Important Exchanges

June 23rd, 2008

When a company wishes to raise capital to expand its activities it may do so
in the form of issuing shares which the public may purchase. The purchaser has the option of holding the
stock for a long time or sell it when he/she feels the time is right (either at a profit or when
the price dropped to a level at which the investor does not wish to hold the stock anymore).

In order to sell the stock the seller has to find a buyer who is willing to buy the shares offered for sale. Where and how can the seller find these buyers?

The place where sellers and buyers perform these transactions is called the stock market or stock exchange.

A stock exchange is a place where equities (such as stocks, options, bonds and others) of public companies are traded. In the distance past the exchanges were large rooms where stock brokers used to shout the orders their customers have placed so that deals (buying or selling) could be carried out. Nowadays, the
exchanges can take place the same large rooms, which are now filled with computers connected to the internet. These computers receive the buying and selling orders, process them and execute them by matching the sell and buy orders.

The New York Stock Exchange (NYSE) is the largest exchange in the world (it has merged with the European Stock Exchange, Euronext, to form the first global stock exchange in the world).

Other famous stock exchanges are the National Association of Securities Dealers Automated Quotations system (NASDAQ), the Tokyo stock exchange (TSE), the London stock exchange (LSE) and the Hong Kong stock exchange (HKEX or SEHK).

The stock exchange makes stock trading (buying and selling) very convenient. You don’t
have to actually travel to New York in order to trade a stock traded on the NYSE; you can call a broker who will go to the exchange and buy or sell the stocks on your behalf. The broker does not have to actually go to the exchange himself- his representatives there and the computer will enable him to execute
your order on the “floor” of the stock exchange.

Today, most brokers are connected to a large number of exchanges around the
world through the internet or other fast communication networks. Thus, the price
of each stock is available globally instantaneously. Investors can therefore
watch the fluctuations in stock’s prices, fluctuations which are based on
financial news from the company, media reports, economic news and lots of other
factors, and decide on their trading actions. Sometimes the changes in stock
prices reflect investors’ expectations, thus understanding the forces affecting
the market becomes a more complex event

Moreover, investors can trade stocks anyplace on the globe regardless of where
they are located, and the trading can be executed almost instantly. By being
able to buy and sell stocks of companies which are headquartered in other
countries the holder of the stock has the ability to affect global economy more
than ever before.

Entry Filed under: Stock Trading Essentials