What is a Stock Exchange?
Stock exchange also referred as a share market, is an integral part of the capital market. It is an organized market, where sale along with purchase of financial and industrial security takes place. It is a place where trading of securities tends to occur in a convenient manner. Though there are certain rules along with regulations that need to be followed to ensure smooth trading of securities.
A host of functions and utility services are provided to the investors along with the borrowing companies. It does encourage industrial along with economic development of the country because it is an investment inter-mediator of sorts. It is a pretty organized market, when it comes to the buying and selling of corporate shares or securities. You can buy or sell them by following a set of rules or regulations.
Some of the Major Features associated with a Stock Exchange are as follows
1. It is a market for securities
It is a market, where securities of government, semi government or corporate bodies are bought and sold
2. Second hand securities are dealt with
It deals with debentures, shares or securities that have already been issued by the companies earlier. In hindsight it deals with second hand or existing securities, and for this reason it is referred to as secondary market.
The Functions of a Stock exchange
A ready along with continuous market for the sale along with purchase of securities is provided. For buying or selling of securities a ready made platform is provided. It is an outlet for the sale of listed securities.
1. Contributes to formation of capital
It contributes to the added pace of capital formation. The habit of saving is developed along with risk taking among the investing class and the profits could be raked in as savings. In a way it acts as a tool for capital formation and it would not be wrong in saying that it is a safe instrument as far as capital formation is concerned.
2. The securities are evaluated
A stock exchange works out to be the perfect place for the evaluation of industrial securities. So as an investor you are aware of the true value of your holdings at a given point of time. You can compare between companies in the same industry through the quotations of the stock exchange.
3. Encourages healthy speculation
One thing for sure healthy speculation is known to keep the stock exchange active. You cannot term normal speculation as something that is not that dangerous, but more business is provided to the exchange. But when you indulge in excess speculation what happens is that it becomes dangerous for the investors along with the growth of the corporate sector in general.
4. Clear housing facility is provided at the same time
A clear housing facility is provided by a stock exchange to all its members. The transactions between the members are settled in a quick manner and with ease. The members need to wait for the balance amount because of the clear housing facility.
5. Security along with safety in terms of dealings is provided
A sense of security along with safety in dealings is provided as a set of rules along with regulations are followed. The management of the stock exchange ensures that each and everything is under control and no fraudulent activities occurs.