21.

‘Efficient functioning of stock exchange creates a conducive climate for active and growing primary market for new issues as well as for an active and healthy secondary market.’ In the light of this statement state any three functions of a stock exchange.

 

A stock exchange place where stock brokers and traders can buy and sell stocks ,bonds, and other securities. The important functions of a stock exchange are:
(1) Providing Liquidity and Marketability to Existing Securities: Stock exchange is a market place where previously issued securities are traded. Various types of securities are traded here on regular basis. Whenever required, an investor can invest his money through this market into securities and can reconvert this investment into cash. Availability of ready market for sale and purchase of securities increases their marketability and enhances liquidity.

(2) Pricing of Securities: A stock exchange provides platform to deal in securities. The forces of demand and supply work freely in the stock exchange. In this way, prices of securities are determined.

(3) Safety of Transactions: Stock exchanges are organised markets. They fully protect the interest of investors. Each stock exchange has its own laws and bye-laws. Each member of stock exchange has to follow them and if any member is found violating them, his membership is cancelled.