QS Study

Features of Stock Exchange

A stock exchange is an institutional arrangement. In stock exchange shares, debentures, bond, securities etc. are transacted. The stock exchange is equally important for investors and for the companies. Being an organized market, the stock exchange has some features. Some of the features of stock exchange are as follows:

Formation and Management: Stock exchanges are the generally limited company. The elected shareholders manage the stock exchange. Besides, a government can form this. Though government establishes this exchange, it also forms a regulatory authority for this purpose.

Organized market: It is an organized market located in a place. The stock exchange has specific authority to regulate the market. There are some specific rules and regulations regarding the stock exchange. Like instruments or products of share market are shares, debentures, bonds etc. of listed public limited companies which are traded in the market.

Secondary Market: It is the secondary market for the financial instruments. In stock exchange shares, bonds, securities are exchanged as products.

Fluctuation of Price: In the stock market price of the products are fluctuates which is depending on the demand and supply. It is an open market where price mechanism acts for determining price tor such financial instruments.

Certain rules and regulations: Every stock exchange has certain specific rules and regulations for performing transactions. If someone wants to trade in stock exchange, he/she must obey the certain rules and regulations. These rules and regulations are for both buyers and sellers.

Specific location: Stock exchanges are located in certain place. In that place or in a building, official activities are performed. But it is not mandatory to go to the place to buy or sell stock or other products. Through the online systems, one can easily buy and sell the instruments.

Membership: To be a member of a stock exchange one must have to buy shares. For this, he/she has to pay certain fees. Besides this, he has to sign an agreement to follow the rules and regulations of the stock exchange.

Transaction through broken: In the stock market, no individual is permitted to transact directly. One must have to do it through the brokers of the stock exchange.

Nature of transaction: Transaction in stock exchange may be in cash or on credit. In case of the cash transaction, the payment is done within 3 or 4 days. In case of credit transaction, advance agreement of the payment is made within 15 or 30 days.

Proper authority: Stock exchanges are owned by the general shareholders, but proper authority regulates the stock exchange.

No separate entity: Though stock exchanges are established as the public limited company no transaction is made in the name of the stock market. Rather the members of the stock market perform the transaction in their own name.

Membership qualification: To be a member of the stock exchange, one is to be matured, financially solvent. A solicitation of any member of the stock exchange is also required. But there is no restriction on educational and professional qualifications of members.

Board of Directors: Every stock exchange has its board of directors elected by the shareholders. The board of directors is liable to the shareholders for their activities.

Time limit of tractions: In a stock exchange, time is limited to completing a transaction. Within the certain time period, a transaction must be completed.

Publication of daily report: Stock exchanges publish a daily report on the transaction of regular interval. The publication may be in printed form or in online.

Listing: To issue share in a cock exchange, a company has to be listed on the stock exchange. Without listing, a company cannot issue share in the stock exchange.

Profits and loss of members: Stock exchange does not involve in trading. The members of it make a transaction in a stock exchange. So, profit or loss of the member does not affect the market.

From the above discussion, we can say that Stock exchange has different types of features in which stock exchange can conduct the activities on behalf of its members.

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