The importance of stock exchange lies in the services which they provide to society. The services rendered by the stock exchange can be categorized as follow:-
- Services to investors
- Services to companies
- Services to community
SERVICES TO INVESTOR: – The stock exchange provides the following kinds of services to the investors:-
Easy marketability and liquidity: – The stock exchange provides the regular and ready market for sale and purchase of securities. The investor can convert their securities into cash and cash into securities at any time. So, it provides easy marketability and liquidity to the investor.
Publication of quotation: – The stock exchange publishes in the newspapers and periodical the rates at which various securities are the deal in it. It is very useful for existing as well as prospective investor
Safeguarding the investor’s interests: – The stock exchanges operate strictly according to rules and regulations enacted through various acts. It eliminates the possibilities of over trading, illegitimate speculation and manipulation.
Better investment opportunities: – The investors always took for better opportunities for their investment. This opportunity is provided by the stock exchange to them as they give information about the highly profitability companies.
Stability in prices: – The stock exchange ensures stability in the price of securities through the securities at low prices and sells them at the high price.
SERVICES TO COMPANIES
Widen Market: – A large number of securities belong to widespread investors throughout the country are traded in the stock exchange. Therefore, the stock exchange provides the wide base for sale and purchase of securities.
Promotion of companies: – The stock exchange provides the wide and ready market for the securities. It is useful for the promotion of the company.
Increase in goodwill: – A company with listed securities enjoys good reputation and image among the investors. So, the stock exchange plays an important role in increasing the goodwill of companies.
Higher market value: – investor always refers to buy listed securities than the unlisted one. Thus, the market price of listed shares will be more due to their enlistment on the stock exchange.
Stability In prices: – The operation of speculators help in stabling the price of the share. It develops the prices of shares. It develops the confidence of investors in the securities of a company.
Services to community:-
Mobilization of surplus funds: – The stock exchanges mobilize the surplus funds of society and direct their flow into profitable channels. It results in the profitable use of idle funds.
Capital formation: – The common people do not hesitate to invest their savings in the corporate sector as stock exchanges ensures safety, security, marketability and the fair return to them. Thus, they facilitate the process of capital formation
The barometer of economic conditions: – The stock exchange is an effective instrument for gauging the economic health, not only for s company but a country as a whole. So they server as the indicator of the economic situation as a whole.
Policy formation: – The stock exchanges depict the clear picture of the economic position of the country. So it helps the government in the formation of policies with respect to industry particularly.
Accelerate economic development: – The stock exchanges play a vital role in the directing the idle funds towards the industrialization of the country. So they help in increasing the rate of economic growth.