Stock market today has become one of the most important sources for companies to raise funds. Business firms raise the capital needed to run it or expand it by selling their shares of ownership in the public market. This is called public trading of the company.  The liquidity earned from the stock exchange allows the investor to sell securities quickly and easily. This is the reason why more and more people are attracted to trade in stock market rather than investing in other things like real estate.

Stock exchanges have gained a prime importance in a country’s economy.  A country where the financial market is rising is considered to be a rising economy.  Not just this, equity market is actually the main indicator of a country’s economic growth and development. If a particular country’s equity market has high share prices, then it is said to be having rising business investments, and if its share prices are at bay, then country economy is said to be deteriorating. Share prices do not just affect company stock and the institutions that have invested, but also to the wealth of household and their consumptions. This the why central banks check on the functioning of the stock exchanges, as it affects people at large and country’s overall economy also. Financial stability is what central banks need to operate, which is dependent of stock exchanges.

The exchanges do not have transaction hassles because it guarantees payment to the security seller, and also they collect and deliver the share.