As you know, there is a marketplace for everything that we want to trade: a vegetable market where you can buy fruits and veggies, a gold showroom that sells ornaments, coins, and other items made of the yellow metal, and so on. Likewise, there is a regulated marketplace called a ‘stock exchange’ (example: BSE and NSE) where you can trade listed-financial instruments such as:
- Futures & Options
The main objective of a stock exchange is to ensure that the companies and clearing members abide by the rules and regulations of the exchange and also that trading happens in a legitimate manner.
Over-the-counter (OTC) market
Financial instruments that are not listed and do not meet the requirements of a stock exchange are traded on an over-the-counter (OTC) market. Compared to a stock exchange, an OTC is less formal and regulated. Stocks traded here belong to smaller and riskier entities.
BSE and NSE
Coming back to stock exchanges, India has 23 in all, out of which BSE and NSE are the major ones. Since both are stock exchanges that facilitate stock trading, many investors wonder what is the difference between NSE and BSE. Let’s look at BSE vs NSE to understand it.
What is BSE (Bombay Stock Exchange)?
Established in 1875, BSE is the oldest stock exchange in India. It is the first exchange to enjoy permanent recognition under the Securities Contract (Regulation) Act, 1956. Its benchmark index S&P BSE SENSEX was introduced in 1986 and it represents the weighted average of the top 30 listed companies traded on BSE. These stocks belong to several sectors including Auto, Banking and Finance, FMCG, and Healthcare. BSE offers trading and related services such as clearing, settlement, and depository (via CDSL), education, in an efficient, transparent, and secure manner.
Here are some interesting facts about BSE:
- BSE was the first stock exchange of Asia
- BSE’s capacity was 8 million transactions per day when BSE on-line trading was introduced in 1995
- BSE has a speed of 6 microseconds, which makes it the fastest exchange in the world
- BSE is the 12th biggest exchange in the world
- BSE’s market capitalization as of July 2017 was over $2tn
What is NSE (National Stock Exchange)?
Known as the National Stock Exchange, NSE was established in 1992. Two years later, in 1996, NSE launched its benchmark index called Nifty 50, which was an identifying base for top 50 stocks listed on the exchange. Like BSE, NSE also offers various trading and related services such as market data, indices, clearing and settlement, depository (via NSDL – National Securities Depository Limited), and education.
Here are some interesting facts about NSE:
- NSE introduced an electronic exchange system in the country
- NSE is India’s largest stock exchange based on the total and average daily turnover for equities
- As of March 2017, NSE’s market capitalization was over $1.41tn
Difference between BSE and NSE
|Point of difference||BSE||NSE|
|Year of commencing operations||1875||1994|
|Vision||Emerge as the premier Indian Stock Exchange with best-in-class global practice in technology, products innovation and customer service||Continue to be a leader, establish global presence, facilitate the financial well being of people|
|Benchmark index||S&P BSE SENSEX||Nifty 50|
|No. of companies considered in the index||30||50|
|Instruments traded||Equity, mutual funds, debt instruments, currencies, derivatives||Equity, debt, equity and currency derivatives|
|Introduction of electronic system||1995||1992|
|Number of listed entities||5,089||~2,000|
Often, investors have this question: ‘NSE or BSE which is better to trade stocks?’. Well, the answer is that both the stock exchanges are recognized by SEBI (Securities and Exchange Board of India) and are efficient platforms to trade in the listed financial instruments.
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