The nature and functions of the stock exchange allow it to use available funds for the purchase and sale of securities. In fact, this is its main task and goal. Any other activity can be exclusively auxiliary in nature, and there should also be a direction to fulfill the basic function.
Stock exchange and its functions
Securities trading is one of the ways to make a profit with minimal effort. However, it is directly associated with serious risks, and without a specialized education there is a great chance to lose all the money. And professionals are not safe from this. After all, the situation can change at any moment, and it is not always possible to react to it. Of the main functions of the stock exchange, the following are distinguished:
- Execution of any possible exchange transaction with a guarantee.
- Providing information regarding possible jumps in stock prices.
- Preliminary preparation and subsequent implementation of contracts.
- Organization of trading on the stock exchange.
Based on the foregoing, we can distinguish 7 main tasks of any such organization.
First task
At the heart of everything is the market place. This is the first task, as well as one of the most important problems. The structure and functions of the stock exchange will not make any sense if there is no trading platform. For full-fledged work, the simplest one is enough, which allows at least a basic, initial sale of securities to new owners. In addition, it is important to have a second platform, which will make it possible to resell already acquired shares. Actually, this is the basis for the work of the exchange. Among other things, it is necessary to ensure strict observance of the rules by all participants, without any exceptions. Otherwise, the prestige will fall, the number of players will decrease significantly, which in turn will lead to a lack of profit or its minimization.
Value of securities
Since the function of the stock exchange is to determine the value of securities, the second problem is precisely this fact. Typically, the problem is solved using statistics from a large number of buyers and sellers. They themselves determine how much they are willing to purchase or sell securities. On this principle, the whole modern market economy exists. The cost of any product or service is formed not on the basis of the resources spent on its creation, but on the background of whether it is in demand on the market or not. If people are willing to pay for an object, for example, 1000 rubles, then it will cost so much, despite the fact that in production it costs only 5 cents. Given the current rise in prices around the world and the general discontent of the population with such a system, global changes in the pricing policy can be predicted in the future, but so far this is still a long way off.
Resale of goods
Any exchange lives on the resale of goods. This is both a task and a function of the stock exchange. It is necessary to enable all participants not only to purchase shares, but also to sell them quickly. Thus, the company generates a very substantial amount of available funds, through which securities can be redeemed almost instantly. In the future, they are sold at a more favorable cost to other members of the exchange. Thanks to this, income is formed. This approach is simultaneously beneficial to all parties, since those who want to get rid of the shares get this opportunity, freeing up funds for more interesting investments, and the exchange receives securities that can be successfully resold later.
Information Support
Information support is the basis of the functions of a stock exchange of any type. The company is obliged to provide all data in the public domain, if it has at least something to do with trading, stock pricing policies or any other related sections.Full openness at every stage is the fourth main task of the stock exchange. Participants must receive any data they require, from the time of the transaction to the forest fires in California, which could lead to higher prices for securities of any nature-related enterprises.
Dispute Resolution
Arbitration disputes are also functions of the stock exchange. Solving this problem, the company is obliged to provide all the tools and capabilities in order to identify the culprit in record time, determine the amount of compensation to the victim and bring its decisions into effect. These should not be recommendations, but direct instructions. Their non-fulfillment should threaten serious expenses, exclusion from the list of players, blacklisting and so on. In such a situation, all participants will be able to hope for an impartial court. This will increase the prestige of the company, increase the number of active members, and with this outcome, growth in profitability can be expected.
Warranty
All transactions must be guaranteed. This function of the stock exchange implies the fact that the securities are authentic, trades are conducted without fraud and as even as possible. No one will spend their money and time on companies that cannot provide such guarantees. Thus, the sixth task of any exchange is to provide 100% guarantees of reliability. Yes, this will not save the participant if the share price drops sharply, but no one is safe from this. But this will help to avoid a situation with a fictitious purchase of securities, which is already very important. In fact, the exchange acts as an intermediary that controls every ongoing process. This eliminates the possibility of fraud or minimizes them.
A separate problem is the solvency of buyers. In some cases, separate accounts are used, to which customers deposit their money and do not have the right to withdraw them until all transactions are confirmed and completed. In another situation, it is possible to use separate personal user accounts from which they pay for the purchase of securities. Here should be provided the opportunity to freeze some of them, which is involved in the transaction.
Standardization
The most recent but equally important feature is standardization. Since the main functions of the stock exchange in many cases involve a high reaction rate of participants and employees, it is necessary to develop a code of conduct common to all, terminology and other elements by which we can eliminate situations of mutual misunderstanding. In most cases, in order to start trading, you first need to confirm your knowledge of the subject so that you do not have to regret about the lost money in the future. This feature makes it possible to significantly reduce the costs of the participant and is primarily aimed at ordinary people who are not particularly versed in the issue. Even the most basic information already makes it possible to more adequately assess everything that happens, and this is the first step to generating income.
Sources of income generation
It has already been said above where the exchange takes profit from. However, this is far from the only moment. Since most users begin to experience doubts in a situation where they do not see the obvious benefit of the other side, here we will talk about how the income of such a company generally appears.
- Contributions of all participants. They go to the formation of a reserve fund. This measure is not always used. But even when this happens, usually the amount of required investments is minimal and in no way can afford. Depending on the nature of the job, such payments may be required once a year or month. In addition, there are special voluntary target programs, all of whose investors receive some kind of advantages.Given the requirements for honesty and openness, the latter measure is rarely applied.
- The requirement to pay for specific securities to be included in the existing list and made available for bidding. Of course, it is charged to the owner of such shares.
- The most popular way of income is to use a commission system for any actions of a market participant. We bought a share - paid a percentage, sold it, again made money. In the vast majority of cases, all this is not publicly advertised, and many users do not even notice the difference in the amount.
Summary
About what functions the stock exchange performs and what tasks it should solve for daily effective work, we described above. You can add to this all that most newcomers to this market in the shortest possible time lose all their savings in favor of more experienced participants. Do not rush. First you need to study all available information and conclude the first deals only by carefully checking everything. It is better to lose your potential income now, but save your money in the future.