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Stock Exchange

The document defines a stock exchange as an organization that facilitates the buying and selling of securities. It provides liquidity, marketability, security evaluation, and safety in dealings. Only listed securities can be traded on an exchange. For a company to list its securities, it must submit documents like its articles of association and audited financials, pay listing fees, and agree to exchange rules. Objectives of listing include protecting investors and ensuring liquidity. Listing provides advantages to companies, investors, and society.

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793 views8 pages

Stock Exchange

The document defines a stock exchange as an organization that facilitates the buying and selling of securities. It provides liquidity, marketability, security evaluation, and safety in dealings. Only listed securities can be traded on an exchange. For a company to list its securities, it must submit documents like its articles of association and audited financials, pay listing fees, and agree to exchange rules. Objectives of listing include protecting investors and ensuring liquidity. Listing provides advantages to companies, investors, and society.

Uploaded by

Nayan kaki
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Stock Exchange

Definition: According to Securities Contract


(Regulation) Act,1956; “Stock Exchange means
any body of individuals; whether incorporated
or not, constituted for the purpose of assisting,
regulating or controlling the business of buying,
selling of securities.”
Stock Exchange Functions :
1. Ensure liquidity of capital: The stock exchange
provides place where shares and stock are converted
into cash. The SE provides ready market where buyers
and sellers are always available and those who need
hard cash can sell their holdings.
2. Marketability : The SE provides a ready and regular
market for securities. The securities once listed
continue to be traded at the exchanges irrespective of
the fact that the owners go on changing.
3. Evaluation of securities : The investors can evaluate the
worth of their holdings from the prices quoted at
different exchanges for those securities. SE are helpful
in evaluating any security listed here.
4. Safety in dealings: The dealings in SE are governed by
the well-defined rules and regulations of SEBI. There is
no scope for manipulating transactions.
5. Listing of securities: only the listed securities can be
purchased at SE. Every company desirous of listing its
securities will apply to exchange authority.
6. Mobilizing of surplus savings: the SE provides ready
market for various securities. The investors do not have
any difficulty in investing their savings by purchasing
shares or bonds, which leads to increase in dealings of
securities and thus resulted into mobilization of savings.
7. Marketing of new issues: if the new issues are listed ,
they are readily acceptable to the public , since listing
presupposes their evaluation by the concerned stock
exchange authorities. Cost of such issues would be less.
Listing of Securities :
• Listing of securities means that the securities are admitted
for trading on a recognized stock exchange.
• Transactions in the securities of any company cannot be
conducted on stock exchange unless they are listed by
them. Hence listing is the very basis of stock exchange
operations. It is the green signal given to selected securities
to get the trading privileges of the stock exchange
concerned.
• Securities become eligible for trading only through listing.
• Listing is compulsory for those companies which intend to
offer shares, debentures to public for subscription by
means of issuing prospectus
Listing Procedures :
A company which requires its securities to be listed must comply with the
formalities by applying in the prescribed form along with the
documents and following details –
• Certified coy of MOA, AOA, Prospectus or statement in lieu of
prospectus, agreement , underwriting etc.
• Specimen copy of shares and debentures certificates, letter of call ,
allotment, acceptance and renunciation.
• Copies of balance sheet and audited account for the last 5 years.
• Copies of offer for sales.
• Particulars of dividend and bonus paid during last 10 years.
• A statement showing dividends or interest in arrears if any.
• Particulars regarding capital structure.
• Particulars of shares and debentures for which permission to deal is
applied for and their issue.
• Particulars of shares forfeited.
• Listing agreement with the necessary initial and annual listing fee.
Objectives of Listing:
1. To ensure proper supervision and control of
dealings in securities
2. To protect the interest of shareholders and
investors.
3. To avoid concentration of economic power.
4. To assure marketing facilities for the
securities.
5. To ensure liquidity of securities.
6. To regulate dealings in securities.
7. To require promoters to have a reasonable
stake in the company.
Advantages of listing
• Advantages to company:
➢ widen the market for the securities of company.
➢ Enhance the credit worthiness, image and status of
company,.
➢ Facilitate tax benefits.
➢ Enhance the confidence of investors
• Advantages to investors :
➢ Increase liquidity
➢ Ensure Marketability and negotiability
➢ Readily acceptable as collaterals security
➢ Ensure safety and security in investment.
• Advantages to the society:
➢ listing facilitates supervision and control over
listed companies and thereby encouraged better
corporate performance and prevent corporate
sickness.
➢ Facilitate capital formation by encouraging
investment in securities.
➢ Attract foreign investment and hence increase
the inflow of foreign capital to the domestic
market.

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