What is Stock Exchange?
As per the Wikipedia,
- A stock exchange, security exchange or
bourse, is a facility where stock brokers and traders can buy and sell securities, such as shares of stock and bonds and other financial instruments.
- Stock exchanges may also provide for facilities like the issue and redemption of such securities and instruments and capital events including the payment of income and dividends.
- Securities traded on
a stock exchangesinclude stock issued by listed companies, unit trusts, derivatives, pooled investment products andbonds.
What is the definition of Stock Exchange?
As per the Securities Regulation Act, 1956
- Stock Exchange is defined as any body of individuals, whether incorporated or not, constituted before corporatization and demutualization under Section 4A and 4B or
- a body corporate incorporated under the Companies Act, 1956 whether under a scheme of corporatization and demutualization or otherwise,
For the purpose of assisting, regulating or controlling the business of buying, selling or dealing in Securities.
What is corporatization and demutualization?
- Corporatization means the succession of the recognized stock exchange, being a body of individuals or a society registered under the Societies Registration Act, 1860, Article 21, by another stock exchange, being a company incorporated for the purpose of assisting in buying, selling and dealing in securities.
- Demutualization refers to the legal structure of an exchange whereby the ownership, the management and the trading rights at the exchange are segregated from one another.
Features of Stock Exchange
- It is an organized Security market
- It is an association of individuals recognized by the Central Government
- Its membership is not open for everybody
- Only the members can deal in a stock exchange
- The Members can buy and sell securities as a broker for and on behalf of their clients
- The dealing in Stock exchange
areunder certainaccepted code of conduct.
- It is an important constituent of
- It deals in Second-hand securities
Functions of Stock Exchange
- Continuous and ready market for Securities.
- Facilitates Evaluation of Securities
- Encourages Capital Formation
- Provides safety and security in dealings
- Regulates Company Management
- Facilitates Public Borrowings
- Provides clearing house facility
- Facilitates healthy speculation
- Serves as economic barometer
- Facilitates bank lending
Services given by stock exchanges to:
- Provides liquidity to Investment
- Provides Collateral Value to Securities
- Offers opportunity to participate in the economical growth
- Estimates the worth of securities Offers
- Safety in corporate investment
- Brings Economic Development
- Forecasting the recession
- Capital Gains and Fund Raising
- Widens market for securities
- Creates goodwill and reputation
- Facilitates fair pricing of listed securities
- Provides better response from investors
- Motivates Management of the companies
- Helps in proper Corporate Governance
- Encourage to complete documentations on time
- Facilitates quick selling of Securities