The absence of secondary markets results in the hardships for investors because they will be able only to get back their investments at the time of dissolving of the company. On the other hand, if secondary market id present the conversion of securities into cash by the investors is possible. This can be done at anytime whenever the investors want. It also gives the investors to sell the securities at market price which is very much higher than the original price of the securities. The securities get liquidity by secondary market. A private market which is used for the trading of securities is termed as stock exchange.
Different persons are associated in a stock exchange to sell and buy securities. The strict regulations are imposed by the concerned authorities for the trading activities and incorporation of stock exchanges. It is to be noted that both the genuine investors and the speculators are present there to buy and sell shares. Today the securities of governments, corporate sectors and many other distinguished institutions are traded in the stock exchanges. The regular transaction of the shares, bonds, debentures, government securities is the main function of stock exchange as an organized market.
A ready and ongoing market is provided for the buyers and sellers of shares and securities are provided by the stock exchanges. The liquidity and marketability of the securities are distributed among the public through different types of secondary markets like stock exchanges. The factors of demand and supply are the basis for the validation of securities in stock market. The investors are able to know the true value of the securities in their hand through the standardization processes of stock market. The price list in the stock market also helps to compare the companies in the same industry. This is the main attraction of the stock exchanges.