Stock exchanges are open markets that trade financial assets. Whether associated with a company or acting as an individual, a stock exchange is the place where stocks are bought and sold. There are a number of major stock exchanges around the world and each of these plays a part in determining the overall financial and economic condition of any economy.
Stock exchanges deal with a number of financial instruments such as stocks, bonds and equities. Both corporate and government bonds are traded in stock exchanges. Equities include popular investment options, rights issues, bonus issues, and all other forms of shares and stocks. The actual trading of stocks takes place through mediators such as financial advisors, brokerage houses, and stockbrokers.
Functions of International Stock Exchanges: An Overview
The main function of a stock exchange is to facilitate the transactions associated with both the buying and selling of securities. Buyers and sellers of shares and stocks can track the price changes of securities from the stock markets in which they operate. The ups and downs of stock indexes help the investors to speculate on the return on investment (ROI) of various investment options.
Stock exchanges also serve as a source of capital formation for listed companies. Business entities that are listed in a particular stock exchange can issue shares to the public and sell those shares in that market.
To take part in these transactions, listed companies need to abide by the rules and requirements of that market. The stock exchanges protect the interests of both buyers and sellers by assuring a timely transfer of money. The participants of a stock market are required to operate within the specified transaction limits fixed by the regulatory authority of that stock market.
Speed and transparency are vital for all stock market transactions. The companies listed in a stock exchange need to provide proper guidance regarding business performance and prospects, mergers and acquisitions, stock prices, dividends and other information at all times. Investors make their investment decisions based on the information obtained from these companies, and the comments of analysts who track those companies.
How Stock Exchanges Operate
With the help of stockbrokers, the buyers and sellers participating in a stock market carry out their transactions. The brokers representing selling parties take their orders to the stock exchange floor and then find brokers representing parties willing to invest in similar stocks. If both parties agree to trade at the fixed price, the transaction takes place.
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