Stock Exchanges

 Stock exchange

Where shares are bought and sold

Stock markets are places where people buy and sell shares of stock. Companies agree to list their shares for trading on the exchanges of their choice, and members of each exchange are permitted to trade shares listed there.

What are stock exchanges?

The stock market functions in some ways like a farmer's market. There, farmers pay the market for space to sell their goods. Buyers come to the market because they know they will be able to buy from many farmers who sell many different agricultural commodities. Both farmers and buyers benefit from the market. The farmers market itself is not actually involved in the buying and selling of agricultural commodities; Their role is simply to provide space so that farmers and buyers have a place to meet and trade. Likewise, stock markets bring together companies, existing shareholders who want to sell shares, and investors who want to buy shares from them.

Why are stock markets useful?

Stock markets help individual investors to invest their money in  the stock market . Typically, the brokerage firms that investors use to buy and sell stocks are either members of major exchanges or have agreements with exchange members, giving them the ability to buy and sell stocks. Without stock markets, interested investors would either have to go directly to the companies whose shares they wanted to buy or find other individuals who owned shares and were willing to sell them. Instead, stock markets bring together buyers and sellers - usually without the two parties knowing each other's identities. Thus, stock markets make trading easier, providing what is known as liquidity: a greater ability to buy or sell stocks.

Stock exchanges also help companies raise money so they can grow their business. When a company first decides to list its stock on a stock exchange and sell shares to the public in an initial public offering, it typically uses the capital it receives from interested investors to expand its operations, conduct research and development, increase customer awareness through marketing or pay for other things important for long-term growth. .

Investors can use the stock markets to help distinguish between healthy, reputable companies and more questionable companies. Stock exchanges have requirements that companies must meet in order to be eligible to list their shares. Major exchanges set strict listing requirements that are difficult for most companies to meet, including minimum numbers of shares outstanding, market capitalization, and company income. Investors know that the stock listed on the stock exchange has met these requirements, and if the stock is not present on the stock exchange, it is an indication that the investor must find out why.

Companies that list their shares on stock exchanges must also provide investors with a lot of information about their business. The US Securities and Exchange Commission requires listed companies to provide these disclosures, including quarterly and annual financial reports. These reports, along with other important news that is revealed as it happens, help investors learn more about the companies they want to invest in.

How do stock exchanges work?

There are two methods of operation that most exchanges generally use. Some exchanges have traders who are physically present on the exchange floor, and their job is to work directly with each other to buy and sell listed stocks. Historically, this was the basic way most exchanges operated.

Recently, electronic trading has become the most common method of exchange operations. Instead of physical trading floors where traders talk to each other directly, computerized platforms can connect buyers with sellers. Today, many exchanges that used to rely solely on a physical trading floor have integrated electronic trading capabilities into their operations, using both methods in combination.

What are the largest US stock exchanges?

• New York Stock Exchange.  The New York Stock Exchange is the largest stock exchange in the United States and is owned by  InterContinental Exchange  ( ICE  -0.23% ). The New York Stock Exchange is located at 11 Wall Street in Midtown Manhattan in New York City. The New York Stock Exchange has nearly 3,000 listed stocks, and their combined market capitalization exceeds that of any other stock exchange in the world.
• Nasdaq Stock Market.  NASDAQ is the second largest American stock exchange. The Nasdaq stock exchange , owned by Nasdaq Holdings Inc.   ( NDAQ  -0.45% ), has about 3,300 stocks listed. Although there are more issues traded on it, the total market capitalization of the NASDAQ is less than the New York Stock Exchange.

Companies choose which exchange they want to list their shares on based on several factors. Each exchange has its own listing requirements, so a company may qualify for one exchange but not another. In addition, some exchanges have a good reputation for listing certain types of stocks. For example, technology companies have historically preferred to list on the Nasdaq, because the Nasdaq was the first exchange to adopt advanced technology such as electronic trading.

In addition to these two major markets, some smaller exchanges serve the US stock market. However, it has been largely integrated into the operations of the NYSE and NASDAQ. For example, the company that owns the New York Stock Exchange bought the Chicago Stock Exchange in 2018. Similarly, the stock exchanges in Boston and Philadelphia that had a long history of operating independently are now controlled by Nasdaq.

important global stock exchanges

In addition to the New York Stock Exchange and Nasdaq in the United States, there is a network of stock exchanges around the world. They include the Tokyo Stock Exchange in Japan, the Shanghai Stock Exchange in China, the London Stock Exchange in the United Kingdom, and Euronext, which serves the European Union.

Companies often choose to list primarily in the country in which they are located, so international exchanges can give investors access to companies around the world. However, some companies choose to list their shares on more than one stock exchange. This practice, known as dual listing, gives investors around the world direct access to the shares of those companies. In some cases, it also allows their shares to be bought and sold around the clock.

Exploiting stock markets well

You may never visit the stock exchange, but if you are buying and selling stocks, the stock exchanges play a vital role in allowing you to invest. Without these exchanges, it would be very difficult to find someone willing to take the other side of your stock trading.