Question

What major benefits do you think companies and individuals enjoy because of the existence of an organized stock exchange? In this context explain why Stock Exchanges the world over have significant code of conduct requirements over firm’s listed, both in terms of formal registration requirements and in supporting educational inputs for Boards of listed firms.

Answer 1

Existence of an organized stock exchange:

Benefits to the organisation: It increases liquidity, stock exchange is a official platform where buyer and seller meet

Benefits to the individuals: It reduces credit risk, as in a stock exchange things are managed by clearing house

Stock Exchanges have significant code of conduct requirements over firm’s listed, both in terms of formal registration requirements and in supporting educational inputs for Boards of listed firms. This is required to safegaurd the investor in case of default. Sometimes in case liquidation, the code of conduct requires to pay the money to the investors. Also, during the M&A activity or directors elections, the company needs to take permission from the investors.