Stock Market- The stock market is concerned with the collection of markets and exchanges where there are regular activities in buying, selling and issuing shares of publicly held companies. Such financial activities are operating under a defined set of institutional authorized exchanges or over-the-counter (OTC) laws. In a nation or region, there may be various stock trading locations that enable stock transactions and other types of securities. Let us understand the functioning of the stock market 

Functions of Stock Market

A stock market mainly performs the following functions: 

Fair dealing in securities transactions: Based on standard demand and supply laws, the stock exchange must guarantee that all interested market members have immediate access to information on all purchase and sale orders, thereby pricing fair and transparent securities; Help in this must effectively match appropriate purchase and sale orders.

For example, three buyers may have placed orders to purchase Microsoft stock at $ 200, $ 205, and $ 210, and four sellers set to sell Microsoft stock at $ 210, $ 212, $ 215, and $ 220 can do. The exchange (through their computer-operated automated trading system) needs to notify that the best buy and best sell is the match, which in this case is $ 210 for the specified amount of trading. 

Efficient Price Discovery: Stock markets need to support an efficient price discovery mechanism that refers to the act of determining the fair price of a security and is usually done by evaluating market supply and demand and other factors associated with transactions goes. 

Liquidity Maintenance: While there is no control over the stock market for the number of buyers and sellers for specific economic security, it should ensure that anyone eligible and ready to trade has access to immediate ordering which should be a fair performance cost. 

Security and Validity of Transactions: While the effective function of a market requires more participants, the same market needs to ensure that all participants are screened and remain in compliance with the required laws and regulations. By default, no space is left for either party. It should also ensure that all the related companies operating on the market also comply with the laws and operate within the legal framework of the regulator. 

Support all qualified participants: The market is created by various participants, including retailers, investors, traders, speculators and hedgers. All these respondents work with many positions and functions in the stock market. For example, an investor can buy stocks and hold them for long periods, while a trader can enter and exit a position  in seconds. A market maker provides the necessary market liquidity, while hedgers may prefer to trade in derivatives to reduce investment risk. The stock market should ensure that all such members can perform their essential roles to ensure that the market continues to function effectively. 

Investor protection: A large number of small investors are served by the stock market for their small amount as well as along with wealthy and institutional investors. These investors may have restricted financial understanding and may not be fully conscious of the losses involved in investing in stocks and other listed instruments. The stock exchange should take necessary steps to provide such security to protect such investors from financial losses and to ensure customer confidence.

Source: