Question

State any four functions of 'Stock Exchange.'

Answer 1

Sock Exchange refers to a market where buying and selling of the existing securities take place. The following are the main functions of a stock exchange.
(I) Provides Liquidity and marketability Stock exchange provides a ready platform for trading of existing securities. In other words, it provides a continuous market fore sale and purchase of securities. Through stock exchange, securities can he easily converted into cash whenever required. In addition, long-term securities can he converted to medium term and short term through stock exchange.
(ii) Determination Prices: Mock exchange helps in establishing the price of the monetary assets .at are traded in that market, It provides a platform for interaction for buyers and sellers of securities and thereby, helps in the determination of prices of the securities through the forces of demand a. supply.
(iii) Facilitates Economic Growth: In a Stock Exchange the securities are continuously brought and sold. This continuous process of disinvestment and reinvestment helps in channelising the savings and the Investments to the most productive use. This, enhances capital formation and economic grow.
(iv) Scope for Speculation It is generally believed that certain degree of speculation is necessary for better liquidity and to maintain demand and supply of securities. Stock exchange provides a reasonable and controlled scope of speculation within the provisions of law.