A stock exchange is a marketplace where investors can buy and sell stocks, bonds and other securities. The number of companies that are traded publicly in the world is estimated to be about 630,000. The exchange in the U.S. is still the largest. Asia is still growing in influence on the world stage.
Stock exchanges can’t be compared to other businesses. The national stock exchanges performance is referring to a nation’s economy’s health.
Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and dividends.
Securities are listed on a stock exchange in order to be able to trade securities. Modern markets are electronic markets. These networks give the advantage of high speed of trading and reduced cost of transactions.
An IPO, Initial Public Offering, of stocks and bonds to investors is done in the primary market. Trading thereafter 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 are driven by various factors that, as in all free markets, affect the price of stocks (see stock valuation).
Over the counter trading (OTC). A security traded in some context other than on a formal exchange. Electronic communications networks, alternative trading systems and “dark pools” have taken a large part of the trading done on the traditional stock exchanges away.
Trading stocks listed on foreign exchanges is still difficult (and expensive) for U.S. investors. Of course, it is up to the brokerages to offer these services and for investors to demand them.
Trades are handled through an automated or manual order processing system. In the automated system, orders are routed electronically to specialists. A system called the Booth Automated Routing System (BARS)is used for this purpose. New Equity Trading System (NETS) is used to collect information about the trades. It also automates the process of updating and matching orders, quoting and reporting trades, and regulating and researching order details.
By calling the floor broker orders can also be placed manually. Manual order processes usually are initiated for large or complex orders. Specialists help to assemble the buyers or sellers for these orders.