Difference between SEBI and Stock Exchange

SEBI

The Securities and Exchange Board of India (SEBI) is the regulatory body that is responsible for regulating the activities of the stock exchange. SEBI was established by the Government of India on the 12th of April, 1992 under the Securities and Exchange Board of India Act, 1992 for two purposes:

  • Protect the financial interests of the investors and institutions who are putting their money in the securities of a publicly held company
  • Promote and regulate the securities market in India

SEBI is headquartered in Mumbai, and it has four regional offices in Delhi, Kolkata, Chennai and Ahmedabad. It was initially formed in 1988 as a non-statutory body and later acquired the statutory status in 1992. It is an autonomous entity that works under the purview of the Ministry of Finance in the Government of India. It has a total of nine members, including the chairperson who is nominated by the union government of India.

Stock Exchange

Stock Exchange is a place for the stockbrokers and traders to conduct transactions related to the securities while taking care of the specific rules and regulations that govern the market. They have a very important role in providing facilities for the issuance of securities and their redemption apart from other activities like the payment of income as well as dividends. There are a number of public companies as well as government bodies that are involved in the raising of capital through trading their securities at these exchanges. These securities include the stocks issued by trusts, listed entities, investment products, bonds and derivatives.

Many investors (individuals and corporations) from various parts of the nation wish to put their hard-earned money into the securities market with the aim of increasing their overall returns. The stock exchanges play the role of auction markets with these buyers and sellers. Some of the most important stock exchange markets in India that witness a high volume of transactions are mentioned below:

  • Bombay Stock Exchange
  • National Stock Exchange
  • Indian International Exchange
  • Calcutta Stock Exchange
  • Indian Commodity Exchange
  • Metropolitan Stock Exchange of India
  • Multi Commodity Exchange of India
  • National Commodity and Derivatives Exchange

These exchange markets are very important both for the investors (by giving them a platform to invest their money in profitable businesses and get better returns) and companies (by creating an opportunity for them to raise capital from the market).

Difference between SEBI and Stock Exchange

There are several points of difference between SEBI and the Stock Exchange. We will explore some of them in the below table:

SEBI

Stock Exchange

Definition

SEBI is a regulatory body that is responsible for protecting the interests of financial investors and companies as they engage in buying and selling of securities.

A stock exchange is a platform which allows stockbrokers and traders to buy and sell securities.

Scope

SEBI has a wider scope than an individual Stock Exchange as it is a regulatory body for the securities market in India.

A stock exchange has a narrower scope than SEBI since it falls under the purview of the regulatory body.

Trade Volume

SEBI is responsible for monitoring the entire securities market in India, but their platform is not used for the issuance, redemption or transfer of securities.

A stock exchange witnesses significant trade volumes on a daily basis since multiple investors and companies use their platform.

Clearing House

SEBI does not work as a clearing house.

Stock exchange works as a clearing house.

Motive

The main purpose of the SEBI is to regulate the securities market in India to ensure that there are no fraudulent transactions.

The stock exchanges run with the motive of getting a profit from the trading activities between investors and companies.

Conclusion

Both SEBI and the Stock Exchange have a crucial role to play in the Indian Securities Market. They also depend on each other for a number of reasons, and one cannot function properly without the other’s support. These two institutions need to work in tandem to ensure the growth of the securities market in the country.

Frequently Asked Questions

What are some of the branches that SEBI can regulate?

Some of the major branches that SEBI can regulate are as follows:
  • Depositories, custodians and participants
  • Debenture trust deeds and trustees
  • Insider trading, mutual funds and the FII (Foreign Institutional Investment) merchant bankers
  • Portfolio managers, share transfer agents, investment advisors and the registrars for capital issues
  • Stockbroker, underwriters, sub-brokers and venture capital funds
  • Takeovers and substantial acquisition of shares

How are the members of the SEBI board appointed?

SEBI has a total of nine members, and they are appointed in the following manner:

  • The chairman gets nominated by the Government of India
  • Two members present on the SEBI board are the officers who are from the Union Ministry of Finance
  • One member present on the board is from the RBI (Reserve Bank of India)
  • The remaining five members get nominated by the Government of India, out of which three are nominated on a full-time basis

Who is the present chairperson of SEBI?

The present chairperson of SEBI is Mr. Ajay Tyagi.

What is the main role of the Financial Corporation and Investigation Department in SEBI?

The Financial Corporation and Investigation Department in SEBI are responsible for handling cases related to the diversion of funds, bank loans and resources by the promoters of a company.

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