A stock exchange is an organization of which the members are stock brokers. A stock exchange provides facilities for the trading of securities and other financial instruments. Usually facilities are also provided for the issue and redemption of securities as well as other capital events including the payment of income and dividends.
The securities usually traded on a stock exchange include the shares issued by companies, unit trusts and other pooled investment products as well as corporate bonds and government bonds.
Usually there is a central location at least for recordkeeping, 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; a stock broker is said to "have a seat" on the exchange.
A stock exchange is often the most important component of a stock market. There is usually no compulsion to issue stock via the stock exchange itself and nor must stock be subsequently traded on the exchange: Such trading is said to be "off exchange".
The initial offering of stock to investors is by definition the primary market and subsequent trading is the secondary market.
Increasingly all stock exchanges are part of the global securities market.
Supply and demand in stockmarkets is driven by various factors which, as in all free markets, affect the price of stocks (see stock valuation).
In francophonic European countries stock exchanges are called bourses.
Companies have to meet the requirements of the exchange in order to have their stocks and shares listed and traded there. To be listed on the NYSE (New York Stock Exchange), for example, a company must have issued at least a million shares of stock worth $100 million and must have earned more than $10 million over the last three years ().
Last updated: 10-11-2005 04:13:22