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Questions
Explain any three functions of stock exchange.
'The Stock Exchange performs many vital functions in today's commercial world.' Explain any three such functions.
'Stock Exchange not only contributes to the economic growth but performs many other functions'. Explain any three such functions.
State any four functions of 'Stock Exchange.'
State any three functions of Stock Exchange.
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Solution
The Stock Exchange serves the sole purpose of providing a market space for purchase and sale of securities in a transparent manner. Its functions can be explained using the following points:
- Provides Liquidity and Marketability: The stock exchange provides a platform where sale and purchase of existing securities can take place. In this way, the stock exchange facilitates the conversion of securities to cash as and when required. In addition, it renders liquidity to long-term securities and can be converted to medium-term and short-term securities
- To provide fair deals through market price determination: The market demand and market supply are forces which determine the price of a security. The Stock Exchange makes sure that all buyers deal in that price only and not higher.
- Safety of Transaction: A stock exchange's membership is carefully controlled, and its transactions are well defined under the existing legal framework.
- Spreading of Equity Cult: By regulating new issues, improving trading procedures, and taking effective steps to educate the public about investments, the stock market plays a critical role in insuring greater share ownership.
- Providing Scope for Speculation: Speculative operations are carried out within the confines of the law, in a restricted and controlled manner.
- Contributes to Economic Growth: : A stock exchange is a market for existing securities which leads to in capital generation and economic progress.
Notes
Students should refer to the answer according to their questions.
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