A stock exchange is also known as the:

Secondary market. Securities that were issued earlier are traded on the stock exchange, so it is called the secondary market.

Which securities can be traded on a stock exchange?

Only listed securities. Only securities included in the exchange's trading list can be traded, which protects investors.

Any security, whether listed or not

Only securities that have not yet been issued

Only securities issued by the government

Which is the oldest stock exchange in the world?

London Stock Exchange. London Stock Exchange was founded in 1571, whereas the Bombay Stock Exchange dates from 1875.

For equity spot markets settlement is T + 2 days, where T is the trading day. A trade made on Tuesday is settled on:

Thursday. T is Tuesday, so T + 2 days is Thursday (assuming no holidays).

Who is allowed to trade securities on a stock exchange?

Only members, on their own behalf or through authorised brokers. Trading is allowed only through members of the exchange, either for themselves or through authorised brokers.

Any member of the public directly on the floor

Only the company that issued the securities

Maharashtra State Board · HSC Commerce · Class 12 (Std XII)

Class 12 Secretarial Practice Chapter 12: Stock Exchange

Short notes, key concepts, quick revision and practice MCQs with answers

The stock exchange is the organised secondary market where already issued, listed securities are bought and sold. The chapter covers its features, functions, BSE and NSE, common market terms, SEBI, and the difference between a jobber and a broker.

Key concepts: Stock Exchange

Stock exchange: A specific, organised and regulated market where already issued securities are bought and sold for investment and speculation. It is also called the secondary market, stock market or share market.
Listed securities: Securities included in the trading list of a stock exchange. Only listed securities can be traded there, and the company must apply for listing and follow the exchange's rules.
BSE: Set up in 1875 as the Native Share and Stock Brokers' Association, at Dalal Street, Mumbai. It is the oldest stock exchange in India, moved to electronic trading (BOLT) in 1995 and its index is the Sensex.
NSE: Set up in 1992 by leading financial institutions, recognised in 1993, and began trading in 1994. It is the largest and most modern exchange in India, the first demutualised electronic one, and its index is the Nifty.
Bull, bear, stag and lame duck: A bull expects prices to rise and buys. A bear expects a fall and sells. A stag buys new issues to sell after listing at a higher price. A lame duck is a bear broker who made a loss as prices rose.
Broker and jobber: A broker is a licensed member who buys and sells for clients as an agent and earns commission. A jobber trades in his own name, earns profit, and cannot deal directly with investors.
Sensex and Nifty: Sensex is the BSE index of 30 large, actively traded stocks, created in 1986. Nifty is the NSE index of 50 companies (including all 30 Sensex stocks), created in 1996.
SEBI: Securities and Exchange Board of India, the regulator of the securities market, set up in 1992 with headquarters in Mumbai. It protects investors, promotes market development and regulates exchanges and intermediaries.

Quick revision: important points

Stock exchange has 10 functions, e.g. capital formation, liquidity, pricing of securities and economic barometer.
London Stock Exchange (1571) is the oldest in the world; BSE (1875) is the oldest in India.
Sensex: 30 stocks, 1986. Nifty: 50 stocks, 1996. Rally: upward move over 14 to 20 trading sessions.
Settlement is T + 2 days for equity spot markets; a contract note is given within 24 hours.
Jobber earns profit and is a special mercantile agent; broker earns commission and is a general mercantile agent.
SEBI was established in 1992 and also prohibits insider trading.

Practice MCQs with answers

A stock exchange is also known as the:
1. Primary market
2. Secondary market
3. Money market
4. Commodity market
Show answer
Answer: B. Secondary market
Securities that were issued earlier are traded on the stock exchange, so it is called the secondary market.
Which securities can be traded on a stock exchange?
1. Only listed securities
2. Any security, whether listed or not
3. Only securities that have not yet been issued
4. Only securities issued by the government
Show answer
Answer: A. Only listed securities
Only securities included in the exchange's trading list can be traded, which protects investors.
Which is the oldest stock exchange in the world?
1. Bombay Stock Exchange
2. National Stock Exchange
3. London Stock Exchange
4. OTC Exchange of India
Show answer
Answer: C. London Stock Exchange
London Stock Exchange was founded in 1571, whereas the Bombay Stock Exchange dates from 1875.
For equity spot markets settlement is T + 2 days, where T is the trading day. A trade made on Tuesday is settled on:
1. Tuesday
2. Wednesday
3. Friday
4. Thursday
Show answer
Answer: D. Thursday
T is Tuesday, so T + 2 days is Thursday (assuming no holidays).
Who is allowed to trade securities on a stock exchange?
1. Any member of the public directly on the floor
2. Only members, on their own behalf or through authorised brokers
3. Only the company that issued the securities
4. Only officers of the RBI
Show answer
Answer: B. Only members, on their own behalf or through authorised brokers
Trading is allowed only through members of the exchange, either for themselves or through authorised brokers.

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