stock exchange

stock exchange,

organized market for the trading of stocks and bonds (see bondbond,
in finance, usually a formal certificate of indebtedness issued in writing by governments or business corporations in return for loans. It bears interest and promises to pay a certain sum of money to the holder after a definite period, usually 10 to 20 years.
..... Click the link for more information. ; stockstock,
in finance, instrument certifying to shares in the ownership of a corporation. Bonds are similar evidences of shares in a loan to a corporation. Stock yields no dividends until claims of bondholders have been met.
..... Click the link for more information. ). Such markets were originally open to all, but at present only members of the owning association may buy and sell directly. Members, or stock brokersbroker,
one who acts as an intermediary in a sale or other business transaction between two parties. Such a person conducts individual transactions only, is given no general authority by the employers, discloses the names of the principals in the transaction to each other, and
..... Click the link for more information. , buy and sell for themselves or for others, charging commissions for their services. A stock may be bought or sold only if it is listed on an exchange, and it may not be listed unless it meets certain requirements set by the exchange's board of governors. However, stocks listed on one exchange may be sold on other exchanges through an intermarket system, and since 2007 U.S. government regulations require that an order for a stock placed with an exchange be routed to the exchange or network that offers the best price. There are stock exchanges in all important financial centers of the world; the New York Stock Exchange (NYSE, in nearly continuous operation since 1792) is the largest in the world. Tokyo, London, and Frankfurt also have major facilities. Euronext, an inter-European exchange that merged with the NYSE from 2007 to 2014, combines facilities in Amsterdam, Brussels, Paris, and other cities is also significant.

By providing a ready market for the exchange of securities, stock exchanges greatly facilitate the financing of business through flotation of stocks and bonds. However, speculationspeculation,
practice of engaging in business in order to make quick profits from fluctuations in prices, as opposed to the practice of investing in a productive enterprise in order to share in its earnings.
..... Click the link for more information. in stocks can sometimes accentuate the instability of an economy. The reality of the Great DepressionGreat Depression,
in U.S. history, the severe economic crisis generally considered to have been precipitated by the U.S. stock-market crash of 1929. Although it shared the basic characteristics of other such crises (see depression), the Great Depression was unprecedented in its
..... Click the link for more information. was emphasized by the stock market crash in 1929. The interstate sale of securities and certain stock exchange practices in the United States are regulated by federal laws administered by the Securities and Exchange CommissionSecurities and Exchange Commission
(SEC), agency of the U.S. government created by the Securities Exchange Act of 1934 and charged with protecting the interests of the public and investors in connection with the public issuance and sale of corporate securities.
..... Click the link for more information. . Today, a large percentage of stocks are traded through such over-the-counterover-the-counter,
method of buying and selling securities outside the organized stock exchange. Unlike an organized stock exchange, the over-the-counter market is composed of dealers who negotiate most transactions by telephone and computer.
..... Click the link for more information. organizations as NASDAQ (National Association of Securities Dealers Automatic Quotations) and its European equivalent, NASDAQ Europe (formerly Easdaq). Through these organizations, many securities not listed on a major stock exchange may be traded by dealers using computer and telecommunications technology; in 1994, NASDAQ, on which many computer and other high-technology stocks are traded, surpassed the NYSE in annual share volume. After the deregulation of the British securities market in 1986, the London Stock Exchange saw a decline in business due to a new computerized market similar to NASDAQ. The 21st cent. has seen the mergers of many stock exchanges, such as those that created Euronext in 2000 from the Amsterdam, Brussels, and Paris exchanges, expanded it in subsequent years, and brought it and the NYSE into NYSE Euronext, Inc., in 2007. Intercontinentcal Exchange (ICE), an exchange and clearinghouse network focused on commodities futures and options, purchased NYSE Euronext in 2012, and sold off Euronext in 2014. The stocks of public companies are also traded outside exchanges on such alternative trading systems as electronic communication networks.

Computer-driven trading has significantly affected the stock exchange. Computer and telecommunications technology, besides opening a wide market in over the counter dealings, has also given rise to trading on an international level. Networked computers allow trading to occur around the clock (after-hours NYSE and NASDAQ trading began in 1999), and the securities trading on one major stock exchange can now significantly affect the trading on others. Technology also now allows for "day trading," a high-risk business in which numerous computerized trades are made during a single day, with large gains (and large losses) possible.

Another form of computerized trading is high-frequency trading, in which computer programs analyze the market and execute trades at high speed to reap momentary financial benefits. Such trades often involve very small gains that are magnified by the amount of shares traded and the number of trades made. Traders engaged in high-frequency trading are typically employed by well-capitalized firms and hold shares for brief periods of time, usually selling all shares by the end of a trading day. High-frequency trading firms have also used early access to information concerning orders for stock, often provided the stock exchanges, to profit on such orders, an approach that has been widely criticized. A majority of all trades are now excecuted by high-frequency traders. As a result of these and other changes, many contend that the traditional manner of trading will eventually become obsolete. The increasing volatility of the stock exchanges in the early 21st cent. and the drop in the number of private companies going public has led to the development of private stock exchanges where the shares of private companies may be traded under restricted terms.

See also margin requirementmargin requirement,
that part of a security's price that a buyer must pay for in cash. The balance of the price is met by the broker, who, in effect, is supplying a client with a loan. The smaller the margin, the greater the inducement to speculation.
..... Click the link for more information. .

