Tuesday, December 12

Understanding The Stock Exchange

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 Function

A stock exchange is a company whose business is a facilitae the buying and selling stocks and other securities. the exchange also sets the parameters for trading, notbly intating circuit breaker-like curbs that halt extremly volatile trading, such as may occur at the announcement of major news. Stocks exchanges keep records about their listed companies and maintain specialists who overseas individual transactions.

 Features

For a company to trade on an exchange it must be listed with the company and meet its listing requirements, which usually involve rules about share price, total market capitalization and, at least in the U.S., financial tramsparency. Exchange derive their revenue from charging a fee for each transaction and have themselves, in most cases, issued public shares.

 Significance

The vast majority of stocks do not trade on the exchange. But because exchanges provide regularity and standards to stock trading, most volume occurs on the major exchange also affords companies access to much larger pools of capital when offering their shares.

 identification

From the exterior, a stock exchange may apphear like any other downtown edifice. insude, however, the flurry of action in open-outcry trading pits and the large boards of lights flashing infomation on incoming bids and offers as well as completed transactions, makes them unmistakable. The shift toward electronic has largely reduceded the number of people physically present on the market and has eliminated some of the chaotic activity associated with exchanges in the past. The Nasdaq, on which many tech stocks are listed, uses an entiely electronic trading system that does not depend on a central location for trading, through the exchange operates a major center in the heart of new york cities times square.

Considerations

 The actual trading is exclusively conducted by  members of the exchange, which is why traders must use a broker to effect their transations. In the process of matching buyers with sellers, the exchange has some control ove the flow of trading, through its speculated that elecronic systems, absent a human specialist to oversee the transactions, are given to more dramatic price fluctuations due to their remarkable efficiency

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