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:
A stock exchange is a mechanism of constant valuation through which the prices of securities are determined. It is based on the forces of demand and supply.
3. Safety of Transaction:
Stock exchange has its own well defined rules and regulations. This ensures safety and fair dealings to investors.
4. Contributes to Economic Growth:
Stock exchange provides a platform by which savings are channelised into the most productive investment proposals, which leads to capital formation and economic growth.
5. Providing Scope for Speculation:
Stock exchange provides scope within the provisions of Law for speculation in a restricted and controlled manner.
6. Economic barometer:
A stock exchange serves as a barometer of a country’s economic condition. Price trends in stock exchange indicate whether economy is going through boom or depression.
