What is the purpose of a stock exchange?

The purpose of a stock exchange is to provide a marketplace for buying and selling stocks. This platform allows investors to trade shares of publicly listed companies, facilitating liquidity in the market and enabling price discovery based on supply and demand. By centralizing trades, stock exchanges help ensure transparency and efficiency in transactions, making it easier for both individual and institutional investors to participate in the equity markets.

The organization of a stock exchange contributes to the overall functioning of the financial system by offering a regulated environment where companies can raise capital through the issuance of shares, and investors can buy and sell those shares conveniently. This structure supports investment activities and allows for asset allocation, which is critical for economic growth and stability.