CAT / FIA FFM Syllabus C. Managing Cash Balances - Functions of Stock and Bond markets - Notes ^{12 / 13}

A stock market (also known as a stock exchange) has two main functions

1. to provide companies with a way of issuing shares to people who want to invest in the company

2. to provide a venue for the buying and selling of shares

The first function allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market

This enables investors the ability to quickly and easily sell securities.

This liquidity is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate

Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security

This eliminates the risk to an individual buyer or seller.

The Alternative Investment Market is regulated by the London Stock Exchange.