Meaning and Functions of Stock Exchange

1. Stock Exchange Overview
M.Rajakrishnan
Asst.Professor in Commerce with CA
Dr.N.G.P.Arts and Science College (Autonomous)
Coimbatore

2. ?Market
Latin word “Marcatus” – Merchandise, trade or a place where business
is conducted.
?Financial Market
No specific placed or location – financial transaction – place – deemed
to have taken place in the financial market ( Refer Financial Markets
and Services – Gordon and Natarajan - 2013 Edition – Page no.7 - 9)

3. Classification of financial Markets:

4. ?Primary Market – New issues
?Secondary Market – Securities – passed through the new issue market
-Stock exchange ( Refer Financial Markets and Services – Gordon and
Natarajan - 2013 Edition – Page no.10-16)
?Stock Exchange – Meaning
-A Specialized market place – facilitates- exchange- securities- already exist.
-A market- industrial securities – bought – sold – code of rules & regulations.
( Refer Financial Markets and Services – Dr.S.Gurusamy - 2010 Edition – Page
no.470)
-Sine-qua-non for the primary market – essential condition – absolutely
necessary (Refer Wikipedia)

5. Stock Exchange – Definition:
Hastings “Stock exchange or securities market comprises all the places where buyers
and sellers of stocks and bonds or their representatives undertake transactions
involving the sale of securities”.
Sec 2(3) Securities Contract Regulation Act 1956 “The stock exchange has been
defined as any body of individuals whether incorporated or not, constituted for the
purpose of assisting, regulating or controlling the business of buying, selling or
dealing in securities”. ( Refer Financial Markets and Services – Dr.S.Gurusamy -
2010 Edition – Page no.470-471)
?Stock Exchange Video URL: https://youtu.be/l3t406oTmss

6. ?Functions of Stock Exchange
•Ideal Meeting Place – Convenient-meeting place- common platform –
buyers and sellers
•Mobilisation of savings – public savings- channelization – productive
purposes – surplus funds
•Providing safety to investors – Genuine investors – adequate safety –
fraud - manipulation
•Distribution of new securities – Already established companies –
additional capital
•Ready market – continuous – ready – open – broad based
•Liquidity – Efficiency – Quickly - Easily
•Capital formation – Quick formation – people – current market price

7. ?Functions of Stock Exchange
•Speculative trading – healthy – adequate liquidity
•Economic barometer – price movement – company – industry - Economy
•Perfect market conditions – Prevailing – carrying cost – least – activities –
standardized – free competition
•Seasoning of securities – players – underwriters – dealers – brokers –
speculators – temporarily – hold – issue – new - company
•Evaluation of securities – reasonable – fair – price.
•Investor education – information technology
•Company Regulation – listing – public interest ( Refer Financial Markets and
Services – Dr.S.Gurusamy - 2010 Edition – Page no.471-475)
Video URL for further reference : https://youtu.be/zBih_r7r5zk