Disadvantages Of Stock Exchange

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B. Delisting Stocks Since 1995, more than 9,000 firms have delisted from U.S. stock exchanges and markets using a sample of New York Stock Exchange firms delisted in 2002. The practice of delisting stocks hurts the firms being delisted, it harms the investors holding those shares, and it removes from the exchange or stock market a security that traders wish to transact. It also imposes costs on trading venues by depriving them of revenues from listing fees and commissions on transactions. When it occurs then share prices fall by half, percentage spreads on average triple, and volatility almost doubles while prices continue to decline after delisting, volume remains remarkably high, with average first day trading. Chapter II of Securities and Exchange…show more content…
g) Recognition from Central Government Stock exchange is an organized market. It requires recognition from the Central Government. h) Working as per rules Buying and selling transactions in securities at the stock exchange are governed by the rules and regulations of stock exchange as well as the governing commissioned institute heading the stock exchanges in any country. i) Specific location Stock exchange is a particular market place where authorized brokers come together daily (i.e. on working days) on the floor of market called trading circles and conduct trading activities. The prices of different securities traded are shown on electronic boards. After the working hours market is closed. All the working of stock exchanges is conducted and controlled through computers and electronic system. j) Financial Barometers Stock exchanges are the financial barometers and development indicators of national economy of the country. Industrial growth and stability is reflected in the index of stock…show more content…
This enables investors to know the true worth of their holdings at any time. Comparison of companies in the same industry is possible through stock exchange quotations (i.e. price list). m) Encourages capital formation Stock exchange accelerates the process of capital formation. It creates the habit of saving, investing and risk taking among the investing class and converts their savings into profitable investment. It acts as an instrument of capital formation. In addition, it also acts as a channel for right (safe and profitable) investment. n) Provides safety and security in dealings Stock exchange provides safety, security and equity (justice) in dealings as transactions are conducted as per well-defined rules and regulations. The managing body of the exchange keeps control on the members. Fraudulent practices are also checked effectively. Due to various rules and regulations, stock exchange functions as the custodian of funds of genuine investors. o) Regulates company management Listed companies have to comply with rules and regulations of concerned stock exchange and work under the vigilance (i.e. supervision) of stock exchange
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