What is the function of a stock exchange?

The primary function of a stock exchange is to facilitate the buying and selling of securities, such as stocks and bonds. This platform connects buyers and sellers, allowing them to transact in a regulated environment. Stock exchanges provide the necessary infrastructure and transparency for these transactions, helping investors make informed decisions. They play a crucial role in capital markets by enabling companies to raise funds from the public through the issuance of shares, while also providing a marketplace for investors to trade these securities.

This function is essential for the functioning of the financial system, as it ensures liquidity in the market, which means that investors can easily enter or exit their investments. The presence of a stock exchange also helps in discovering prices for securities, which are determined based on supply and demand dynamics. This marketplace ultimately contributes to the overall efficiency and stability of the financial market.