What is a stock exchange?A stock exchange is a highly organized financial market where various securities such as shares, debentures and bonds can be bought or sold.Its main function is to create a link between the buyers and sellers of these securities so that investments can change hands in the quickest and best possible way.
Features of a stock exchange
Functions of stock exchange
1)Ready market A stock exchange provides a ready and regular market where investors can buy and sell securities. It provides a common meeting place where people can convert their money into securities and vice-versa. Thus, the people are saved from the trouble of going to different places as different companies have their headquarters at different places.
2)Price determination A stock exchange helps in determining the prices for various securities. Regular dealings reduce wide fluctuations in prices. The prices at which dealings take place are published as quotations in the newspapers on a daily basis.
3)Protection of the investorsA stock exchange functions strictly according to the rules and regulations. The rules and regulations provide a check on the over trading in securities and manipulation in the prices. Thus, the investors can buy and sell securities with confidence without the fear of being exploited.
4)Capital formation A stock exchange induces the people to save and invest in securities holding out prospects for increased earnings. There is regular publicity of its operations which encourages savings and investments. Thus, it mobilizes the savings of the people and results in capital formation for the country.
5)Channel for investment A stock exchange channelized the funds in more productive industries. A company with better performance and future prospects has no difficulty in raising its capital. A stock exchange informs the investors in which direction the investment wind is blowing. Thus, by directing the flow of capital into worthwhile projects, it gives an impetus to the economic development of the country.
6)Economic barometer It reflects changes taking place in the economy. Prices on a stock exchange tend to reflect trade cycles- boom, recession, depression, recovery etc.
7)Regulation of the company management Stock exchanges frame their rules and regulations. Any company which wants its securities to be listed on the exchange has to submit to these rules. Thus, stock exchange exercises a heavy and healthy influence on the working of the companies.
8)Clearing house of information: A stock exchange is a medium of useful business information. Many stock exchanges publishes directories which provide data on the corporate sector.
Services of a stock exchange
Services to the corporate sector
Services to the investors
Services to the community
Major stock exchanges in India
The stock exchange in India is a development of the 19th century. In India, the first organized stock exchange was set up in Bombay in 1887 under the name of Native share and Stock Broker's Association.
At present, there are 22 stock exchanges at Kolkata, Mumbai, Delhi, Chennai, Ahmedabad, Patna and other major cities of India.
Names of some of the stock exchanges are:
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