Stock Market Participants

  • 08_Stock market participants
  • Posted By :
  • Thursday Sep 07, 2017

Stock Exchange

The stock exchange is an organised market for buying and selling corporate and other securities. In a stock exchange, securities are purchased and sold out as per some well-defined rules and regulations. It provides a convenient and secured mechanism or platform for transactions in different securities. Such securities include shares and debentures issued by public companies duly listed on the stock exchange, and bonds and debentures issued by governments, public corporations, and municipal & port trust bodies.

Stock exchanges are indispensable for the smooth and orderly functioning of the corporate sector in a free market economy. A stock exchange is not a place for speculation or a gambling den. It should act as a place for safe and profitable investment and this, effective control on the working of the stock exchange is necessary, which avoids misuse of the platform for excessive speculation, scams and other undesirable and anti-social activities.


Investors, also referred to as stockholders or shareholders are those who own shares of stock of a publicly listed company.  They are accorded certain privileges like the right to fair and equal treatment, the right to vote and exercise-related rights, and the right to receive dividends and other benefits due to stockholders. They are classified as either retail or institutional, and local or foreign.

Stock Brokers

A stock broker or trading participant is licensed by the Securities and Exchange Commission (SEC) and is entitled to trade at the exchange. They act as an agent between a buyer and seller of stocks in the market. They execute orders in the market to the most significant possible advantage of their customers, by buying at the lowest reasonable price or by selling at the highest available price.

For their services as stock brokers, they receive from their clients either a buying or a selling commission.

There are two  types of stockbrokers:

  • Traditional: Those who assign a licensed salesperson to handle your account and take your orders via a written instruction or a phone call.
  • Online: Those whose primary interface is the internet where clients execute their orders and access market information online.

Listed Companies

Listed companies, also called "issuers", are traded on the exchange. These companies have gone through initial public offering (IPO) or listing by way of introduction.


A depository is an organisation which holds securities (like shares, debentures, bonds, government securities, mutual fund units etc.) of investors in an electronic form at the request of the investors through a registered Depository Participant (DP). A DP is an agent of the depository through which it interfaces with the investor and provides depository services. It also provides services related to transactions in securities. Public financial institutions, scheduled commercial banks, foreign banks operating in India with the approval of the Reserve Bank of India (RBI), state financial corporations, custodians, stock-brokers, clearing corporations /clearing houses, NBFCs and registrar to an issue or share transfer agent complying with the requirements prescribed by SEBI can be registered as DP. Banking services can be availed through a branch whereas depository services can be availed through a DP.

At present two Depositories viz. National Securities Depository Limited   (NSDL) and Central Depository Services (India) Limited (CDSL) are registered with SEBI.

Transfer Agents

The stock transfer agent is considered the "official keeper" of the corporate shareholder records. The stock transfer agents provide the issuer or the listed company with a list of holders of its securities. They affect the transfer of beneficial ownership and process corporate actions like stock or cash dividends, stock rights, stock splits, and collation of proxy forms.

Credit Rating Agencies

Credit Rating Agencies provide opinions on the creditworthiness of a company or security. They indicate the credit quality through a grade. Credit ratings distinguish between investment grade and non-investment grade. For example, a credit rating agency may assign a "triple A" credit rating as its top "investment grade" rating, and a "double B" credit rating or below for "non-investment grade" or "high-yield" corporate bonds. Credit rating agencies registered as such with the SEC are known as "Nationally Recognised Statistical Rating Organisations.”

Investment Advisers

Investment advisers are people or firms that are in the business of providing investment advice to investors or issuing reports or analyses regarding securities. They do these activities for compensation.