1. Determining the security price

Stock exchanges play a crucial role in determining the prices of securities through the forces of supply and demand in the market. The continuous trading of stocks allows for price discovery based on market sentiment, company performance, and economic factors.

2. Maintaining liquidity

Stock exchanges provide a platform for investors to buy and sell securities quickly and efficiently, ensuring market liquidity. This liquidity allows investors to enter and exit positions easily, reducing the risk of price manipulation and providing a fair market for all participants.

3. Indicating the economic stock

The performance of stock exchanges is often seen as a barometer of the overall economic health of a country. Rising stock prices can indicate a thriving economy, while falling prices may signal economic challenges. Investors and policymakers closely monitor stock exchange movements to gauge economic trends.

4. Facilitating investment

Stock exchanges provide a regulated marketplace for investors to invest in a wide range of securities, including stocks, bonds, and derivatives. This facilitates capital formation, encourages investment, and allows individuals and institutions to participate in the growth of companies and economies.

5. Raising capital

One of the primary functions of stock exchanges is to facilitate the raising of capital for companies. By issuing shares to the public through initial public offerings (IPOs) or follow-on offerings, companies can raise funds for expansion, research and development, and other business activities.

6. Building a healthy environment

Stock exchanges promote transparency, accountability, and good governance practices among listed companies. By imposing listing requirements, disclosure standards, and regulatory oversight, stock exchanges create a healthy environment that fosters investor confidence and market integrity.

7. Providing right to investors

Stock exchanges provide investors with the right to participate in the ownership and profits of publicly traded companies. By buying shares, investors become shareholders and have voting rights, dividend entitlements, and the potential for capital appreciation.

8. Attracting foreign investment

Stock exchanges attract foreign investment by providing a transparent and regulated market for international investors to participate in. By allowing foreign companies to list their shares and enabling cross-border trading, stock exchanges help diversify investment opportunities and promote capital flows across borders.