What are the main objectives of stock exchange?

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umaan waqar
Apr 16, 2020 02:14 PM 0 Answers
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What are the main objectives of stock exchange?

umaan waqar
- Apr 16, 2020 02:14 PM

To trade stocks, of course.

You might then ask: what is the value in trading? Why do we need a venue to trade stocks? I’ll answer these two questions separately.

Why do we trade?
Trading can create value for both parties.

I’ll give you an example. Suppose you want to do laundry and need quarter coins to put into the machine, and you go to a grocery store to exchange a $20 bill for 80 coins. The store manager is not so nice and he demand a quarter as commission.

In this example, you get: -$0.25, but clean clothes
Store manager get: $0.25

If you think clean clothes is worth more than $0.25 to you, then both you and the store manager are better off.

2. Why do we need an exchange to trade in?

Exchange creates liquidity by gathering all the buyers and sellers.

Liquidity refers to the easiness of finding a trading partner. It is important because without it, there will be no trade.

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