A stock exchange is a centralized, organized market for buying and selling shares of publicly traded companies.
It makes it easier for stockbrokers to trade company stocks and other securities. Stock exchanges also serve an economic purpose by providing liquidity to businesses.
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| Types of Stock Exchange: eAskme |
Stock exchanges include the New York Stock Exchange, the London Stock Exchange Group, the Shanghai Stock Exchange, and the Shenzhen Stock Exchange.
A stock exchange is also known as a securities exchange or bourse. Stock exchanges bring companies and current shareholders who want to sell stock together with investors who want to buy stock from them.
Stock exchange types are rarely discussed because they are mostly intertwined; stock exchanges that used to rely solely on their physical trading platforms have now incorporated electronic trading capabilities into their operations, blurring the distinction. But in all, we have the physical location stock exchange and the electronic dealer-based stock exchange.
Physical location stock exchanges (Organized Market):
These are formal organizations with tangible physical locations that conduct auction markets in designated listed securities.
A security exchange with an office where traders meet to buy and sell securities. Typically, there is a central location for record-keeping, but trade is becoming less linked to the physical location due to modernization and digitalization.
At a physical exchange, such as the New York Stock Exchange, orders are routed to a floor broker, who forward the order to a stock specialist.
The specialist oversees a specific stock trading and ensures a fair and orderly market.
Most exchanges began as physical locations where trading took places, such as the NYSE and the Chicago Board of Trade.
Electronic dealer-based exchanges (OTC market):
These are the electronic communication networks, abbreviated as "ECNs." An OTC market is a large group of brokers and dealers linked electronically via telephones and computers.
Stocks not listed on major exchanges can be traded in the OTC market.
Buyers and sellers are electronically matched on an electronic exchange such as NASDAQ.
Market makers provide bid and ask prices, facilitate trading in specific securities, match buy and sell orders, and, if necessary, use their inventory of shares.
Advances in electronic trading platforms have altered the trading process in many OTC markets, blurring the line between traditional OTC markets and exchanges.
The introduction of electronic trading has rendered physical exchanges obsolete. The NASDAQ, the London Stock Exchange, and Eurex are entirely electronic.
In some cases, an electronic brokering platform enables dealers and some non-dealers to submit quotes and trades directly through an electronic system.
Electronic trading systems have supplanted the open outcry system at most exchanges.
These systems can match buyers and sellers more efficiently and quickly than humans.
Many exchanges that used to rely solely on a physical trading floor have incorporated electronic trading capabilities into their operations, using both methods simultaneously.
Stock exchanges have existed for over two centuries, with the most notable being:
New York Stock Exchange NYSE:
The New York Stock Exchange is the world's largest marketplace for investors to buy and sell stock shares, and it is owned by Intercontinental Exchange (NYSE: ICE).
Nasdaq:
The Nasdaq stock market is a New York-based American stock exchange.
It is owned by Nasdaq, Inc. and is ranked second on the list of stock exchanges by market capitalization of shares traded.
Japan Exchange Group:
Japan Exchange Group is a Japanese financial services corporation that operates several securities exchanges, including the Tokyo Stock Exchange and the Osaka Securities Exchange.
The Shanghai Stock Exchange (SSE):
The Shanghai Stock Exchange (SSE) is a stock exchange in Shanghai, China.
It is one of three independent stock exchanges in mainland China and a significant stock exchange worldwide.
Euronext:
Euronext is a pan-European bourse that trades regulated equities, ETFs, warrants, and certificates. The market capitalization in May 2023 was 5.44 trillion euros.
Others are;
The Hong Kong Exchanges and Clearing, LSE Group, The Shenzhen Stock Exchange, TMX Group, The Saudi Stock Exchange (Tadawul), BSE India Limited, National Stock Exchange of India Limited, Deutsche Boerse AG, SIX Swiss Exchange, Nasdaq Nordic, and Baltics, Australian Securities Exchange, Korea Exchange, Taiwan Stock Exchange, B3-Brasil Bolsa Balcao, Moscow Exchange.
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