The Roles and Functions of the Stock Market

The stock market is arguably the most popular Forex Broker List financial market in the world. It serves many roles in the financial industry, and below are its most important functions. Come and check it out!

Fair Dealing of Securities and Transactions

Depending on the standard rules of supply and demand, the stock exchange has to ensure that all the involved and interested market participants have instant access for all buy and

In addition, it should also perform the efficient matching of appropriate buy and sell orders. The exchange, through their computer operated automated trading system, has to ensure that the best buy and best sell are matched.

Efficient Price Discovery

Finance Brokerage Stocks markets need to support an efficient mechanism for price discovery, which refers to the act of deciding the proper price of a security and is usually performed.

Maintaining Liquidity

While getting the number of buyers and sellers for a particular financial security are out of control for the stock market, it needs to guarantee that whosoever is qualified and willing to trade gets instant access to place the orders which should get executed at an absolutely fair price.

Security and Volatility of Transactions

While a higher number of participants is important for the efficient working of the market, the market needs to ensure that all participants are verified and remain compliant with the necessary rules and regulations. This makes it impossible for default by any parties to occur.

In addition, it should guarantee that all associated entities operating in the market must also comply with the rules, and work within the legal framework given by the regulator.

Support for Eligible Participants

A marketplace is composed of a variety of participants, and those participants include market makers, investors, traders, speculators, and hedgers. All of these participants operate in the stock market with different roles and functions.

For instance, an investor may buy stocks and hold them for the long term which means many years, while a trader may enter and exit a position within seconds.  A market maker provides the necessary liquidity in the market, while a hedger may prefer to trade derivatives to mitigate the risks involved in investments.

Investor protection

Along with the wealthy and institutional investors, a high number of small investors are also served by the stock market for their small amounts of investments.

Balanced Regulation of Corporate Entities

The workings of a listed company are largely regulated and their dealings are always monitored by market regulators, like the Securities and Exchange Commissions (SEC) of the US. Additionally, exchanges also mandate certain requirements, such as timely filing of quarterly financial reports and instant reporting of any relevant developments, to ensure that all market participants are aware of corporate happenings. Failure to adhere to the regulations can lead to the suspension of trading by the exchange s and other disciplinary measures.