Feature of Stock Exchange and Commodity Exchange

Feature of Stock Exchange

1. Meaning

Stock Exchange (also called Stock Market or Share Market) is one important constituent of capital market. Stock Exchange is an organized market for the purchase and sale of industrial and financial security. It is convenient place where trading in securities is conducted in a systematic manner i.e. as per certain rules and regulations.

2. Function

Providing easy marketability

3. Object

Object is facilitating capital formation and making best use of capital resources

4. Participants

Investors and Speculators

5. Period of dealings

Cash, ready delivery and dealings for account for a fortnight

6. Articles Traded

Industrial securities such as stocks and bonds and government securities.

7. Speculation

Speculation ensures saleability of securities affording a broad, ready, liquid and continuous market of securities.

8. Forward contract

Forward dealings are simplified as securities are fully standardized

9. Cornering

As seller has to deliver the agreed securities, cornering is easy

10. Price Quotation

As regards forward dealings, only one quotation is possible

Feature of Commodity Exchange

1. Meaning

A commodity exchange is an exchange where commodities are traded. Tradable commodities fall into the following categories. Metals (e.g. gold, silver,copper) Energy (e.g. crude oil, natural gas) Agricultural (e.g. rice, wheat, cocoa) Livestock and meat (e.g. live cattle, lean hog)

2. Function

Offering hedging or price insurance services and liquidity to securities.

3. Object

Object is facilitating goods flow through risk reduction

4. Participants

Producers, dealers, traders and a body of speculators.

5. Period of dealings

Instant cash dealings and a settlement period of 2 or 3 months for Future Market dealings

6. Articles Traded

Only durable, graded and goods having large volume of trade, price uncertainty and uncontrolled supply

7. Speculation

Speculation ensures assumption and absorption of price risk.

8. Forward contract

Standards are to be fixed for deliverable grades to facilitate futures contract

9. Cornering

Cornering is difficult as the seller has option to deliver standard or other deliverable goods.

10. Price Quotation

For future dealings, multiple quotations are possible