You should have heard alot about the stock exchange on the internet and television and it may have seemed a little confusing, which it shouldn’t have to be. For many of us people, we all see the stock exchange as a lucrative investment that keeps on giving us a return on investment over the year, which is undoubtedly true. But for these kinds of investments, you must know how does stock exchange work? What makes it different from the stock market. If you are curious about it, the below guide will help you alot.
What is Stock Exchange?
In simple terms, a stock exchange is a marketplace where stocks are being traded, bought and sold. These stock exchanges are managed by the institution or association which hosts the market. Traders who want to buy and sell stocks or bonds on the stock exchange have to go through a broker, and the broker has the license to trade on the stock exchange this is how the stock exchange work.
Apart from the trading, some of the other facilities provided by the stock exchange are the issue or redemption of securities and the capital events, including the payment of dividends and income.
The securities traded on the stock exchange include stock ( issued by the listed companies ), bonds, unit trust derivatives, and pooled investment products. A stock exchange is also known as the securities exchange or a bourse.
How does Stock Exchange Work?
Shareholder ( who owns at least one share of the company ) will have to buy or sell the share someday. Without the stock exchange, the shareholder has to find the buyer or seller physically in the community interested in making a deal with the respective price. The working of stock exchange helps the shareholder find an appropriate buyer. The complete process of buying and selling from one investor to another instead of getting issued from the company is the secondary market.
Suppose a company is listed on the stock exchange, which means that that company’s stock can be traded on the stock exchange. Every exchange across the world has a specific requirement; companies who meet these requirements are eligible to list on these stock exchanges.
Companies that are not qualified to list on these stock exchanges are being traded through the over-the-counter exchange.
Largest Stock Exchange Across the World
Here is the list of Top 7 Stock Exchanges worldwide in terms of trading.
- New York Stock Exchange ( NYSE )
- National Association of Securities Dealers Automated Quotations ( NASDAQ )
- Shanghai Stock Exchange, China
- Hong Kong Exchange
- Japan Exchange Group
- Shenzhen Stock Exchange, China
- Euronext, Europe
Difference between Stock Exchange and Stock Market
|Stock Market||Stock Exchange|
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