Notes on Functions Of Stock Exchange:

      The secondary market or stock exchange plays an important role in the economic development of the country. It channelizes the savings of the people and makes them available for investment purpose. Some of the important functions of Stock Exchange are:

1. Common platform:

      It provides a common platform for trading in securities.

2. Safety and Equity of Dealings:

It is maintained through-

  1. Judicious selection of members.
  2. Formulating strict rules and regulations to avoid excessive and unhealthy speculations.
  3. Restricting advertisements by members to avoid unhealthy competition.
  4. Minimum brokerage to avoid cut- throat competition.
  5. Strict requirements for listing privileges for reputed companies with growth prospect.

3. Liquidity and Marketability of Securities:

      Liquidity and marketability of securities is done with price stability through continuous, ready, open and broad market. Here, all benefits of speculation are available to the investing classes and the society at large.

4. Correct Evaluation of securities:

      The listed securities are correctly evaluated because of the following reasons-

  1. Free competition.
  2. Maximum publicity.
  3. Scientific trading based on accurate knowledge of present as well as future prospect of demand and supply.

5. Economic Barometer:

      Stock exchange indicates the health not only of the companies listed but also of the nation as a whole. It can precisely diagnose the root cause of economic downfall or prosperity.

6. Forecasting service:

      It is the most important of all the services that a stock exchange does. The effects of future events are reflected and forecasted in the current price movement. The signs of economic downfall or prosperity are first indicated by the stock exchanges in advance.

7. Perfect Market:

The features of a perfect market are represented in the stock exchange. When the cost of dealing is very low, with durable and standardized system providing for free competition of demand and supply enabling suit encashment at moderate cost, it indicates a perfect market.

8. Maturing of securities:

      The speculators operating in the exchanges helps to season the who securities in during the proving period of the new compromise. Thus, it helps to ensure speedy economic development.

9. Platform for Public Debt:

The stock exchanges are an organized market for government securities. It is an over the counter market consisting of dealers and brokers in government securities.

10. Clearing house of Business Informations:

      The stock exchange acts as a clearing house of business informations. Companies are required to furnish all essential financial statements annual reports and other reports etc to ensure Maximum publicity of corporate operations and working.