Most people understand that Stock Market is all about buying and selling of online shares however very few exactly know in detail about Stock Exchange and its operations.

Let us discuss in detail about Stock Exchange, Share Market, Stakeholders and their mode of operations to keep traders invested in securities.

Share Market Jurisdiction and Operation

The Securities Contract (Regulation) Act, 1956 (SCRA) defines ‘Stock Exchange’ as any party or company or individuals, whether incorporated or not, constituted for the purpose of assisting, promoting, regulating or controlling the business of buying, selling or dealing in securities. In simpler terms, we can say that exchange is an open place where online shares are traded between different parties supervised by government regulatory authorities.

Stock exchanges are majorly of two types depending on their area of operations; regional stock exchange and national stock exchange.

Regional stock exchange

Regional stock exchange serves trading to certain jurisdiction. Their area of operation in terms of trading and securities is limited within this jurisdiction. A major example of regional stock exchange is Kolkata Stock Exchange (Kolkata).

National stock exchange

And second is a national exchange, which are allowed to have pan-India trading since the time they are established, major examples are National Stock Exchange (NSE Mumbai) and Bombay Stock Exchange (BSE Mumbai).

What type of Parties Involve in Share Market Trading?

Investors and traders majorly deal with shareholders and stakeholders of the company in share market. The contract between both the parties involve in buy/sell transaction of derivatives, equities and options in stock market trading.

Let us understand in brief about difference in stakeholder and shareholder.

Who is a stakeholder?

A stakeholder is an individual or a group of persons or any other party that has an interest in the company. Either of the stakeholder involved – individual or group abide by the regulations and changes of the company’s policies.

Similarly, if you consider, a share market to be a huge company then there are different types of stakeholders involved in it managing transactions of billions of rupees on daily basis.

Are Shareholder Same as Stakeholders?

For the sake of conversation and interactions most of the times, the terms shareholder and stakeholder are often used interchangeably, there are striking differences between them. While a shareholder is a stakeholder of a company, the opposite is not always true.

A shareholder holds certain percentage of a company’s shares and thus have minimal ownership in it. On the contrary, a stakeholder has an interest in the company’s performance for a short-term or a long-term position, other than market valuation. Exposure and management of stakeholders in the company are always higher than that of shareholders.

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What are Types of Stakeholders?

There are majorly two types of stakeholders:

Internal stakeholders

These stakeholders can be a group of persons who run the organisation. They are also part of managing an entire administration of the company and are directly affected by its policies, performance, expansion, dilution and strategy.

For example, employees are internal stakeholders who are directly affected by their company’s policies, strategies and performance. Their personal and professional life is dependent on the performance of company’s projects and products.

External stakeholders

External stakeholders, on the other hand, represent those who have certain interest in the company’s performance but their success is not entirely dependent on the company’s future.

For example, investors, consumers, regulators, vendors and suppliers are external stakeholders who have interests in other companies relevant to their choices and mode of action.