Objectives of Stock Exchange

Objectives of Stock Exchange

Objectives of Stock Exchange

The stock exchange is the index of the economy of a country. It is the center of the capital market. It is called the economic mirror of a country. It is called share market interchangeably. In developing trade, commerce and industries in a country stock exchange play an important role. The objectives of establishing stock exchange are mentioned below:

  • To supply capital

The main function of a stock exchange is to help companies elevate money. It is established to supply the required capital for companies of a country. To achieve this task, ownership in a private corporation is sold to the public in the form of shares of stock. Funds received from the sale of stock contribute to the firm’s capital formation.

  • To inspire savings

This inspires people to save their income by making a profit. A stock exchange helps in determining the prices for various securities. Continuous purchase and sale of securities on a stock exchange lead to the evaluation of their prices. Regular dealings reduce wide fluctuations in prices. It accumulates the individual income and yet they go to the industries to the economic development of a country.

  • To trade financial instruments

It is established to trade the financial instruments for individual investment and company collect capital. It provides a regular meeting place where people can convert their money into securities and securities into money. Buying and selling of securities are confined to one particular place and the investors are saved the trouble of going to different places to buy or sell securities.

  • To develop economy

It helps economic development by supplying capital to the industries. Unregulated markets can have an unenthusiastic impact on capital formation. Close regulation of stock exchanges allows strangers from all parts of the world to honor contracts executed in the daily trading of shares. It is an important objective of the stock exchange.

  • To present information

Another objective of the stock exchange is to present information about transactions and financial conditions of the companies. It reflects changes taking place in the country’s economy. Price trends on stock exchange indicate trade cycles i.e. boom, recession, depression, recovery, etc.

  • To do long-term financing

Commercial banks generally disburse the short-term loan. So, supplying long-term finance is an objective of the stock exchange. Any company which wants to get its securities listed has to submit to these rules and regulations.

  • To raise awareness

It raises awareness among the general people by giving information than to invest and gain profit from the market. Thus, stock exchanges exercise a healthy influence on the working and management of companies.

  • To have a fair operation

To transact the financial instruments easily and fairly stock exchange is established. A stock exchange channelizes the investible funds in more productive industries. A company with better performance and prospects has no difficulty in raising its capital. So, it is a duty of stock exchange to secure both investors and borrower.

  • To protect fraudulently

It is also to ensure that no fraudulence occurs in a transaction. A stock exchange functions exactingly according to established rules and regulations. These rules and regulations provide a check on overtrading in securities and manipulation of prices. The Government, too; exercises supervision and control over a stock exchange. By this means the evils can deceit the tender investors and the stock are liable for protecting that.

  • Convenience

The objective of the stock exchange is to formulate policies for easy transactions and the safety of the investors and companies. A stock exchange informs investors which way the investment wind is blowing. By directing the flow of capital into worthwhile projects, it gives an impetus to the economic development of the country.

  • Security and Transparency

The lawful sale of stock on any exchange requires dependable and correct information. By requiring a high level of transparency from all trading companies, the stock exchange creates a more protected environment for investors, which helps them to verify the risks of investing.

So, the objectives of the stock exchange are great and efficient operations of stock exchange are so much required for the economic development of a country.

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