Ans: Following are the functions of stock exchange:
1. Ready market and liquidity: Stock exchange provides a ready and continuous market where investors can convert their money into securities and securities into money easily and quickly. It provides a convenient meeting place for buyers and sellers of securities.
2. Evaluation of securities: Stock exchange helps in determining the prices of various securities that reflect their real worth. The forces of demand and supply act freely in the stock exchange and help in the valuation of securities.
3. Mobilisation of savings: Stock exchange helps in mobilising surplus funds of individuals and institutions for investment in securities. In the absence of facilities for quick and profitable disposal of securities, such funds may remain idle.
4. Capital formation: Stock exchange not only mobilises the existing savings but also induces the public to save money. It provides avenue for investment in various securities which yield higher returns. It helps in allocation of available funds into the most productive channels.
5. Regulation of corporate sector: Stock exchanges frame their rules and regulations. Every company which wants its securities to be dealt in at the stock exchange has to follow the rules framed by the stock exchange in this regard.