Functions of stock exchange

Functions of stock exchange

Stock exchanges are the head of all security transactions, it has many functions, but important functions of stock exchanges are as follows

• To promote the savings and for them to be canalized towards of carrying through investment projects that otherwise wouldn’t be possible you need that the issuing institution of the securities to be admitted for quoting.
• to assure liquidity of investors, and ensure easy trading of securities. 

Other functions of the stock exchange market as an organization are:

• To guarantee the legal and economic security of the agreed contracts.
• To provide official information about the quantities that are negotiated and of the quoted prices.
• To fix the prices of the securities according to the fundamental law of the offer and the demand.

Functions done by the stock exchange market in favor of the investor:

• It permits him the access to the profitable activities of the big companies.
• It offers liquidity to the security investments, through a place in which to sell or buy securities.
• It permits for the investor to have a political power in the companies in which he invests its savings due that the acquisition of ordinary shares gives him the right (among other things) to vote in the general shareholders meetings of the company in question.
• It offers the possibility of diversifying your portfolio by enlarging the field of strategy of investments due to alternative options, as could be the derived market, the money market, etc.

With respect to the function done by the stock exchange market in favor of the companies:

• It supplies them with the obtaining of long-term funds that permits the company to make profitable activities or to do determine projects that otherwise wouldn’t be possible to develop for lack of financing. Also, this funding signifies a less cost than if obtained at other channels.
• The securities quoted at the stock exchange market usually have more fiscal purpose advantages for the companies.
• It offers to the company’s free publicity, which in other way would suppose considerable expenses. The institution is objecting of attention of the media (television, radio, etc.) in case any important change in its owners (the share holders).