Question -
Answer -
The functions of a stock exchange are as follows:
1. It provides a platform for trading of securities. A stock exchange offers easy conversion of securities to cash and also conversion of securities
2. It helps in establishing price for the assets of monetary nature which are traded. It is a common place for buyer and seller interactions and prices of securities are determined based on supply and demand.
3. There is safety and regulations in a stock market. Trade is conducted within a defined legal framework which ensures fairness in transactions.
4. In a stock market there is continuous buying and selling of stocks which helps in enhancing capital formation and supports economic growth.
5. As share prices keep changing, it indicates the corresponding changes in economic conditions, an economic recession will see share prices fall while a boom in the market will contribute to price increase.