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b. From the investor's point of view, this market imparts liquidity to the long-term securities held
by them by providing an auction market for these securities.
c. It operates through the medium of stock exchanges which regulate the trading activities in this
market and ensures a measure of safety and fair dealings to the investors.

Stock exchange
“A stock exchange means anybody of individuals, whether incorporated or not, constituted for the
purpose of assisting, regulating or controlling the business of buying and selling or dealing in
securities."
Features of stock exchange
1) Association of persons: A stock exchange is an association of persons or body of individuals which
may be registered or unregistered.
2) Recognition from central government: Stock exchange is an organized market. It requires recognition
from the Central Government.
3) Market for securities: Stock exchange is a market, where securities of corporate bodies, government
and semi-government bodies are bought and sold.
4) Deals in second hand securities: It deals with shares, debenture, bonds and such securities already
issued by the companies. In short it deals with existing or second hand securities and hence it is called
secondary market.
5) Regulates trade in securities: Stock exchange does not buy or sell any securities on its own account. It
merely provides the necessary infrastructure and facilities to its members and brokers who trade in
securities. It regulates the trade activities so as to ensure free and fair trade.
6) Allow dealings only in listed securities: In fact, stock exchanges maintain an official list of securities
that could be purchased and sold on its floor. Securities which do not figure in the official list of stock
exchange are called unlisted securities. Such unlisted securities cannot be traded in the stock exchange.
7) Transactions effected only through members: All the transactions in securities at the stock exchange
are affected only through its authorized brokers and members. Outsiders or direct investors are not
allowed to enter in the trading circles of the stock exchange. Investors have to buy or sell the securities
at the stock exchange through the authorized brokers only.
8) Working as per rules: Buying and selling transactions in securities at the stock exchange are governed
by the rules and regulations of stock exchange as well as SEBI Guidelines.
No deviation from the rules and guidelines is allowed in any case.

Functions of a stock exchange
Stock exchange performs a number of functions in respect of marketability of different types of
securities for investors and borrowing companies. It is important functions are:
(a) Continuous and ready market for securities
Stock exchange provides a central market for purchase and sale of securities. It provides ready and
continuous outlet for buying and selling of securities. Buyers and sellers strongly believe that they would
be able to buy and sell securities as and when they want.
b) Facilitates evaluation of securities
Stock exchange is useful for the evaluation of industrial securities. It publishes price quotation of the
shares of the companies that have been listed with them after thorough analysis of demand and supply
position. This enables investors to know the true worth of their holdings at any time.
c) Checks on brokers