There are a number of advantages of having a local stock exchange such as the Nairobi Stock Exchange, New York stock exchange, London Stock Exchange and others.

Stock exchanges perform important roles in national economies. Most importantly, they encourage investment by providing places for buyers and sellers to trade securities. This investment, in turn, enables corporations to obtain funds to expand their businesses.

Corporations issue new securities in what is known as the primary market, usually with the help of investment bankers. The investment bank acquires the initial issue of the new securities from the corporation at a negotiated price and then makes the securities available for its clients and other investors in an initial public offering (IPO). In this primary market, corporations receive the proceeds of security sales. After this initial offering the securities are bought and sold in the secondary market. The corporation is not usually involved in the trading of its stock in the secondary market. Stock exchanges essentially function as secondary markets. By providing investors the opportunity to trade financial instruments, the stock exchanges support the performance of the primary markets. This arrangement makes it easier for corporations to raise the funds that they need to build and expand their businesses.

The stock exchange is an important source of long-term funds for borrowers and an outlet for lenders of such funds.  

The stock exchange is a convenient market for advertising shares of new public limited companies.

It enables share prices to be quoted publically so that foreign investors can assess the financial standing of a given company and its position in the economy as a whole. This is important for a company or nation trying to attract private investors.

The market also acts as a basis for valuing and comparing securities.

By having their shares quoted publically on the stock exchange, the stock exchange protects the stockholders from fraud.

 In a Stock Exchange the investors are able to convert their shares into cash.

Through capital gains taxes, government is able to earn income in a Stock-Exchange.

By selling gilt-securities, government is able to implement monetary policies.

The members of the stock exchange who deal in these stocks are divided into the categories.

The existing prices for shares in a stock exchange may be a good economic indicator.

Insurance companies are able to get business from the stock exchange by selling to them policies.

Although corporations do not directly benefit from secondary market transactions, the managers of a corporation closely monitor the price of the corporation's stock in secondary markets. One reason for this concern involves the cost of raising new funds for further business expansion. The price of a company's stock in the secondary market influences the amount of funds that can be raised by issuing additional stock in the primary market.

Stock exchanges encourage investment by providing this secondary market. Stock exchanges also encourage investment in other ways. They protect investors by upholding rules and regulations that ensure buyers will be treated fairly and receive exactly what they pay for. Exchanges also support state-of-the-art technology and the business of brokering. This support helps traders buy and sell securities quickly and efficiently. Of course, being able to sell a security in the secondary market increases the relative safety of investing because investors can unload a stock that may be on the decline or that faces an uncertain future.