What is the stock exchange? Functions of Stock exchange.

What is the stock exchange? Functions of Stock exchange.

stock exchange, a securities exchange or a stock exchange is a platform where stockbrokers and traders can acquire and sell stocks, such as equity and bonds and other financial instruments. Stock exchanges may also provide facilities for the issuance and redemption of such securities and instruments and capital events, including the payment of income and dividends.

Securities exchanged on the stock exchange include securities issued by listed companies, unit trusts, derivatives, pooled investment products, and debt. Stock exchanges also operate as “continuous sale” markets with buyers and sellers exchanging trades by open outcry at a central location such as the exchange floor or through the use of an electronic trading network.

To order to be able to sell securities on a certain stock exchange, security must be classified there. Usually, there is at least a central location for record-keeping, but trade is increasingly less connected to a physical location, as modern markets use electronic communication networks that give them the advantage of increased speed and reduced transaction costs. Trade-in exchange shall be limited to traders who are representatives of an exchange. Throughout recent years, many other trading platforms, such as electronic communication networks, digital trading systems, and ‘dark pools, ‘ have taken away much of the trading activity from traditional stock markets.

IPO of stocks and bonds to investors take place in the primary market and subsequent trading takes place in the secondary market. The stock exchange is often the most important part of the stock market. Supply and demand in stock markets are influenced by a variety of factors that, as in all free markets, influence stock prices.

There is typically no requirement for the stock to be sold through the stock exchange itself, nor must the stock necessarily be exchanged on the stock exchange. These trade may be off-exchange or over-exchange. This is the usual way stocks and shares are traded.

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