Stock exchanges are the lifeline of the stock market. They provide a platform for companies to raise funds for their business expansion. For traders/investors, they provide an opportunity to earn money. Securities and Exchange Board of India (SEBI) regulates the stock market in India.
Stock market is made up of financial intermediaries. From the time a security is bought to the time the security is sold, various financial intermediaries play their assigned roles in the process. All these intermediary are under scrutiny by SEBI and follow the rules strictly set by SEBI.
There are four main financial intermediaries in stock market.
1. Stock broker : For individual trader/investor, a stock broker is a gateway to stock exchange. You should open a trading account with a stock broker. eg Zerodha, Sharekhan
2. Depository & Depository Participant
eg : NSDL (National Securities Depository Limited)
CDS (Central Depository Services (India) Limited)
A depository is a financial intermediary which offers service of demat account. This demat account is a digital vault for electronic shares.
3. Bank
A bank as a financial intermediary of stock market facilitates funding to-fro trading account.
4. Clearing corporation
Financial intermediary, clearing corporations are wholly owned subsidiaries of NSE & BSE. The job of a clearing corporation is to make sure that all the trades are closed successfully. Means if there is a buyer buying X share at Rs 1, there should be a seller selling at Rs 1.
There are two clearing corporation in India viz.
NSCCL (National Security Clearing Corporation Ltd)
ICCL (Indian Clearing Corporation)
