Functions of Stock Exchange are:
(a) It provide liquidity and marketability to existing securities.
(b) It determines the price of securities by force of demand and supply.
(c) It ensure safety of transactions as the transactions carried out within an existing legal framework.
(d) It contributes to economic growth as it indirectly promotes capital formation.
(e) It spreads equity cult and ensuring wider share ownership.
(f) It provides scope for speculation within the provisions of law.
Detailed Answer:
Functions of Stock Exchange:
(a) Providing liquidity and marketability: Stock exchange provides common platform to buyers and sellers to buy and sell securities.
(b) Pricing of securities: The forces of demand and supply in a stock market determine the price of a financial security.
(c) Safety of transaction: Stock exchange regulates membership and transactions by well defined legal framework. Thus, ensures safety of transaction for the investors.
(d) Contribute to economic growth: Through the process of disinvestment and reinvestment, the savings are channelised into the productive investments leading to the capital formation and economic growth.
(e) Spreading of equity cult: Stock exchange ensures wider share ownership by providing better trading practices, educating people about new investment and regulating new issues.
(f) Providing scope for speculation: Stock exchange provides certain degree of healthy speculation to ensure liquidity and price increase in securities.
