Stock exchange

DEFINITION of Stock exchange

The stock exchange represents a medium by which shares are bought and sold.

WHAT IT IS IN ESSENCE

Stock exchanges are different from other exchanges because the tradable assets have limitation. Traders can trade only shares. They are different from other ways of trading shares, such as over-the-counter markets.  

They have strict regulations for the trading of shares and of the companies that list on them.

There are many stock exchanges, located all around the globe.

The majority of trades are now taken care of electronically. Some of the more famous include the London’s- LSE, New York’s –  NYSE and the NASDAQ.

Only specified participants can trade directly on an exchange: most individual traders will buy and sell shares via a broker.

A stock exchange or bourse is an exchange where stock brokers and traders can buy and/or sell stocks, bonds, and other securities.

Stock exchanges may also provide facilities for issue and redemption of securities and other financial instruments. They can provide capital events including the payment of income and dividends.

Securities on a stock exchange include stock, unit trusts, derivatives, pooled investment products, and bonds.

Stock exchanges often function as “continuous auction” markets. With buyers and sellers consummating transactions at a central location, such as the floor of the exchange.

HOW TO USE

To be able to trade a security on a certain stock exchange, it must be listed there. Usually, there is a central location at least for record keeping.

But trade is increasingly less linked to such a physical place. Modern markets use electronic networks, which gives them advantages of increased speed and reduced cost of transactions.

Trade on an exchange is restricted to brokers who are members of the exchange.

In recent years, various other trading venues, such as alternative trading systems and “dark pools” take much of the trading activity away from traditional stock exchanges.