हिंदी
Tamil Nadu Board of Secondary EducationHSC Commerce Class 12

Functions of Stock Exchange

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Estimated time: 9 minutes
CBSE: Class 12

Introduction

  • Stock exchange is a place where existing securities are bought and sold by investors.
  • It performs several important functions that make trading in securities easy, safe and useful for the economy.
  • These functions help investors to buy, sell, hold and change their investments effectively.
CBSE: Class 12

Functions of Stock Exchange

1. Provides Liquidity and Marketability

  • Stock exchange is a place where people can buy and sell existing securities.
  • It helps investors change their securities into cash whenever they need.
  • Investors can easily exit old investments and enter new ones.
  • Because of this, securities become easy to sell and buy in the market.

2. Determination of Prices

  • Prices of securities are decided continuously by demand and supply on the stock exchange.
  • These changing prices give useful information to buyers and sellers.

3. Fair and Safe Market

  • Stock exchange offers a safe and fair place to trade in securities.
  • It works under clear and proper legal rules.

4. Facilitates Economic Growth

  • By allowing buying and selling of securities, it sends people’s savings to better investments.
  • This helps in building capital and improving the growth of the economy.

5. Spreading of Equity Cult

  • Stock exchange motivates people to invest in securities.
  • It does this by controlling new issues, teaching investors, and using better trading practices.

6. Scope for Speculation

  • Some amount of healthy speculation is needed to keep demand and supply of securities active.
  • Stock exchange performs this role in the market.
CBSE: Class 12

Key Points: Functions of Stock Exchange

  • Stock exchange provides liquidity and marketability by allowing easy buying and selling of securities.
  • Security prices are determined by the forces of demand and supply.
  • It provides a fair, safe and legally regulated platform for trading.
  • It promotes economic growth by directing savings into productive investments.
  • It encourages investment in securities, leading to the spreading of equity cult.
  • It provides scope for healthy speculation, helping maintain market activity.
  • Overall, a stock exchange makes trading in securities easy, safe and efficient.

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