what is stock exchange

What is Stock Exchange? Stock Exchange Definition

What is Stock Exchange?

The stock exchange is a very heavily related topic with the Stock Market. As we know that the companies issue shares to raise money for their future expansions by an IPO or initial public offering. Then those shares are bought by the general public who generally hold those shares to make a good amount of money in the future. The price of the shares depends on the supply and demand factor or the number of buyers available to buy those shares. The exchanges basically bridge the gap between those buyers and the sellers so that they can make the trade.

The Sock Exchange is actually an organization which works as a platform to initiate a buying or selling. Plus, it helps to maintain a certain price of security without fluctuating it much.

Stock Exchange Definition

Just like the term a stock exchange, it’s a place where a buyer and a seller can exchange stocks. The stocks represent the ownership of a particular company. So, in other words, a stock exchange is a field where several types of stocks and securities are get bought and sold. A stock exchange also offers other securities like Bonds, Mutual Funds, Derivatives, Unit Trusts etc. So, just because the stock exchange trades in all types of securities, it is also recognized as the Securities Market. The stock exchanges are not the primary market for the stock trading, it actually works as a secondary market. The initial public offering of a company happens in the primary market and then the issued shares are allowed to be bought and sold from the stock exchanges.

So, in above we have discussed what is stock exchange and also have elaborated the definition of stock exchange which is enough to give you a basic idea about it. But now we will discuss its functions to know completely know this topic.

Functions of Stock Exchange

The socks exchanges play a great role in the progress of a country’s economy. And in below we have discussed some important functions of stock exchange to show you how.

Marketability of Securities:

The Stock Exchange is a very suitable place for the stocks and securities to be bought and sold. It gives a great platform to the companies to raise capital for their future growth. And the people get the opportunity to invest and grow money in it.

Provides Fair Trading:

The stock market provides a very fair and regulated trading platform for us. It does not buy any securities on its own account but just provides the facilities and infrastructure to execute these trades.

Liquidity:

In my opinion, maintaining liquidity is one of the most important functions of stock exchange. The stock market investments are basically for the long term. And if the investors want their money back after a short period of time it will result in a complete meltdown. The stock market basically prevents this event from happening.

Corporate governance:

Through a stock exchange, many people can own a company’s stock, and by which they become a legitimate owner of a portion of that company. So, because of this, a public limited company has to improve its standards to satisfy the needs of these shareholders.  And because of this much involvement of general public, the exchange and government impose laws to protect the interest of people.

Investment Method:

Through the stock exchanges, the common people get the opportunity to utilize their money through investment. The people buy the stocks in speculations that the price will go up, which in term give money and support to the stock market.

The Barometer of Economy:

The stock exchanges greatly dictate the future economy of a country. The stock indexes can tell the current and future economic status. The investors access the information to determine whether the stock price of a particular security will go up or down.

So, these are very important functions of stock exchange which have a very great impact on our economy. And is equally important if you want to get knowledge about what is stock exchange.

Examples of Stock Exchanges

Now, if we talk about the United States then it has a number of exchanges in different regions. But here we will discuss about the topmost exchanges.

  1. New York Stock Exchange in the US.
  2. NASDAQ in the US.
  3. London Stock Exchange in the UK.
  4. Tokyo Stock Exchange in Japan.
  5. Shanghai Stock Exchange in China.
  6. Indian Stock Exchange in India.
  7. Euronext located throughout Europe.
  8. Frankfurt Stock Exchange in Germany.
  9. Australian Securities Exchange in Australia.

Conclusion

So, in this article, we have covered the idea of what is stock exchange with an elaborated discussion of stock exchange definition and functions of stock exchange. And I think it is enough to give you a clear and complete idea about stock exchanges.

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