Question

Answer each of these questions in about two hundred and fifty words:

Explain the functions of stock exchange.

Answer 1

Stock exchange performs a number of functions in respect of marketability of different types of securities for investors and borrowing companies. It’s important functions are:

1. Continuous and ready market for securities:
   • Stock exchange provides a central market for purchase and sale of securities.
   • It provides ready and continuous outlet for buying and selling of securities.
   • It facilitates and helps all buyers to buy and sell securities as and when they want.
2. Facilitates evaluation of securities:
   • It is useful for the correct evaluation of industrial securities.
   • It publishes price quotation of the shares of the companies that have been listed with them after thorough analysis of demand and supply position.
   • This enables investors to know the true worth of their holdings at any time.
3. Checks on brokers: It checks and controls the activities of brokers and protect the investors from being deceived.
   While dealing,’if any broker is found indulging in malpractices as overcharging or giving wrong information, his/her licence may be cancelled.
4.  Provides safety and security in dealings:
   • All activities of the stock exchange are controlled by the provisions of the Securities Control (Regulation) Act and this creates confidence in the mind of investors.
   • Each and every dealings and transactions are conducted as per well defined rules and regulations, fraudulent practices stands checked effectively ensuring safety, security and justice in dealings.
5. Regulates company management: All listed companies in the stock exchange, compulsorily have to follow with rules and regulations of concerned stock exchange and work under the vigilance of their authorities.