The Stock Exchange market is an essential component of any stock market. It permits the exchange of financial items between vendors and customers. The aforementioned governing body protects investors’ interests and promotes the stock market. This section discusses the definition, examples, and different types of stock exchanges.
A company’s reputation improves with importance of stock exchange listing. This is particularly true of early trades. Being register on a stock exchange also allows investors to buy the company’s shares, allowing it to raise capital for expansion.
What is Stock Exchange?
A stock exchange is a centralize market for buying and selling publicly listed corporation shares. Stock exchanges only trade stocks, bonds, and exchange traded products (ETPs).
The fundamental difference between using a stock exchange and trading stocks over-the-counter (OTC) is that transactions on an exchange are mediated rather than taking place directly between two parties. This means that there are tighter controls on investors, speculators, and publicly traded companies.
Before a company may be register on a stock exchange, it must frequently meet certain conditions, which vary depending on the stock exchange. A company must have a market value of $70 million before it can be register on the NASDAQ, but the New York Stock Exchange demands a valuation of $100 million.
The India stock exchange serves as a trading platform for financial assets such as stocks, bonds, and commodities. It is a marketplace where buyers and sellers can trade financial products at specific hours on any business day while adhering to SEBI’s tight guidelines.
Only corporations that are register on the stock exchange, however, are permit to trade on it. It is possible to trade shares that are not register on a respected stock exchange in a ‘Over The Counter Market’. Such shares, however, would not be held in high regard on the stock exchange.
How Does Stock Exchange Works?
The majority of the time, a stock exchange in India operates autonomously because no “market makers” or “specialists” are present. In India, the entire stock market trading operation is order-driven and managed by an electronic limit order book.
Orders are automatically match in such a system with the assistance of a trading computer. It links investor market orders with the best-suited limit orders. The primary benefit of an order-driven market is that it promotes transactional transparency by allowing all market orders to be freely publish.
Brokers play an important role in the stock market trading system because all orders must be place through them. The advantages of direct market access, or DMA, are available to both institutional and individual clients. Using the trading terminals provided by stock exchange market brokers, investors can place orders directly into the trading system.
Examples of Stock Exchange
Globally, there are numerous stock exchanges. Among the largest exchanges (JPX) (JPX) are the New York Stock Exchange (NYSE), the NASDAQ, and the Tokyo Stock Exchange (JPX). The London Stock Exchange (LSE), Shanghai Stock Exchange (SSE), and Bombay Stock Exchange (BSE) are also well-known stock exchanges (BSE).
Types of Stock Exchanges in India
Trading on a stock exchange exposes traders to reduced counterparty default risk. This is due to the stringent regulations that govern stock exchanges. There are two major types of stock exchanges in India, which are detail here.
BSE (Bombay Stock Exchange)
This stock exchange was establish in 1875 on Dalal Street in Mumbai. It is not only the oldest stock market in Asia, but also the world’s tenth largest. The Bombay Stock Exchange has an estimate market capitalisation of $ 4,9 trillion as of April, and around 6000 companies are publicly register on it. The Sensex tracks the performance of the BSE, and it recently achieved a new high.
NSE (National Stock Exchange)
The National Stock Market (NSE) was found in 1992 in Mumbai and is widely regard as the pioneer of India’s demutualize electronic stock exchange platforms. This stock exchange market was establish to eliminate the Bombay Stock Exchange’s monopolistic influence on the Indian stock market.
The estimated market value of the National Stock Exchange in March 2016 was US$ 4.1 trillion, making it the world’s eleventh largest stock exchange. The NSE’s NIFTY 50 index is widely use by investors all over the world to assess the performance of the Indian capital market.
Stock Exchanges in the United States
Once the company has gone public, it must revisit its pledges to shareholders, who now have a stake in the company. The New York Stock Exchange and Nasdaq are the two most important financial securities exchanges in the United States.
New York Stock Exchange (NYSE)
The New York Stock Exchange (NYSE) was establishe in 1790. The New York Stock Exchange merged with Euronext, a European stock exchange, in April 2007 to become the current NYSE Euronext. NYSE Euronext also owns NYSE Arca (formerly the Pacific Exchange) (previously the Pacific Exchange) (formerly the Pacific Exchange).
A corporation must have shareholder equity in excess of $4 million to be register on the New York Stock Exchange. Despite the fact that more than 80% of transactions are now conduct online, locals and visitors alike can observe the exchange’s edifice on Wall Street in New York City.
The American Stock Exchange (AMEX), a famous New York stock exchange, was purchase in 2008. Unlike Nasdaq and NYSE, AMEX concentrates on exchange-traded funds (ETFs) (ETFs).
Full form of Nasdaq is “National Association of Securities Dealers Automated Quotation System”. Nasdaq, not AMEX, is the largest screen-place electronic market. The National Association of Securities Dealers (NASD) established the Nasdaq in 1971, and it is well-known for its computerize system and relative modernity in comparison to the New York Stock Exchange. It has lower listing fees than the NYSE and is home to some of the world’s most powerful firms, such as Apple, Google, Amazon, and Microsoft.
Stock exchanges are also prone to crashes. Even though they are uncommon, stock market crashes can significantly lower the value of equities and cause years-long economic downturns. Traders and investors can reduce their exposure to stock market volatility by employing a risk management strategy. Hope you understand briefly about types of stock exchanges with examples and meaning of it.