Stock Exchange is the Barometer of Economic Prosperity of a country
Stock Exchange
Stock exchange is an organized market for the purchase and sale or listed financial securities. It is the place where the buyer may find an immediate seller and the seller may find a reasonable buyer. Stock exchange is indispensable for economic development of a country. It is called the barometer of a country’s prosperity. Today, stock exchange constitutes a vital organ of a free modern society.
The Stock exchange is the market where stocks, shares and other securities are bought and sold. This market deals in stocks, share and other securities. The owners may sell their securities, stocks or shares as and when they like. They serve as a form for trading in stocks, shares and bonds that have a local and national followings.
According to Hartley Withers, “Stock Exchange is like a big godown where different securities are purchased and sold.” In the words of Pyle. “Stock Exchange are marketing place where securities that have been listed there on may be bought or sold for either investment or speculation.” In the words of Hastings. “Stock exchange or securities market comprises all the places where buyers and sellers of stocks and bonds or their representatives undertake transactions involving sale and purchase of securities. According to Securities Contracts (Regulation) Act of 1956 “Stock exchange means a body of individuals, whether incorporated or not, contributed for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities.”
The main features of Stock exchange are stated below:
1. Voluntary Association: A Stock Exchange is a voluntary association. It may be a private club or private or public limited company.
2. Elected Management: A Stock Exchange is managed by an elected managing committee. The committee exercises rigid control over the members. It also deals with the manner and methods of dealing with customers.
3. Great Responsibility of Members: A member of an organized Stock Exchange has to bear great responsibility. He is responsible both to fellow members and to clients. Thus, every Stock Exchange follows strict rules and regulations governing the admission of new members.
Following discussion will make it clear that stock exchange is considered as a barometer of prosparity of a country.
Importance of Stock Exchange: The importance of stock exchange may be listed as under:
(1) It safeguards the interests of investors through strict enforcement of rules, regulations and bye-laws of the stock exchange.
(2) Listed securities serve as a better collateral security for loans as the stock exchange provides negotiability to the securities.
(3) The risk in the investment of securities on the stock exchange is minimized and safety is well assured by the presence of the continuous market, negotiability, correct evaluation, listing rules and facility for liquidating the investment.
(4) The stock exchange publishes daily quotations of listed security prices, thereby enabling the investors to know and assess their real worth of their investment in securities.
(5) The stock exchange by its strict listing regulations, the interference
of Securities Exchange Board of India (SEBI) and its rules, regulations and buy-laws provides safety against false securities to the investors..
(6) The stock exchange encourage the investors’ will to save the money and invest the same in more profitable areas of investment in securities which is expected to give them higher return.
(7) Listed securities enjoy higher degree of marketability and liquidity and are thus preferred by the investors.
(8) The market for the shares, stocks and debentures of such companies is naturally widened.
(9) Listed securities command higher values on the stock exchange as against the non listed securities.
(10) Stock exchange encourages the flow of capital into companies by initializing the saving of the investors and directing their flow into securities by providing a free, open and continuous market,
(11) Those companies are in a position to get easy and adequate finance from the banks and other financial institutions whose shares, stocks and debentures are quoted at a higher price on the stock exchange.
(12) It promotes the habit of saving and accelerates the rate of capital formation in a country.
(13) It provides a platform to be Government-central state or local semi government institutions to raise finance by means of public debts.
(14) It makes the foreign capital available for the economic development of the country by attracting foreign investors both from the government and private sectors to invest money in the listed securities quoted on the stock exchange. Today Indian Stock Exchanges, like Bombay (Mumbai) Stock Exchange and National Stock Exchange and dominated by foreign investors. Stock exchange provides safety to foreign investors by their rules, regulations and bye-laws.
In short, stock exchange encourage thrift, help accumulation of capital, increase mobility of capital, bring idle funds in contact with the genuine needs of trade, industry and commerce, help development of national economy on sound lines, attracts foreign capital in huge amount and above all brings prosperity in the country.
