- A stock exchange is a central marketplace where stocks and other securities are traded, bought, and sold.
- Exchanges can be either physical or electronic, but electronic exchanges are now the norm.
- The main purpose of an exchange is to connect buyers and sellers, and to bring stability, transparency, and efficiency to the trading process.
- Visit Business Insider’s Investing Reference library for more stories
A stock exchange is a place where shares of publicly traded companies are bought and sold in real-time, either physically or electronically.
When you think of buying stock, the first thing to understand is the stock market is actually made up of a network of exchanges. The lea stock exchanges in the US are the New York Stock Exchange (NYSE) and the Nasdaq.
It’s on these regulated exchanges where a lot of action takes place. Stock exchanges are a major part of the market, and understanding how they work can give you a better handle on the inner workings of the stock market at large.
What is a stock exchange?
A stock exchange is a marketplace where you buy stocks, bonds, and other securities. It provides a platform for companies to sell stocks, and for investors to trade those stocks between each other — all within a regulated space that aims to make everything as efficient and transparent as possible.
There are many stock exchanges around the world, each catering to different markets. The NYSE, for example, is one of many stock exchanges in the world, but it’s also the largest by market capitalization, which measures the total value of securities traded there.
Historically, stock exchanges were primarily physical spaces with men standing on a floor yelling buy and sell orders. These days, exchanges are largely virtual with computers matching buyers and sellers together. The Nasdaq, which began operations in 1971, is a prime example of an electronic exchange.
When a company is “listed” on an exchange, that means the company can be traded on it. Listing requirements vary by exchange, but include meeting minimum criteria, such as number of shareholders, earnings, and stock price.
In return for meeting these requirements, companies enjoy the prestige of being on a major stock exchange. Being listed on a popular exchange gives companies visibility within the global marketplace.
How does a stock exchange work?
To understand the basics of how a stock exchange works, it’s helpful to understand the concept of primary and secondary markets.
- Primary market: In a primary market, companies sell new shares of stocks to the public for the first time, such as an initial public offering (IPO). One of the most important things to note…
Read More: www.businessinsider.com