Stock Exchange

Definition

A Stock Exchange is an organized marketplace where securities like stocks, bonds, and derivatives are traded. * It acts as an intermediary, providing the infrastructure (trading systems, rules) to ensure fair and orderly trading. * Unlike OTC (Over-The-Counter) markets, exchanges are centralized and highly regulated.

Key Roles

• Capital Raising: It helps companies raise capital for expansion by selling shares to the investing public (IPO).
• Liquidity: It provides a platform where investors can quickly convert their assets into cash.
• Corporate Governance: Exchanges enforce strict reporting and transparency rules on listed companies to protect investors.

Evolution: Floor vs. Electronic

• Open Outcry (The Past): Traditionally, traders met on a physical "trading floor" (the pit) and used hand signals and shouting to execute trades. (Think of the chaotic scenes in movies).
• Electronic Trading (The Present): Today, almost all trading is done electronically via high-speed computers. The "floor" is now largely symbolic or used for specific complex trades.

Major Global Players

• NYSE (New York Stock Exchange): The world's largest exchange by market capitalization. Famous for its physical trading floor on Wall Street.
• Nasdaq: The world's first electronic exchange, known for listing tech giants.
• LSE (London), JPX (Tokyo), SSE (Shanghai): Other major hubs of global finance.