Role and functions of Stock exchanges, Stock exchanges in India

A stock exchange is a platform or marketplace where securities, such as stocks, bonds, and derivatives, are bought and sold. It provides a regulated and transparent environment for buyers and sellers to trade securities. The exchange acts as a mediator between buyers and sellers, providing a central location where buyers can meet sellers and conduct transactions.

The stock exchange serves as a critical component of the global financial system, providing liquidity and transparency to investors and companies seeking capital. It enables companies to raise capital by selling shares of ownership to investors, who can then trade those shares on the exchange.

The two main types of stock exchanges are the physical exchange and the virtual exchange. A physical exchange is a physical location where buyers and sellers meet to trade securities, while a virtual exchange is an electronic platform where trading takes place.

Stock exchanges are governed by regulatory bodies that ensure fair and transparent trading practices, and companies seeking to list their shares on an exchange must meet specific listing requirements. The most prominent stock exchanges in the world include the New York Stock Exchange (NYSE), NASDAQ, Tokyo Stock Exchange, and London Stock Exchange.

Role and Functions of Stock exchanges

The primary role of a stock exchange is to provide a marketplace for the trading of securities such as stocks, bonds, and other financial instruments. In doing so, it performs several important functions:

• Providing liquidity: Stock exchanges provide a platform for investors to buy and sell securities, providing liquidity to the market. This liquidity ensures that investors can easily buy or sell securities, which helps to stabilize prices and improve market efficiency.
• Facilitating price discovery: The stock exchange helps to determine the fair market price of securities through the interactions between buyers and sellers. This price discovery mechanism is essential for investors to make informed investment decisions.
• Enhancing transparency: Stock exchanges require companies to disclose information to the public, including financial statements, earnings reports, and other material information. This transparency helps to ensure that investors have access to accurate and timely information to make informed investment decisions.
• Regulating trading activities: Stock exchanges have strict regulations and oversight to prevent fraud and manipulation, protect investors, and ensure fair and orderly trading practices.
• Providing access to capital: Companies can raise capital by issuing securities, such as stocks and bonds, on the stock exchange. This enables companies to fund growth and expansion, create jobs, and contribute to economic development.
• Supporting economic growth: By providing access to capital and facilitating the trading of securities, stock exchanges play a vital role in supporting economic growth and development.

Stock exchanges in India