Difference Between BSE and NSE

Many traders in the beginner are confused about the difference between BSE and NSE due to the similarities of stock exchanges.

Many people even tend to use them interchangeably because of the confusion. 

Here is the document that helps you in getting a clear idea of the difference between the two major stock exchanges of India.

So let’s start right from scratch to create a road map that helps you in understanding the role of BSE and NSE.

A trader requires a demat account and a trading account to begin his/her journey of trading. The service of a demat account is extended by stockbrokers affiliated by the national depositories – CDSL (Central Depository Services of India) and NSDL (National Service of Depository Limited).

The regulatory body for all stock exchange-related activities is SEBI (Securities and Exchange Board of India). Then comes the stock exchanges BSE and NSE that regulates the stock market. 

The whole trade occurs here and also it helps you in knowing the companies performing well and offering high returns or good profit to investors and traders.

With a little background understanding, now we will attempt to draw a clear line of difference between BSE and NSE. Let’s dive into the details.

What are BSE and NSE?

Before comparing the two of the biggest stock exchanges in India, we need to learn about them individually.

Without the necessary understanding, comparing the two would undoubtedly lead to unprecedented confusion.

So, let’s start. 

BSE (Bombay Stock Exchange)

It is the only Indian Stock Exchange established in the pre-independence era (1875) and was instituted as the Native Share and Stock Brokers’ Association.

The exchange was previously named as Bombay Stock Exchange but was recently renamed to BSE.BSE has an operational speed of 6 microseconds, making it one of the fastest stock exchanges.

It facilitates the traders to trade in multiple financial segments like equity, currency, debt instruments, mutual funds, and derivatives.

It lists different companies on the basis of an index called SENSEX, Sensex consist of 30 companies that are performing well and are actively traded in the stock market. 

Presently, around 5,000 companies are listed on BSE and approximately 250 Small and Medium Enterprises (SME) on the BSE SME.

Small factors like those discussed above matter a lot in establishing the difference between BSE and NSE.

To be listed on the BSE, the company has to fulfill requirements set by the stock exchange to ensure fair and transparent trading for the investors and traders trading on the same.

NSE (National Stock Exchange)

To prove the difference between BSE and NSE, the next stock exchange is the National Stock Exchange.

It is popularly known as NSE and is one of India’s biggest stock exchanges based on market capitalization. It was founded in 1992 but started operating in 1994.

It began electronic screen-based trading in 1994. It offered trading in equity and wholesale debt market segments.

Still, today has the option to trade in derivatives, mutual funds, equities, IPOs, ETFs (Exchange Traded Funds), Corporate bonds, debt market, and many more.

Also, read Rank MF which is a tool of SAMCO through which you can invest in Mutual Funds.

It became the first exchange in India to do so by launching the facility to trade in derivatives. It also started electronic trading in the year 2000.

Currently, approximately 1700 companies are listed on the exchange, of which around 1370 are active.

Similar to SENSEX, NSE index is called NIFTY that enlist the 50 most actively traded companies. Trading in the indices opens the gateway to earn a good profit and to plan the best stocks for long term investment. 

However, companies listed on NSE are necessitated to fulfill some essential criteria to become eligible. Only companies that satisfy the eligibility requirements stay listed on the exchange. 

Even companies that, after getting listed, fail to meet the eligibility criteria are unlisted.

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BSE and NSE Difference

There are various factors based on which we can compare the two stock exchanges. So, let’s list them without any further delay and establish the difference between BSE and NSE.

• Incorporation

BSE is Asia’s oldest stock exchange. NSE, on the other hand, came into existence very late. BSE was incorporated in 1875, and NSE was incorporated in 1992. However, NSE became operational only in 1994.

In the worldwide ranking of stock exchanges, BSE ranks 10th, and NSE stands at the 11th position.

• Number of Listed Companies

In the debate of BSE vs NSE, this factor makes the differentiation evident. The Bombay Stock Exchange (BSE) has an unquestioned lead in this aspect – the number of companies listed on either of these stock exchanges.

National Stock Exchange (NSE) has more than 1700 companies listed on the stock exchange, and BSE features 5000+ companies on its stock exchange.

This stark difference between BSE and NSE is quite understandable and generally gets credited to BSE’s longer existence time than NSE.

• Electronic Trading

This factor helps in clearly demarcating the difference between BSE and NSE.

With the achievement of being the first Indian stock exchange to introduce electronic trading, NSE has a prominent and deciding edge over the oldest stock exchange of Asia – BSE.

NSE was incorporated to be a fully electronic stock exchange. Thus, reducing the dependency on paper. In contrast, BSE has been following a paper-based trading system. This system has been popular due to its incorporation in the pre-technology times.

In 1995, BSE switched to electronic trading when BOLT (BSE On-Line Trading) was institutionalized.

• Derivatives Contract

Being the first stock exchange for offering trade derivatives, NSE has a massive head start over BSE. Further, we can say that NSE has virtually monopolized the entire segment by taking the initiative.

The two significant indices of NSE are NIFTY 50 and Bank NIFTY. Both of them are exceptionally liquid. They are labeled as having the highest number of traded contracts in the Indian derivative segment.

BSE, on the other hand, has a lower number of investors and traders that trade derivatives.

• Listing of Stock Exchange

When we talk about the difference between BSE and NSE, a prominent distinguishing feature of BSE is that the only listed stock exchange in India is BSE. The most surprising revelation is what is coming up next.

BSE is listed on the National Stock Exchange (NSE) – one of its rival stock exchanges.

Yes, you read that right!

NSE has been planning on getting listed on a stock exchange but has been unable to meet the eligibility criteria due to various legal hurdles.

