Introduction The essay outlines the various functions that the stock exchange plays in the stock market. Principle Functions of Modern Stock Exchange Shares and bonds are referred to as securities in the capital market. The buying, selling, and dealings involving shares and bonds in Australia are controlled by the Australian Stock Exchange (ASX). The first function of the stock exchange is to facilitate or create a platform for companies to raise capital. Companies or trusts are allowed to sell shares to either the members of public or private investors so that they can get finances to fund their expansion or establish new businesses. The trading of those shares by the investors can be done when listing of the company or trust on ASX is done. The second function of the stock exchange is to provide a market where securities are traded. Buyers and sellers exchanging securities make up the share market. The stock exchange has provided the players with an electronic trading system where orders to sell or buy shares are entered electronically without the sellers and buyers having to meet physically. Before the automation of the trading system, the ‘trading floor’ was a physical location, where orders of trading shares were taken. The legal ownership of securities can be transferred electronically when trading takes place between the buyer and the seller. According to Bruce (29), the stock exchange establishes rules to be followed by the companies and other players so as to ensure fair trading of securities. The rules enable the stock exchange to regulate the trading process and ensure best practices are followed by companies and stock brokerage firms. Listed companies are obliged to inform the stock exchange on critical issues like mergers and changes of management. The stock exchange will then release the information to the market. Such information is very vital to the market players and the members of the public since it affects the share price of the company (Bruce 33). Information like when a company wants to release its financial reports will influence share price as traders anticipate the profitability or the financial position of the company. The fourth function of the stock exchange is to establish the rules that regulate the trading that takes place at the stock exchange. The buying and selling overovershare done by licensed stock brokerage firms. Stock brokerage firms are responsible for entering the orders of the customers (buyers or sellers) into the market upon such directives from the customers without delay. The rules also stipulate how brokerage firm should carry out their business so that the integrity of the market is maintained. Finally, the stock exchange performs the function of supervising the parties within the market to ensure that all parties follow the rules adequately and that the trading process is running smoothly at the highest level of efficiency. There is continuous monitoring of the price and the volume of the shares traded to ensure that a normal pattern is maintained. The computer system can generate real-time trading information and this helps the stock exchange to detect any unusual change of price or volume of