Stock Exchange

Meaning of stock Exchange:

                      Earlier stock exchange was physical market place where the agents of buyer & seller operated through auction process. Now these are being replaced with electronic exchanges where buyer and seller are connected only at computer over a telecommunication network. Auction trading is also known as Screen Based trading, where bid price & offer price (ask price) are displayed on computer screen.

Bid Price:- Price at which an investor is willing to buy the security.

Offer Price:- Price at which investor is willing to sell security.

Bid offer Spread:- Difference between the bid price & offer constitutes the margin of Profit.

Definition of Stock Exchange:-

·       “ A centralized market for buying & selling stock where the price is determined through supply demand mechanism”

·       “ An organization that provides a facility for buyer & seller of listed securities to come together to make trades in these securities”

 

Functions of Stock Exchange:-

                                           It has an important role in economic development of a country. It is essential for smooth functioning of private sector corporate economy. It performs mainly four function:-

1.    Market place for purchase & sale of securities such as shares, bonds, debentures etc.

2.    Provides liquidity to investment in securities because it gives the investor a place to liquidate their holdings

3.    Helps in Valuation of securities by providing the market quotation of the price of securities

4.    Play a role of barometer- an indicator of state of health of nation’s economy as a whole.