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Difference Between BSE and NSE in Tabular Form

By now, a lot of aspects have been discussed, and they might seem messy. So to ease this process, we are listing the difference in BSE and NSE in tabular form below:

 

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History of BSE and NSE

NSE – NSE or National Stock Exchange of India Ltd was incorporated in 1992, and it became operational in 1994.

That same year, NSE launched electronic screen-based trading and derivatives trading. This derivative trading was conducted in the form of index futures.

NSE was the first demutualized stock exchange in India, along with being technologically advanced. These advancements became very popular and preferred among traders and investors in very little time.

NSE became one of a kind stock exchange in India when it launched Internet trading in 2000.

Over the years, NSE has developed a fully integrated business model that includes trading services, exchanges listings, indices, market data feeds, etc.

It has also initiated offerings in the financial education sector too. NSE supervises its traders, investors, and listed companies in following the stock exchange rules and regulations.

Currently, NSE is a leading stock exchange in India and is the second-largest in the world based on the number of trades in equity shares.

BSE – The BSE History commences with five stockbrokers leading meetings back in the 1850s. These stockbroker meetings were conducted under a banyan tree.

With time, the number of brokers increased, and they kept on switching the venue for meeting as per the requirements.

After more than two decades, in 1874, this little association of brokers relocated to Dalal Street, Mumbai.

By the next year, they formed an official organization – “The Native Share and Stock Brokers Association”.

Independent India’s government recognized BSE under the Securities Contracts Regulation Act in 1956. This recognition made it the first stock exchange of Independent India.

In 1986, the first market index of BSE – SENSEX was created. The purpose of developing this index was to measure the overall administration of the stock exchange.

In 2000, multiple equity derivative markets opened up, and various futures trading contracts got initiated.

These small steps lead to the expansion of the trading platform by BSE. Until 1995, BSE used to conduct floor trading or follow a paper-based trading system.

Post which, the transition to electronic trading system happened, and this transition was executed in fifty days only.

BSE On-Line Trading, also known as BOLT, is the automated trading platform by BSE that can execute more than 8 million orders in a day.

Lastly, BSE was the first stock exchange to introduce a centralized internet trading system (BSEWEBx.co.in).

This system was to facilitate investors globally to trade on the BSE trading platform.

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Functions of BSE and NSE

The difference between BSE and NSE functions is almost negligible. So, to understand them, let’s list them.

BSE – Bombay Stock Exchange has multiple functions. They are listed below

• Price Determination

Demand and supply are the two factors that dictate the price of various financial segments in the secondary market. BSE helps in the constant valuation of the listed companies and securities.

To track the different securities prices, you can go through the multiple indices (like SENSEX) to estimate the market movement.

• Economical Contribution

The continuous selling and reselling of the securities listed on the Bombay Stock Exchange permits funds and capital movement. This movement of money boosts and grows the national economy.

• Ability to Raise Capitals

It allows the various corporations (that fulfill the eligibility criteria) to get listed and raise capitals using multiple financial segments.

• Marketability and Liquidity

The ratio of liquidity and marketability of these listed securities is far more than any other investment segment. At any point in time, you can sell your securities to convert them to cash.

The transactions related to the securities are at the complete discretion of the trader or investor.

NSE – The functions and objectives of the National Stock Exchange are listed below. They are as follows

• It offers corporations the ability to raise capital.
• It aims to meet the current international standards of securities markets.
• It provides electronic trading systems that can enhance the trading market’s transparency, efficiency, and fairness.
• Gives the facility to trade in multiple financial instruments like equity, currency, debt, and other hybrid financial instruments.
• It enables book-entry settlement systems and shorter settlement cycles.

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Features of BSE and NSE

Features of the two stock exchanges are certainly going to establish the exact difference between BSE and NSE.

BSE – A few distinctive features of this stock exchange are as follows

• The securities listed on BSE are stocks, stock options, stock futures, index options, weekly options, and index futures.
• It is India’s oldest stock exchange.
• SENSEX 30 is the benchmark index of BSE, and it includes companies from 12 different sectors.
• This stock exchange has given a helping hand in developing the capital market of India and enhancing the growth of India’s corporate sector.

NSE – Features of the National Stock Exchange are as follows

• It has a fully automated screen-based trading system known as NEAT (National Exchange for Automated Trading).
• NSE is driven by orders and not quotes.
• The orders are matched using NEAT by comparing the buy order and the sell orders to provide the best price for selling and buying.
• NEAT allows its members to set conditional clauses on the already submitted orders. These conditional clauses are related to – Quantity, Time, and Price.

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Where is BSE and NSE Located?

The debate of NSE vs BSE is incomplete without the mention of their headquarters. Although both are situated in the Financial Capital of India – Mumbai, they are different in this aspect.

Bandra Kurla Complex of Mumbai, Maharashtra, is the Corporate Office of the National Stock Exchange of India Ltd. Bombay Stock Exchange, on the other hand, is headquartered on Dalal Street in Mumbai, Maharashtra.

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Conclusion

Both NSE and BSE are well established and the most famous stock exchanges in India.

These two are similar and distinguished in multiple ways, and the difference between BSE and NSE is evident yet confusing for a beginner.

Bombay Stock exchange was established in the early 1850s in the then Bombay, under a banyan tree.

At that time, the stockbrokers had no idea that they were laying the foundation for Asia’s first and biggest stock exchange. National Stock Exchange was incorporated in 1992 but became functional in 1994.

This exchange was established to cater to the latest market requirements and help traders and investors to trade efficiently.

These exchanges rank among the top stock exchanges globally and are a legal and transparent way of raising capital for the country’s multiple corporations.

They help in building a more robust economy with increased liquidity.

They have multiple functions and features that make them unique and similar at the same time.

We hope this article helped you demarcate the difference between BSE and NSE.

Happy learning!

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