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Stock exchanges control the activities of brokers and protect the investors from being deceived. Now, if
any broker is found indulging in malpractices as overcharging or giving wrong information, his license
may be cancelled.
d) Provides safety and security in dealings
Activities of the stock exchange are controlled by the provisions of the Securities Control (Regulation)
Act and all this create confidence in the minds of investors. As transactions are conducted as per well
defined rules and regulations, fraudulent practices stands checked effectively ensuring safety, security
and justice in dealings.
e) Regulates company management
Listed companies have to comply with rules and regulations of concerned stock exchange and work
under the vigilance of stock exchange authorities.
f) Intensifying capital formation
Stock exchange accelerates the process of capital formation through creating the habit of saving,
investing and risk taking among the investing class by converting their savings into profitable, safe
investments.
g) Facilitates raising of new capital
Because of stock exchange, for development, organization or expansion, the need for more capital by
the existing companies is easily met out.

Importance of a stock exchange
Stock exchange indicates about the good or bad health of an economy. It is an investment intermediary
which facilities economic and industrial development of a country.
For the smooth and orderly functioning of corporate sector in a free market economy, stock exchange
are indispensable, because of the different roles played by them for different groups.

1. from the view point of investors
(a) Dissemination of useful information: Stock exchange publishes useful information regarding price
lists, quotations, etc., of securities through newspapers and journals. The interested persons buy and
sell their securities on the basis of information provided by the stock exchanges.
(b) Ready market: Persons desirous of converting their shares into cash may easily do so through a
member of stock exchange.
(c) Investors' interests protected: Stock exchanges formulate rules and regulations so that members
may not exploit the investors.
(d) Genuine guidance about the securities listed: The investors can safely depend upon the information
provided by the stock exchanges.
2. from the view point of entrepreneurs /companies
(a) Recognition: The market values of companies' shares are published in important dailies. This
enhances the reputation of good companies/entrepreneurs.
(b) Wide market: The securities of some companies are listed in some stock exchanges.
The market for the securities of such companies is considerably widened. Thus, larger amounts of capital
may be raised from different types of investors.
(c) Higher share values: People have a tendency to buy shares that have some premium value. Demand
of such shares increases. This leads to further increase in the price of such shares.
3. from the viewpoint of society
(a) Rapid capital formation: People get tempted to invest in securities when they study the trend of
necessary prices of shares of good companies. This habit leads to investment of savings in corporate and
government securities. The income from these securities may further be invested in buying more
securities. This flow of funds leads to rapid capital formation.