Stock Exchange

A stock exchange, share market or bourse is a corporation or mutual organization, which provides facilities for stockbrokers and traders, to trade company stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities, as well as, other financial instruments and capital events including the payment of income and dividends. The securities traded on a stock exchange include: shares issued by companies, unit trusts and other pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there. Usually there is a local & central location at least for record keeping, but trade is less and less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of speed and cost of transactions. Trade on an exchange is by members only & stock & shareholders. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. Supply and demand in stock markets is driven by various factors, which, as in all free markets, affect the price of stocks

There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that bonds are traded. Increasingly more and more stock exchanges are part of a global market for securities.

The role of stock exchanges

Barometer of the economy

At the stock exchange, share prices rise and fall depending, largely, on market forces. Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth. An economic recession, depression, or financial crisis could eventually lead to a stock market crash. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy.

As opposed to other businesses that require huge capital outlay, investing in shares is open to both the large and small stock investors because a person buys the number of shares they can afford. Therefore the Stock Exchange provides the opportunity for small investors to own shares of the same companies as large investors, and to enjoy similar rates of return.

Raising capital for businesses

The Stock Exchange provides companies with the facility to raise capital for expansion through selling shares to the investing public.

Mobilizing savings for investment

When people draw their savings and invest in shares, it leads to a more rational allocation of resources because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized and redirected to promote business activity with benefits for several economic sectors such as agriculture, commerce and industry, resulting in a stronger economic growth and higher productivity levels.

Facilitating company growth

Companies view acquisitions as an opportunity to expand product lines, increase distribution channels, hedge against volatility, increase its market share, or acquire other necessary business assets. A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways for a company to grow by acquisition or fusion.Redistribution of wealth

By giving a wide spectrum of people a chance to buy shares and therefore become part-owners (shareholders) of profitable enterprises, the stock market may help to reduce large income inequalities. However, capital losses may also happen. Both casual and professional stock investors through stock price increases and dividends get a chance to share in the profits of promising business that were set up by other people.

Major stock exchanges

The main stock exchanges in the world include:

• American Stock Exchange
• Australian Stock Exchange
• Bombay Stock Exchange
• Euronext
• Frankfurt Stock Exchange
• Helsinki Stock Exchange
• Hong Kong Stock Exchange
• Istanbul Stock Exchange
• JASDAQ
• Johannesburg Securities Exchange
• Karachi Stock Exchange
• Korea Stock Exchange
• London Stock Exchange
• Madrid Stock Exchange
• Milan Stock Exchange
• Nagoya Stock Exchange
• National Stock Exchange of India
• NASDAQ
• New York Stock Exchange
• Osaka Securities Exchange
• São Paulo Stock Exchange
• Shanghai Stock Exchange
• Singapore Exchange
• Stockholm Stock Exchange
• Taiwan Stock Exchange
• Tokyo Stock Exchange
• Toronto Stock Exchange
• Zurich Stock Exchange

Types of Stocks

Trading Stock

• Terms dealing with trading

• Exchanges:

• Trading Theories:

• Stock Pricing:

Stock Related Terms