Introduction 

In the Budget week, all the sectoral indices of the stock exchanges rose and ended in the green. 

 
• Primary indices smallcap gain over 2% amid volatility in the stock market, leaving its two-week losing streak behind. 
• The stock market continued to be highly volatile, and 80 smallcap shares rose by 10-47%. 
• The BSE Midcap index gained 2.3% amid volatility.
• Also, the BSE 500 index rose 2.4%.

Such factors work on the investors' minds and attract them to start investing. An increasing number of investors want to learn about stock investments and upcoming IPOs. To invest in the stock market, you should know about stock exchanges and how they work.

What is a Stock Exchange?

Stock exchanges are regulated electronic platforms to buy and sell different types of financial securities, like shares and bonds, in the stock market. It is the secondary market to trade listed stocks. 

You must have heard the two terms, the stock exchange, and the stock market. These two terms are often used as synonyms, but they are different. These are the subset of the stock market. There can be more than one stock exchange in an economy. You can trade several financial securities in the stock market through relevant stock exchanges. 

These are operated digitally. Investors can access stock exchanges online through SEBI registered stockbrokers. These stockbrokers offer online trading platforms with demat accounts and trading accounts. An investor needs both accounts to trade in the stock market through the stock exchange. Using a demat account, you can invest in upcoming IPOs, and trading accounts offer you a margin equity facility to leverage your position.

History of the Stock Exchange

BSE is the first organized stock exchange in India and the oldest in Asia started in 1875. There was a time when this was operated offline, and investors had to be present physically in the exchange to place a trade order. Whether it was a buy or sell order, investors had to wait for months to change the security ownership. It was a hectic process. 

It was changed in 1966 when the dematerialization stock trading system was introduced, and it became an electronic trading platform to meet buyers and sellers. Today, there is no paperwork involved for online stock trading.

Facts about Stock Exchange 

In India, there are eight active national and twenty-one regional stock exchanges. Following are the facts about its functions that add to its importance: 

 

•  Price Valuation 

Stock exchanges are important components of the stock market. Various factors affect stock prices, including supply and demand. It helps find such levels in real-time and help investors trade at fair prices. 

 

•  Barometer to the economy

Stock exchanges indicate the state of the economy. Therefore, they are an indicative economic barometer in a country. It reflects the impacts of all the major and minor changes on the stocks through real-time share prices. It is the pulse of the economy.

 

•  Transactional Safety

Stock exchanges ensure transactional safety for online trading. It allows trading of stocks of listed companies only after verifying the company's position. Every company listed adheres to the SEBI and exchange laid rules and regulations. From deciding margin equity to infrastructure details of stock exchanges, SEBI has to ensure all transactional details.

 

•  Contribution to Investment Awareness

Stock exchanges have indexes that show the top stocks based on their performance in the market. Investors can follow these indexes like NIFTY, SENSEX, BSE500, etc., to invest in top performers with stability.

 

•  Maintaining Liquidity 

Stock exchanges are the ready platform for selling and purchasing financial securities in the stock market. Investors can convert securities into cash when they require. Therefore, exchanges offer liquidity for investments.

Thus, stock exchanges provide a safe environment where you can confidently make short or long-term commitments.

Stock trading account:

The stock trading account is a digital space to hold the securities. Different brokers allow the investors to open a trading account along with a Demat account at a low cost. Generally, it is used for intraday trading in the stocks, and margin-based trading for the stocks. Both types of trading can execute with the stock trading account.

 Margin-based trading is known as derivative trading in which the future and options are executed with margin only. Intraday trading is taking long and short positions on a day period. The intraday tradings execute to gain the short term profits only.

Requirement of social security number for a trading account:

Trading with a stock trading account requires a social security number. The brokerage firms provide the SSN or TIN (taxpayer identification number). The TIN number is issued to the resident investors. It is required to have this number for the transaction.

In case, the investor is a non-resident of India, then the brokerage firms issue the ITIN (International taxpayer identification number). It helps in the online training in the stock market. So, it can be said that the stock training can not proceed with the help of the social security number and the taxpayer identification number.