4.3 Types Of Stock Markets

DIFFERENT STOCK MARKETS

When we talk about stock markets, we have both, the organised and the unorganised markets. To differentiate between these two markets, let us take an example of used car markets. Buying and selling of used cars in a random manner in different parts of your city is an unorganised market. Whereas, in an organised market, few intermediaries come together at a common place and attract all the buyers and sellers to this common place. In an organised market, people expect more quality, dependability and service which may not be available in the unorganised market. Similarly, stock markets can be seen in an unorganised form as well as in an organised form. Organised stock markets are much bigger and popular in any country.

Organised Stock Markets:

These markets refer to stock markets in the form of stock exchanges which are structured, professional and have strong regulatory frameworks. Some examples of stock exchanges are the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) in India, London Stock Exchange (LSE) in UK, New York Stock Exchange (NYSE) and National Association of Share Dealers Automated Quotations (NASDAQ) in USA.

Unorganised Stock Markets:

Unorganised or unstructured markets in India are active though they are illegal. The important forms of these markets are ‘dabba’ trading (trading within day’s trading hours) and ‘kerb’ market (after the trading hours). Let us get some understanding of these forms of markets.

Dabba (Trading) Market:

Dabba means box and a dabba operator, in stock market parlance, is the one who indulges in ‘dabba’ trading. His office is like any other broker’s office having terminals linked to the stock exchange showing market rates of stocks. However, the difference is that the investor’s trades do not get executed on the stock exchange system but in the dabba operator’s books only. It is a form of trading outside the stock exchange more popular in Western India. Traders are interested in doing this because they can avoid service tax, securities transaction tax, stamp duty and lowest possible brokerage paid to the broker as it is out of the exchange surveillance. In India, SEBI has banned dabba trading but it is still thriving in some parts of the country.

Kerb Market:

This is unauthorised stock trading after the market hours which is more popular at the Calcutta Stock Exchange (CSE). This is meant for people who are still interested in trading even after the closure of the market. It is more active prior to the weekend i.e. Friday as the market is closed on Saturday and Sunday, and when the markets are more volatile during the closing session.