Functions Of Stock Exchange
The stock exchange is a most important institution, which is held for promoting the economic development of the country by mobilizing the national resources. It provides funds for the development of the industry in the country and helps in board basing industrial ownership. It is world recognized fact that stock exchange is the real institution for the capital formation in the country and for providing fair opportunities for industrial investment. The importance and role of the stock exchange can be realized from the following important functions of the stock exchange.
1.Regular Stock Market:
The stock exchange is a main source of capital formation in the country. It
The stock exchange works as regular stock market. The shares, debentures, bonds and participation term certificates of the listed companies and securities of the government are regularly sold and bought at stock exchange.
2.Capital Formation:
motivates and facilitates the common persons to invest their saving for productive purposes to earn profit.
3. Information about Capital Market:
The stock exchange is a main source of providing current and up to date information about the capital market. It guides the prospective investors in making investment decision. It also enables the regular investors to shift their funds from non-profitable concerns to profitable ones.
4.Industrial Development:
The stock exchange lays an important role in the industrial development of the country. It arranges to provide funds for the installation of large-scale industries. It also facilitates for the growth and expansion of small and medium sized industry in the country.
5. Employment Opportunities:
Stock exchange provides employment opportunities to the jobbers and other members who perform their activities in the stock exchange. So it is an important source of employment not only for investors but also for the members and their employees.
6. Economic Development:
The stock exchange is one of the most important instruments of mobilizing national resources and broad-basing the industrial ownership to promote economic development of the country. It promotes capital formation to finance the industrial sector of the economy, which increases production, provides job opportunities, increases the income of the people and brings prosperity and development in the country.
7. Encourage Savings:
information about capital market and induces the general public to invest their The stock exchange encourages the saving in the country. It provides savings to purchase the shares and debentures of the companies to earn profit. The vestment made in shared and debentures of the companies are used for productive Purposes and it also promotes the economic development of the country.
8.Investment Opportunities:
There are some persons who have surplus funds but have no experience of business. The stock exchange motivates and leads such people to invest their funds in profitable securities to earn regular income from their savings.
9.Evaluation of Securities:
The price of the securities is determined by the demand and supply forces in the stock market. The stock exchange gives daily evaluation of price of the shares and debentures of all the listed companies for the guidance of the sellers and buyers
10. Listing of Companies:
The stock exchange provides option to public limited companies for listing at
stock exchange. A company can be listed after meeting the rules and payment of fee. 11. Provision of Job
11.Opportunities:
The stock exchange also provides job opportunities to so many persons as brokers, jobbers and regular staff of the stock exchange. In this way it increases the rate of employment and it helps in controlling the unemployment in the country which is also a favorable sign for economic development of the country.
12. Barometer for Economy:
The stock exchange works as barometer for the economy of the country. It tells not only the state of economy for investment but also explains the overall business conditions of the country. The increase in prices of the shares and securities indicates the better economic conditions of the country and regular fall in the prices of securities and share indicates the bad financial and economic situation of the country
13. Investment in liquid Form:
The banks and insurance companies due to nature of their business want to keep their funds in liquid form in order to meet the sudden needs of their customers. The stock exchange provides investment opportunities in shares and debentures of the companies and in other marketable securities where the investors can earn profit and their funds remain in liquid form. So the stock exchange provides suitable investment opportunity to banks, insurance companies and other such like institutions where they can earn profit but their investment remains in liquid form.
14. Price determine tion:
The stock exchange helps in determining the prices of various securities Continuous purchase and sale of securities on a stock exchange lead to the appraisal of their prices. Regular dealings reduce wide fluctuations in prices. The prices al which dealings take place are recorded as quotations. These quotations are published in newspapers. The investors can know the market value of their securities from these quotations
15.Funds to Government:
The stock exchange is also an important source of providing funds to the government needs funds for some national project, it may issue securities through stock exchange and it can collect a required amount of funds. In government. When this way the stock exchange works as link between the government and investors and makes arrangements for providing funds to the government at the time of need.
16. Interest free Investment:
Pakistan is a Muslim country and interest has been prohibited by Islam. So the stock exchange provides investment opportunities in the shares of the companies where there is no concept of interest and in this way it gives chance of interest free investment.
17. Equilibrium of demand and Supply:
The prices of the shares and debentures are determined by the demand and supply forces. The investors of stock exchange create equilibrium in demand and supply of the shares in order to control the price fluctuations of these shares and debentures
Does it Really Promote Economic Growth?
There is no doubt that due to the influence of social, political conditions and manipulation by the big investors, there are fluctuations in the prices of shares which sometimes create excessive losses to the shareholders. But if the market is organized Dfa Ho and well regulated, stock exchange does help in promoting economic gowth in the country. Stock exchange helps in mobilizing surplus savings of the community. It channelizes these savings into different industries for productive purposes. Stock exchange thus, helps in promoting capital formation and economic development in the country.
