State any three functions performed by the stock exchange.

Question 5:State any three functions performed by the stock exchange.

The correct answer is – A stock exchange is a marketplace where stocks, bonds, and other securities are bought and sold. The main functions performed by the stock exchange are as follows:

1. Facilitating Trading of Securities: The primary function of a stock exchange is to provide a platform for trading securities. It brings together buyers and sellers of securities, providing a mechanism for them to buy and sell securities in a transparent and efficient manner. The stock exchange ensures that the transactions are carried out in a fair and orderly manner, and that the prices of securities are determined through the forces of supply and demand.

2. Providing Liquidity to Investors: A stock exchange provides liquidity to investors by allowing them to buy and sell securities whenever they want. This provides investors with the flexibility to invest in securities that suit their investment objectives and risk tolerance. Liquidity is essential for the smooth functioning of the securities market, as it enables investors to exit their positions quickly if needed.

3. Price Discovery: Another function of the stock exchange is to facilitate price discovery. The prices of securities traded on the stock exchange are determined through the forces of supply and demand. The stock exchange provides information on the prices of securities and the volumes traded, which helps investors to make informed investment decisions. The prices of securities traded on the stock exchange are also used as a benchmark for valuation of securities and portfolios.

In summary, the stock exchange facilitates trading of securities, provides liquidity to investors, and enables price discovery. These functions help to promote the efficient functioning of the securities market, which is essential for the growth and development of the economy.