Difference between Stock Exchange and SEBI
SEBI, serves as the regulatory authority overseeing the functioning of stock exchanges in India. Its important in maintaining transparency, fairness, within the market. Checkout the article to know more about the diffrence between SEBI and stock exchanges
Shruti Dutta28 May, 2024
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Stock Exchange and SEBI: The two major entities that stand out in India's financial markets are the SEBI (Securities and Exchange Board of India) and the stock exchanges. SEBI serves as the regulatory watchdog entrusted with overseeing the functioning of the securities market, ensuring fairness, transparency, and investor protection.
On the other hand, stock exchanges provide platforms for trading, acting in marketplaces where buyers and sellers converge to exchange securities. While both are crucial for the smooth operation of India's capital markets, they differ significantly in their roles, functions, and areas of jurisdiction. Check out the article on the differences between SEBI and stock exchanges and their distinct yet complementary roles in shaping India's financial landscape dynamics.What is SEBI?
SEBI is a statutory body under the Indian Government that aims to enhance transparency in the Indian investment market. Established on April 12, 1992. Initially formed as a non-statutory body in 1988, it gained statutory status in 1992. Headquartered in Mumbai with regional offices in Delhi, Kolkata, Chennai, and Ahmedabad, SEBI operates under the Ministry of Finance, Government of India, comprising nine members, including a chairperson appointed by the central government. SEBI's primary mandate is to foster the development and regulation of the capital market, ensuring its integrity and fairness. It also safeguards the interests of investors by overseeing securities market activities.Functions of SEBI
The Securities and Exchange Board of India (SEBI) plays a crucial role in regulating the securities market in India. Here are some of the key functions of SEBI:- Regulatory Oversight : SEBI is the guardian of the securities market, formulating regulations and guidelines to ensure a level playing field for all participants and promote fairness and ethical conduct.
- Investor Safeguarding : SEBI protects investor interests by promoting fair trading practices, ensuring timely disclosures, combating fraud, and promptly addressing grievances.
- Market Advancement : SEBI fosters a vibrant securities market by encouraging innovation, diversification, and adoption of international best practices.
- Supervision and Vigilance : SEBI conducts inspections and investigations to monitor regulation compliance, detect market manipulation, and maintain integrity.
- Investor Education : SEBI educates investors about their rights, responsibilities, and risks associated with market participation through various outreach programs and collaborations.
What Is Stock Exchange?
A stock exchange is a platform where stockbrokers and traders engage in securities transactions, adhering to market-specific rules and regulations. They play a vital role in facilitating the issuance and redemption of securities and distributing income and dividends. Public companies and government bodies utilise these exchanges to raise capital by trading their securities. These securities encompass stocks, bonds, derivatives, and investment products issued by trusts and listed entities. Stock exchanges serve as marketplaces where buyers and sellers converge to conduct transactions. Multiple stock exchanges exist in India, with the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) as prominent examples.Function Of Stock Exchange
The stock exchange serves crucial functions that facilitate the smooth trading of securities fairly and efficiently:- Trading Platform : The stock exchange's primary role is to provide a centralised platform for securities trading. It facilitates the buying and selling of securities by matching buy and sell orders, ensuring transparent price discovery, and reflecting market sentiment.
- Listing and Delisting : Stock exchanges facilitate the listing of securities, allowing companies to raise capital from investors by going public. They regulate the listing process, ensuring compliance with disclosure requirements and corporate governance norms. Additionally, exchanges oversee delisting procedures, removing securities from trading for reasons like mergers, acquisitions, or non-compliance with listing regulations.
- Market Surveillance : Stock exchanges maintain market integrity by monitoring trading activities to detect irregularities or market manipulation. They employ advanced surveillance systems to identify suspicious trading patterns, insider trading, or any activity undermining market fairness.
- Liquidity Enhancement : Stock exchanges enhance market liquidity by facilitating easy buying and selling of securities. Continuous trading throughout trading hours ensures efficient price discovery, allowing investors to enter and exit positions without significant price impact.
- Index Compilation : Stock exchanges compile various market indices representing the performance of selected securities. These indices, such as Nifty 50 and Sensex in India, serve as benchmarks for overall market performance, providing valuable insights to investors and industry participants.
Difference between SEBI and Stock Exchange
SEBI (Securities and Exchange Board of India) and stock exchanges are integral components of India's financial ecosystem, each playing distinct yet interconnected roles. While SEBI is the regulatory authority overseeing the securities market, stock exchanges provide the infrastructure for trading securities. Understanding the differences between these entities is crucial for grasping India's capital market dynamics. Below, we outline key distinctions between SEBI and stock exchanges| Difference between SEBI and Stock Exchange | ||
| Aspect | SEBI | Stock Exchange |
| Regulatory Role | Regulates the securities market in India. | Facilitates trading of securities within its marketplace. |
| Functions | Formulates regulations and oversees market activities. | Provides a platform for buying and selling securities and ensures market liquidity. |
| Jurisdiction | Governs the entire securities market, including exchanges. | Operates within the regulatory framework established by SEBI. |
| Oversight | Monitors compliance and protects investor interests. | Maintains market integrity to ensure fair and transparent trading. |
| Establishment | Established as a statutory body by the Government of India. | It operates as an independent entity or corporation typically owned by shareholders. |
| Authority | Has regulatory authority over the entire securities market. | Provides trading infrastructure and ensures compliance with SEBI regulations. |
| Governance | Governed by a board of directors appointed by the government. | Governed by its board of directors and management team. |
| Clearing House | Does not function as a clearing house. | Acts as a clearing house, facilitating settlement of trades. |
| Trade Volume | Does not facilitate transactions; overseas market. | Experiences significant trade volumes daily. |
| Motive | The primary objective is market regulation and integrity. |
Aims to profit from trading activities. |
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Difference between SEBI and Stock Exchange FAQs
How does a stock exchange differ from SEBI?
While SEBI regulates and oversees the entire securities market, including stock exchanges, a stock exchange provides the platform and infrastructure for trading securities.
What is SEBI's jurisdiction?
SEBI has authority over the entire securities market in India, including stock exchanges, listed companies, intermediaries, and investors.
What is the role of a stock exchange?
A stock exchange's primary role is to facilitate the buying and selling of securities by providing a centralised platform for trading. It ensures fair and transparent trading and maintains market liquidity.
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