Bibliography

See A. Crump, The Theory of Stock Speculation (1983); D. L. Thomas, The Plungers and the Peacocks: An Update of the Classic History of the Stock Market (1989); E. S. Bradley and R. J. Teweles, The Stock Market (7th ed. 1998).

stock exchange

Stock Exchange

A place, whether physical or electronic, where stocks, bonds, and/or derivatives in listed companies are bought and sold. A stock exchange may be a private company, a non-profit, or a publicly-traded company (some exchanges have shares that trade on their own floors). A stock exchange provides a regulated place where brokers and companies may meet in order to make investments on neutral ground. The concept traces its roots back to medieval France and the Low Countries, where agricultural goods were traded for cash or debt. Most countries have a main exchange and many also have smaller, regional exchanges. A stock exchange is also called a bourse or simply an exchange.

stock exchange

See securities exchange.

stock exchange

a MARKET which deals in the buying and selling of company stocks and shares and government bonds. See STOCK MARKET entry for fuller discussion.

stock exchange

stock market

A MARKET that deals in the buying and selling of company STOCKS and SHARES and government BONDS. The stock exchange and the MONEY MARKET (which deals in short-term company and government securities) are the main source of external capital to industry and the government.

Institutions that are involved in the UK stock exchange include MARKET MAKERS (who act as JOBBERS and STOCKBROKERS), specialist stockbrokers, ISSUING HOUSES, MERCHANT BANKS and, as general buyers and sellers of securities, the CENTRAL BANK, COMMERCIAL BANKS, PENSION FUNDS, INSURANCE COMPANIES, UNIT TRUSTS and INVESTMENT TRUST COMPANIES, together with private individuals, industrial companies and overseas investors and institutions.

The stock exchange performs two principal functions. It provides:

a primary or ‘new issue’ market where capital for investment and other purposes can be raised by the issue of new stocks, shares and bonds (see SHARE ISSUE), and;
a ‘secondary’ market for dealings in existing securities, including forward dealings (see FUTURES MARKET), which facilitates the easy transferability of securities from sellers to buyers.

Day-to-day movements in the prices of shares (and other securities) are recorded by various SHARE PRICE INDICES (for example, the FTSE-100 share index).

The stock exchange thus occupies an important position in a country's FINANCIAL SYSTEM by providing a mechanism for channelling savings into physical and portfolio investment.

In the UK, the London Stock Exchange is the country's centre for dealings in securities, and the LONDON INTERNATIONAL FINANCIAL FUTURES EXCHANGE provides a market for commodities, currencies, etc.

In order to obtain a full listing or quotation on the London Stock Exchange for their shares, companies must satisfy various requirements, including proof of their financial standing and previous business history, and be prepared to issue at least 25% of their shares to the investing public. Additionally, more flexible arrangements have been introduced to allow smaller companies to raise capital without obtaining a full listing (see UNLISTED SECURITIES MARKET).

In recent years, stock markets worldwide, such as those based in London, New York, Tokyo, Zurich and Paris, have become increasingly interdependent with the growth of multinational companies, whose shares are traded on a number of exchanges, while financial institutions and securities firms themselves have become more internationally based. This has led to an increase in competitive pressures, which has brought about a number of important changes, particularly in the case of the UK stock exchange, including:

the so-called ‘big bang’ - the termination (under the prodding of the OFFICE OF FAIR TRADING) of the cartel arrangements for fixing minimum commissions on securities transactions and the ending of the traditional division between the stockbroking and jobbing functions;
various mergers and joint ventures between UK securities firms and international securities and banking groups so as to provide clients with a more diversified range of financial services and geographical spread;
the computerization of dealing systems, using the Stock Exchange Automatic Quotations System (SEAQ), which provides a mechanism for linking buying and selling transactions on a global basis. This has largely transferred day-to-day business from a physical presence on the stock-exchange floor to telephone exchanges and the use of VDU computer terminals in dealing rooms.

In recognition of the growth in international dealings, the London Stock Exchange merged in the 1990s with the International Securities Regulatory Organization (ISRO), which represented the big international securities firms. In November 1999, a new competitive stimulus emerged when the London Stock Exchange set up a new sub-exchange (Techmark) for the listing of shares in high-tech companies, only to be followed days later by NASDAQ (the US high-tech stock exchange) setting up a rival exchange in London as part of its plan to build up a pan-European operation. In addition, the London Stock Exchange has faced competition from Tradepoint, an electronic stock exchange based in London and owned by a consortium headed by Reuters and a number of American investment banks and fund management groups. Like Nasdaq, Tradepoint aims to build a pan-European trading system.

In 2000 the Paris, Amsterdam and Brussels stock exchanges merged to form the ‘Euronext’ exchange, and SWX, the Swiss stock exchange, joined up with Tradepoint to form the Virt-X exchange. Also in 2000, a proposed plan to merge the London Stock Exchange and the Frankfurt Deutsche Bourse to form the ‘iX’ exchange fell through following a hostile takeover bid for the London Stock Exchange by the OM group, which also fell through. In 2005, however, the Deutsche Bourse put in a further bid for the LSE, with Euronext also putting in a hostile bid (watch this space!).

The UK stock market is regulated by the Financial Services Authority in accordance with various standards of good practice laid down by the FINANCIAL SERVICES ACT 1986. See CAPITAL MARKET, CITY CODE, SPECULATOR, SHARE PURCHASE/SALE, SHARE PRICE INDEX, INSIDER TRADING, PORTFOLIO, TRACKER FUND, INDIVIDUAL SAVINGS ACCOUNT (ISA).

stock exchange

stock exchange

stock exchange

stock′ exchange`

stock exchange

stock

stock exchange

stock exchange

stock exchange,

Bibliography

stock exchange

stock exchange

stock exchange

Stock Exchange

stock exchange

stock exchange

stock exchange

stock market

stock exchange

Synonyms for stock exchange

noun an exchange where security trading is conducted by professional stockbrokers

Synonyms

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