place. A stock market regulator is an authority that controls and regulates the entire stock market. In India SEBI (Security and Exchange Board of India) is the regulating authority of the securities market. SEBI controls the entire securities market and makes sure it is working transparently and assures fair practices in the market.
Financial intermediaries are the institutions or individuals who play middleman role between the stock exchange and the clients. these intermediaries carry out the financial functions to make our stock market activities complete. the stock market can not function without financial intermediaries. The following are the major financial intermediaries in the Indian stock market.
- Depository participants.
- Settlement banks.
- Transfer agents.
A depository is a financial intermediary which provides Demat account services. A Demat account is a place where your shares are kept in a dematerialized form. demat and trading accounts are interlinked. broker opens a Demat account under the depository on behalf of the client. you can access the Demat account only with the help of a broker. in India there are two major depositories are there.
- NSDL-National Securities Depository Ltd.
- CDSL-Central Depository Services Ltd
Depository participants(DP) are the agents of the depository.they are the intermediary between depository and investors. A depository participant can be a bank, brokerage house, financial institution, or any similar entity.
Also read: what are depositories? what is NSDL&CDSL
A bank is an essential financial intermediary in the stock market. you must have a valid bank account for opening a trading and Demat account. because the only way to transfer money to the trading account is bank transfer. same way, you can transfer money from the trading account to the bank account easily. note that, you can do transfer only with the registered bank account.it also ensures security. banks offer NEFT, UPI, etc. you can choose the mode of transfer according to your comfort.
A clearinghouse is a financial institution associate with an exchange to handle the confirmation, settlement, and delivery of transactions.function of the clearinghouse is to make sure that all trades are will close successfully. ie the clearinghouse finds the buyer and seller and complete the trade by matching the debit and credit. ensuring transparency, improving the efficiency, reducing post-settlement arbitration, etc are the major functions of the clearinghouse. the major clearinghouse in India are,
- NSE Clearing Limited ( formerly known as NSCCL-National Security Clearing Corporation Ltd.)
- ICCL-The Indian Clearing Corporation Ltd.
- MCXCCL-Multi Commodity Exchange Clearing Corporation Ltd.
NSE Clearing is the clearinghouse of NSE and ICCL is the clearing house of BSE.
Transfer agents are the companies or third parties that manage the ownership on shares and they will maintain an ownership record. the main function of the transfer agent is to maintain investor’s detail financial records. cams, Karvy, etc are some of the popular third-parties who perform the record-keeping duty for financial institutions.
Investors are the person or institution that puts money in the financial market for their gain. investors are the backbone of the stock market. all the above setups are made for investors and their smooth functioning. investors put money in the stock market by expecting capital gain in return. investing in the stock market can be Short term or long term, it will depend upon their investment goals. individual investors and institutional investors the major types of investors in the stock market. individual investors are common peoples like us and institutional investors are Mutual funds, companies, or other financial institutions.
In this modern era of fin-tech, we can buy and sell the shares is very easy in a short time. but we are not aware of the background process. buying and selling of stocks seem to be a straightforward process because of its ease and technology.but actually there are many background process is running behind every buys and sell order that you place. these background processes will be carried out by a group of stock market participants. in this post, we discussed the stock market participants. I hope this post gave you an idea and basic knowledge about Indian stock market participants. this is just an introduction, we will discuss participants in detail in the coming posts.