4.4 History of stock markets
STOCK MARKET HISTORY
World History:
History says that the stock market originated in Europe during the 12th century. But major developments in the stock market took place in the US after the initiation of the New York Stock Exchange (NYSE) in 1892. Interestingly, most stock markets in the world took their birth and started operating either under a banyan tree or a neem tree.
Indian History:
The history of the Indian stock market is about 200 years old. Prior to this, hundis and bills of exchange were in use, especially in the medieval period, which can be considered as a form of virtual stock trading but it was certainly not an organised form of stock trading. Records of stock trading can be traced only after the arrival of East India Company. The first organised stock market that was governed by rules and regulations came into existence in the form of the Native Share and Stock Brokers Association in 1875. After undergoing numerous changes, this association is today better known as the Bombay Stock Exchange (BSE).
During this period several other exchanges were launched. Many of these have now closed down. At present, there are 19 recognised stock exchanges and two derivative exchanges. The BSE and the National Stock Exchange (NSE) are national exchanges (with nationwide participation) and the others are regional ones. The volume of trade in the regional exchanges is negligible. The formation of the Securities and Exchange Board of India
(SEBI) has brought substantial transparency in share market practices and thus managed to bring in the trust of domestic and international investors.
| 1800s |
Recognition from banks and merchants to about half a dozen brokers. |
| 1830s |
Business on corporate stocks and shares in bank and cotton presses started in Bombay. Trading list by the end of 1839 got broader. |
| 1840s |
Recognition from banks and merchants to about half a dozen brokers. |
| 1850s |
Rapid development of commercial enterprise saw brokerage business attracting more people into the business. |
| 1860s |
The number of brokers increased to 60. |
| 1860-61 |
The American Civil War broke out which caused a stoppage of cotton supply from the United States of America, marking the beginning of the ‘share mania’ in India. |
| 1862-63 |
The number of brokers increased to about 200 to 250. |
| 1865 |
A disastrous slump began at the end of the American Civil War (for example, Bank of Bombay’s share which had touched Rs 2,850 could be sold at only Rs 87). |
| 1874 |
With the rapidly developing share trading business, brokers used to gather at a street (now well known as Dalal Street) for the purpose of transacting business. |
| 1875 |
The Native Share and Stock Brokers Association (also known as The Bombay Stock Exchange) was established in Bombay. |
| 1880s |
1880s Development of the cotton mills industry and setting up of many others. |
| 1894 |
Establishment of the Ahmedabad Share and Stock Brokers Association. |
| 1880-90s |
Sharp increase in share prices of jute industries in 1870s was followed by a boom in tea stocks and coal. |
| 1908 |
The Calcutta Stock Exchange Association was formed. |
| 1920 |
Madras witnessed a boom and business at the Madras Stock Exchange was transacted with 100 brokers. |
| 1923 |
When recession followed, the number of brokers came down to three and the exchange was closed down. |
| 1934 |
Establishment of the Lahore Stock Exchange. |
| 1936 |
Merger of the Lahore Stock Exchange with the Punjab Stock Exchange. |
| 1937 |
Re-organisation and set up of the Madras Stock Exchange Limited led by improvement in stock market activities in south India with establishment of new textile mills and plantation companies. |
| 1940 |
Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited were established. |
| 1944 |
Establishment of the Hyderabad Stock Exchange Limited. |
| 1947 |
The Delhi Stock and Share Brokers Association Limited and the Delhi Stocks and Shares Exchange Limited were established and later on merged into the Delhi Stock Exchange Association Limited. |
| 1986 |
BSE launched a stock index for its market as sensitive index known as Sensex. |
| 1993 |
Establishment of the National Stock Exchange (NSE). |
| 1995 |
BSE replaced open outcry system with Online Trading System. |
| 1996 |
Launch of S&P CNX Nifty. |
| 1996 |
Commencement of trading/settlement in dematerialised securities. |
| 2000 |
Commenced operations in the Derivatives segment. |
Current Scenario In Indian Stock Markets:
- BSE and NSE are the leading stock exchanges.
- There are 19 stock exchanges and two derivative exchanges in India.
- BSE is the oldest stock market in Asia.
- BSE is the biggest stock exchange in the world in terms of number of companies listed. There are over 4,000 companies listed on BSE.
- NSE is the biggest in terms of turnover per day.
| SEBI Registered Market Intermediaries Statistics |
| Market Intermediaries |
Number Of Intermediaries |
| Year |
2000 |
2007 |
2008 |
| Stock Exchanges (Cash Market) |
23 |
21 |
19 |
| Stock Exchanges (Derivatives Market) |
2 |
2 |
2 |
| Brokers (Cash Segment) |
9,192 |
9,443 |
9,487 |
| Corporate Brokers (Cash Segment) |
3,316 |
4,110 |
4,190 |
| Sub-Brokers (Cash Segment) |
5,675 |
27,541 |
44,074 |
| Brokers (Derivative) |
0 |
1,258 |
1,442 |
| Foreign Institutional Investors |
506 |
997 |
1,319 |
| Depositories |
2 |
2 |
2 |
| Depository Participants |
96 |
593 |
654 |
| Underwriters |
42 |
45 |
35 |
| Credit Rating Agencies |
4 |
4 |
5 |
| Registrars To An Issue & Share Transfer Agents |
242 |
82 |
76 |
| Mutual Funds |
38 |
40 |
40 |
| Source: SEBI Handbook 2008 |
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