| Stock exchange or bourse is a mutual organization | | | | The Stock Exchange helps current and |
| which provides facilities for stock brokers and | | | | newly-formed companies raise capital for building |
| traders, in trading company stocks and other | | | | and expanding their business through selling shares |
| securities, and for the issue of redemption of | | | | to the investing public. |
| securities and other financial tools and capital | | | | Mobilizing savings for investment: |
| events like the payment of income and dividends. | | | | When people draw their savings and invest in |
| The securities traded on a stock exchange include: | | | | shares, it leads to a more balanced allotment of |
| shares issued by companies, unit trusts and other | | | | resources because funds, which could have been |
| pooled investment products and bonds. To be | | | | consumed, or kept in idle deposits with banks, are |
| able to trade a security on a certain stock | | | | mobilized to promote business activity that |
| exchange, it has to be listed there. Usually there is | | | | benefits several economic sectors like agriculture, |
| a central location at least for recordkeeping, but | | | | commerce and industry, resulting in a stronger |
| trade is less linked to such a physical place. | | | | economic growth. |
| Electronic networks run modern markets are, | | | | Government capital-raising for development |
| providing them great speed and cost of | | | | projects: |
| transactions. Stock exchange is often called the | | | | Governments at various levels may decide to |
| most important element of a stock market. The | | | | borrow money for financing infrastructure |
| Demand and Supply in the stock markets is | | | | projects like sewage and water treatment works |
| attracted by number of factors that affect the | | | | or housing estates by selling another category of |
| price of stocks. | | | | securities known as bonds. These bonds are |
| Creating investment opportunities for small | | | | raised through the Stock Exchange where public |
| investors: | | | | buy them, thus loaning money to the |
| The Stock Exchange provides opportunity for | | | | government. The issuance of such municipal bonds |
| small investors like the big investors to own | | | | can prevent the need to directly tax the citizens |
| shares of the same or different companies. | | | | in order to finance development, although by |
| History of stock exchanges: | | | | securing such bonds with the full faith and credit |
| In 12th century France, the courratiers de change | | | | of the government instead of with collateral, the |
| were concerned with managing the debts of | | | | result is that the government must tax the |
| agricultural communities on behalf of the banks | | | | citizens or otherwise raise additional funds to |
| and these men also traded in debts. These men | | | | make any regular coupon payments and refund |
| were the first brokers. | | | | the principal when the bonds mature. |
| In the middle of the 13th century, Venetian | | | | Listing requirements: |
| bankers traded in government securities. In 1351, | | | | Listing requirements are the set of conditions |
| the Venetian Government outlawed spreading | | | | forced by any given stock exchange upon |
| rumors about lowering the price of government | | | | companies that want to be listed on that |
| funds. Because of this rumor people in Pisa, | | | | exchange. |
| Verona, Genoa and Florence also started trading | | | | Requirements by stock exchange: |
| in government securities which was possible | | | | For companies to have their stock and shares |
| because there were independent city states ruled | | | | listed at the stock exchange have to meet |
| by a council of powerful citizens during the 14th | | | | certain requirements of the exchange. But |
| century. | | | | requirements vary in different exchanges. |
| Raising capital for businesses: | | | | |