What are exchanges and their functions?

Stock Exchange

A stock exchange or exchange is a center where traders buy and sell shares of companies. A company wants to list its shares on the stock exchange. Stocks of large companies are usually listed on many stock exchanges around the world.

Now it comes down to what a stock is. A stock is a small part of a company. When someone buys stock in a company, it means that the buyer owns a small portion of that particular company. Stock prices are based on many factors. The main thing that affects stock prices is the balance of supply and demand. If too many traders want to buy a stock, the price of that stock will go up, and if there are more sellers, the price of that stock will go down. Exchanges provide a platform for determining the value of securities based on supply and demand factors. If there is more demand, the security will be valued higher. This is how a security is priced and the more demand there is, the more valuable the security is. Therefore, investors can know the value of their investment. Valuation of securities is very useful.

• Trading Security: Each exchange is an organized market and has its own laws. All members must abide by the rules and the company must abide by strict rules and regulations. This ensures security when buying and selling on exchanges.

• Contribution to economic growth: Stocks of many companies are traded on stock exchanges, allowing investors to buy stocks for profit and sell them when they need the money. These investment processes encourage investors to invest money in industries, thereby enabling economic development.

• Spreading Stock Worship: The stock market plays a key role in encouraging investors to invest in real estate stocks. The stock market guides investors by providing them with the latest information on the economy. Generally, this information is made public by providing knowledge about investments, better trading practices, etc.

• Leave room for speculation: When investors buy stocks to make a profit, the change in the market price of those stocks is called speculation. In order to provide liquidity to a security, some tolerance for speculation is necessary. The stock market offers this possibility.

• Liquidity: The primary function of an exchange is to provide a platform for buying and selling stocks. This gives investors the peace of mind that they can convert their investment into cash at any time. Therefore, investors invest in long-term investments without hesitation, as they can always be converted into short-term and medium-term investments.