What is the stock exchange and its functions?

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What is the stock exchange and its functions?

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nomi king 3 months 1 Answer 48 views 0

Answer ( 1 )

  1. Originally Answered: What is stock exchange and its functions?
    Stock exchange is a market place where stock, shares and other types of securities are bought and sold. It is market where the owners may purchase or sell/ dispose off their securities as per certain well defined rules and regulations. Such securities include shares and debentures issued by public companies, bonds and debentures issued by government, public corporation and municipal and port trust Board of Directors.

    Function of Stock Exchange.

    Continuous Market: The primary function of stock exchanges is the creation of a continuous market, where securities are bought and sold in large volume.
    Evaluating the price of securities: The stock exchange provides mechanism for evaluating the price of securities. It helps to check the real worth of securities in the market.
    Barometer of the economy: The price of shares is the indicator of future economic situation in the country.
    Helps capital formation: Stock exchange help capital formation in the country to large extents, as it develops the habit of saving, investing and risk taking in the investor.
    Facilitates speculation: Speculation is an important part of stock exchange operations. It enables speculators to speculate and secure adequate profit through fluctuations in security price.
    Proper utilization of capital: The stock exchange controls the flow of investment from unproductive, unprofitable enterprise.
    Provides safety and security in dealing: Stock exchange provides safety, security as transactions are conducted as per the rules and regulations.
    Listing of securities: Listing means obtaining the permission of stock exchange for trading in specific securities.
    Facilities bank lending: Bank easily know the prices of quoted securities. They can offer loan to investors against such securities.
    Facilities takeover: It helps in takeover of their a section of business or the wholes business, by acquiring the majority of shares.

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