Stock exchange market is a highly organised market where investors can buy and sell existing securities like shares, stocks, debentures, etc. This is a market where those who are interested in purchase of securities are brought into contact with the sellers. The stock exchange is an essential part of the capital market to serve as a source of raising capital as well as a forum for financial investment. The market deals in old existing shares only, i.e. new ones are not traded in it.
The stock exchange market ensures that every transaction must follow prescribed set of rules and regulations, which are complex in nature. Quoted companies are organisations whose shares are quoted on the stock exchange market. The Nigerian Stock Exchange Market is in Lagos with branches in Abuja and Port Harcourt. It was established in 1960 through the Act of Parliament. Some of the companies quoted on the stock exchange market include Dunlop Nig. Plc ., Access Bank Plc ., First Bank of Nig. Plc ., Zenith Bank Plc ., guinness Nig. Plc ., UTC Nig. Plc. and Longman Nig. Plc.
Importance of stock exchange
- An avenue for raising capital: Capital can be raised by companies and governments through the stock exchange.
- Provision of employment opportunities: The stock exchange provides employment for brokers, jobbers, clerks and others.
- Provision of information to investors: Investors, especially foreign investors, can obtain necessary information about the investment situation of a country.
- Facilitates transfer of investment: An investor can withdraw his investment from a company to invest in another company.
- It is a market for investment: The stock exchange provides an avenue for people to invest in any sector of the economy.
- It provides yardstick for measuring performance of companies: The price quoted can be used to measure performance of a business as only sound and efficient companies are quoted on the stock market.
- It leads to increase in the standard of living: Investment opportunities will lead to more income, which will affect consumption, thereby increasing the standard of living of the people of a country.