(i) Mobilization of savings and channelizing them into the most productive uses:
(a) A financial market facilitates the transfer of savings from savers to investors.
(b) It gives savers the choice of different investments and thus helps to channelize surplus funds into the most productive use.
(ii) Facilitating Price Discovery:
(a) In the financial market, the households are suppliers of funds and business firms represent the demand.
(b)Such forces of demand and supply help to establish a price for the financial asset which is being traded in that particular market.
(iii) Providing Liquidity to Financial Assets:
(a)Financial markets provide liquidity to financial assets by facilitating easy purchase and sale of financial assets.
(b) Holders of assets can readily sell their financial assets through the mechanism of the financial market.
(iv) Reducing the Cost of Transactions:
(a) The financial markets reduce the cost of transactions by providing a common platform where buyers and sellers can purchase and sell the financial assets.
(b) It helps to save time, effort and money that both buyers and sellers of a financial asset would have to otherwise spend of to try and find each other.
