A Stock Exchange is an institution which provides a platform for buying and selling of existing securities. It facilitates the exchange of a security i.e. share, debenture etc. into money and vice versa. Following are some of the important functions of a Stock Exchange:-
1. Providing liquidity and Marketability to Existing Securities : Stock Exchange provides a ready and continuous market for the sale and purchase of securities.
2. Pricing of Securities : Stock Exchange helps in constant valuation of securities which provide instant information to both buyers and sellers and thus helps in pricing of securities which is based on the forces of demand & supply.
3. Safety of Transaction : The members of a stock exchange are well regulated, who are required to work within the legal framework. This ensures safety of transactions.
4. Contributes to Economic Growth : Stock exchange provides a platform by which savings get channelised into the most productive investment proposals, which leads to capital formation & economic growth.
5. Spreading of Equity Culture : Stock exchange helps in educating public about investments in securities which leads to spreading of Equity culture.
6. Providing Scope for Speculation : Stock exchange provides scope within the provisions of law for speculation in a restricted and controlled manner.
Bombay Stock Exchange (BSE) and National Stock Exchange (NSE)
are famous in India.
