Question

Explain in detail objectives and functions of Stock Exchange and also give a brief critical analysis on the working of Stock Exchange?

Answer 1

The major functions and objective of stock exchanges are:

· Stock exchanges act as a platform where people can buy and sell securities. It provides a medium of exchange where buyers and sellers of secondary market can interact.

· Stock exchange also make sure that all the material public information related to the listed companies which can affect the share price of the company is available in the public space to investors.

· Stock exchange acts as barometer of economy, if the major indexes on these stock exchanges are doing well then it is said that the overall economy is doing well. These indexes act as a leading indicator for the economy.

· Stock exchange also provides mechanism for companies to raise funds be it through issuing equity or debt in a systematic manner.

The working of stock exchange over the years has become more simple and transparent because of the regulations brought in by the regulators to protect the retail investors. The stock exchange before opening for the brokers and retail investors first has to take permission from the regulator of the capital market and register themselves with them, meet all the criteria like capital investment, depository and others. The stock exchange has to attract the companies so they list their stock on those exchanges and people can trade there. It has to attract companies and investors so there is high liquidity for easy entry and exit.