The Role of the Stock Exchange

The Stock exchange is a unit which provides trading services for stock brokers and for market traders and other securities.  It also  Shares are the type of securities that are being traded in the stock exchange that are issued by the companies as well as some unit trusts, derivatives and bonds. There might be a pool of investment products present in such trading places which are being marketed as well. One major requirement for such securities of a company to be traded in the stock exchange is that the company should be listed first.  When it comes to trading it is not a must to have it done physically. Now, trading is commonly done electronically which enables the market to minimize the cost of transactions and eventually speeds up the process.

Primary market and Secondary market

Primary market within the stock exchange is the part of the capital market that makes trading with the issuance of new securities. A capital market is a market where debt and equity is being transacted, and where the company or business enterprise and government can raise funds for a long term basis. Or it is defined as a market in which money is being offered for a time which is more than a year.  And in terms of the short term funds it is being traded in a different market. For the primary market, it has the features of being the market for new long term equity capital, in which the securities are being sold for the first time and being called as new issue market (NIM), another feature will be for the company in receiving the money and for them to issue the securities directly to the investors.  It performs the vital function of making it possible for a capital formation in the economy. While the secondary is known as the aftermarket in which the bonds and the issued securities and the stocks are being sold and bought. Secondary market is used to refer to a market that involves the used assets or goods, or an alternative in using an existing product or asset where the secondary market is the customer base.

Role of the Stock Exchange:

Stock exchange as an entity has its role in the market and in the economy.  One of the major roles of the stock exchange would be the raising of capital as stated earlier for the businesses that are present in the market whether it is a local company or a multi-national company which is locally based.  Next would be the role of mobilizing the savings for investment in which in terms for a company or individual who have savings or profit can have the pleasure to buy stocks or bonds to the company listed in the stock exchange and considered their share. They have the role of providing growth in the company since if investors are attracted to their business and company, it will have the capacity in expanding its business and diversify to other forms of business as well. It plays a major role as well in profit sharing since they are the institution in which company’s shares are being sold and bought. The stock exchange also helps in creating opportunities to small investors to be able to make an investment.   It serves as a barometer of the economy.

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