Question

Answer in brief: Explain any four features of Stock Exchange.

Hint:

Key features of a stock exchange: it's a {Regulated} marketplace for {Old} (second-hand) securities from {Listed} companies, making it easy to {Liquidate} (sell) your investments.

Answer 1

A stock exchange is a specific, regulated marketplace where various financial securities like shares, debentures, and bonds are bought and sold. The four key features are:

Organised and Regulated Market: A stock exchange is a highly organised market that functions under a strict set of rules and regulations. In India, all stock exchanges are regulated by the Securities and Exchange Board of India (SEBI) to ensure fair and transparent dealings and to protect investor interests.
Market for Second-hand Securities: The stock exchange primarily deals in the trading of existing or 'second-hand' securities. It is a secondary market where securities that have already been issued by companies in the primary market are traded among investors. It does not provide a platform for companies to issue new shares for the first time.
Listing of Securities Required: Only the securities of companies that are 'listed' on the stock exchange can be traded. For a company to be listed, it must fulfill certain stringent requirements related to its financial health, stability, and minimum capital, as laid down by the exchange. This ensures that only sound companies are available for trading.
Provides Liquidity: The most crucial function and feature of a stock exchange is that it provides a continuous market for securities, thereby ensuring liquidity. Liquidity means investors can easily convert their securities into cash whenever they want by selling them on the exchange. This readiness of the market encourages people to invest their savings in corporate securities.