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Jeffrey Veen

Investment Dictionary


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Stock Exchange

 

A stock exchange is an operator/company that takes bids from the sellers and buyers and executes transactions if conditions allow it. Usually stock exchanges offer trading not only for stocks but also for other financial investments (bonds, funds, derivatives) and most of them can be called securities exchange as well. 

 

Retail investors do not make bids directly to stock exchange, only members of stock exchange can do that. Members of stock exchange are financial brokerage companies, banks or similar institutions. When retail investors gives a buy or sell order to his broker company, it goes straight (online investing) or trough a broker (employee of FBC) to the exchange.

 

Every member of exchange has to pay fees for the membership, which usually consists of two parts: fixed annual payment and some percentage on made transactions. Companies listed on the exchange also pay fees for the exchange and those fees depend on the exchange and trading list. 

 

Now almost all exchanges prefer electronic trading. The last of the main stock exchanges that was trading traditionally was NYSE (now NYSE Euronext), but this exchange also turned mostly to electronic trading, which is much faster and more efficient.

 

An OTC trading is opposite to stock exchange trading and is gaining popularity between financial institutions because of cost efficiency, however, stock exchanges brings a lot of easement in investing process and would be hard to imagine financial markets without them.

 

 






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