A stock exchange, also known as a securities exchange or bourse represents is a facility where stockbrokers and traders can buy and sell securities.
This includes shares of stock, bonds, exchange-traded funds (ETFs), or other financial instruments.
By extension, stock exchanges can also provide facilities for the issue and redemption of such securities and instruments and capital events including the payment of income and dividends
Stock exchanges have developed into a permanent fixture in the financial market and some of the most visible entities in the entire industry.
Nearly every developed country boasts a domestic stock exchange, with many varying in importance and size.
The largest stock exchanges in the world as of May 2020 include the New York Stock Exchange (NYSE), NASDAQ, Tokyo Stock Exchange, Hong Kong Stock Exchange, London Stock Exchange, EURONEXT, and Shenzen Stock Exchange.
What Functions Do Stock Exchanges Perform?
Stock exchanges have a variety of utility within the modern financial system. As its name suggests, a stock exchange is often the most important component of a stock market.
Another crucial element of stock exchanges is the prevalence of initial public offerings (IPOs) of company stocks and bonds to investors.
This is performed in both the primary market and subsequent trading the secondary market.
Not any company or entity can be included on a stock exchange. To be able to trade a security on a certain exchange requires the listing of specific securities.
Trading on an exchange is restricted to certified brokers who are members of the exchange. The traditional image of crowded trading floors has waned in recent years to include other various other trading venues.
This includes electronic communication networks, alternative trading systems and "dark pools" which have ultimately seen the migration of trading activity away from traditional stock exchanges.