A stock exchange is an entity An entity is something that has a distinct, separate existence, though it need not be a material existence. In particular, abstractions and legal fictions are usually regarded as entities. In general, there is also no presumption that an entity is animate. Entities are used in system developmental models that display communications and internal which provides "trading" facilities for stock brokers A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors. A broker may be employed by a brokerage firm and traders In finance, a trader is someone who buys and sells financial instruments such as stocks, bonds, commodities and derivatives. A broker who simply fills buy or sell orders is not a trader, as they are merely executing instructions given to them, to trade stocks The stock or capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors. Stock is distinct from the property and the assets of a business which may fluctuate in and other securities A security is a fungible, negotiable instrument representing financial value. Securities are broadly categorized into debt securities and equity securities, e.g., common stocks; and derivative contracts, such as forwards, futures, options and swaps. The company or other entity issuing the security is called the issuer. A country's regulatory. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business , or it can be paid to the shareholders as a dividend. Many corporations retain a. The securities traded on a stock exchange include shares In financial markets, a share is a unit of account for various financial instruments including stocks , and investments in limited partnerships, and REITs. The common feature of all these is equity participation (limited in the case of preference shares) issued by companies, unit trusts Found in Australia, Ireland, the Isle of Man, Jersey, New Zealand, South Africa, Singapore, and the UK, unit trusts offer access to a wide range of securities, derivatives A derivative, in non-financial-expert terms, is an agreement or contract that is not based on a real, or true, exchange, i.e.: There is nothing tangible like money, or a product, that is being exchanged. For example, a person goes to the grocery store, exchanges a currency for a commodity (say, an apple). The exchange is complete, both parties, pooled investment products and bonds In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest and/or to repay the principal at a later date, termed maturity. A bond is a formal contract to repay borrowed money with interest at fixed intervals.

To be able to trade a security on a certain stock exchange, it has to be listed there. Usually there is a central location at least for recordkeeping, but trade is less and less linked to such a physical place, as modern markets are electronic networks An electronic communication network is the term used in financial circles for a type of computer system that facilitates trading of financial products outside of stock exchanges. The primary products that are traded on ECNs are stocks and currencies. ECNs came into existence in 1998 when the SEC authorized their creation. ECNs increase competition, which gives them advantages of speed and cost of transactions. Trade on an exchange is by members only.

The initial offering of stocks and bonds to investors The term has taken on a specific meaning in finance to describe the particular types of people and companies that regularly purchase equity or debt securities for financial gain in exchange for funding an expanding company. Less frequently, the term is applied to parties who purchase real estate, currency, commodity derivatives, personal property is by definition done in the primary market The primary market is that part of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called and subsequent trading is done in the secondary market The secondary market, also known as the aftermarket, is the financial market where previously issued securities and financial instruments such as stock, bonds, options, and futures are bought and sold.. The term "secondary market" is also used to refer to the market for any used goods or assets, or an alternative use for an existing. A stock exchange is often the most important component of a stock market A stock market or equity market is a public market for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. Supply and demand in stock markets is driven by various factors which, as in all free markets A free market is a market without economic intervention and regulation by government except to enforce ownership and contracts. It is the opposite of a controlled market, where the government regulates how the means of production, goods, services and labor are used, priced, or distributed. This is the contemporary use of the term "free market&, affect the price of stocks (see stock valuation In financial markets, there are several methods used to calculate theoretical values of companies and their stocks. The main use of these methods is to predict future market prices, or more generally potential market prices, and thus to profit from price movement – stocks that are judged undervalued are bought, while stocks that are judged).

There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter Over-the-counter or off-exchange trading is to trade financial instruments such as stocks, bonds, commodities or derivatives directly between two parties. It is contrasted with exchange trading, which occurs via facilities constructed for the purpose of trading (i.e., exchanges), such as futures exchanges or stock exchanges. This is the usual way that derivatives A derivative, in non-financial-expert terms, is an agreement or contract that is not based on a real, or true, exchange, i.e.: There is nothing tangible like money, or a product, that is being exchanged. For example, a person goes to the grocery store, exchanges a currency for a commodity (say, an apple). The exchange is complete, both parties and bonds In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest and/or to repay the principal at a later date, termed maturity. A bond is a formal contract to repay borrowed money with interest at fixed intervals are traded. Increasingly, stock exchanges are part of a global market for securities.

The first stock exchanges

In 12th century France France (pronounced /ˈfrænts/ frantss or /ˈfrɑːnts/ frahnts; French pronunciation (help·info): [fʁɑ̃s]), officially the French Republic (French: République française, pronounced: [ʁepyblik fʁɑ̃sɛz]), is a state in Western Europe with several of its overseas territories and islands located on other continents and in the Indian, the courtiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. As these men also traded in debts, they could be called the first brokers A broker is a party that mediates between a buyer and a seller. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Distinguish agent: one who acts on behalf of a principal. A "brokerage" or a "brokerage firm" is a business that acts as a broker. A brokerage firm is a business that.

Some stories suggest that the origins of the term "bourse" came from the Latin bursa meaning a bag because, in 13th century Bruges The historic city centre is a prominent World Heritage Site of UNESCO. It is egg-shaped and about 430 hectares in size. The area of the whole city amounts to more than 13,840 hectares, including 1,075 hectares off the coast, at Zeebrugge . The city's total population is 117,073 (1 January 2008), of which around 20,000 live in the historic centre, the sign of a purse (or perhaps three purses), hung on the front of the house where merchants met.

However, it is more likely that in the late 13th century commodity A commodity is a good for which there is demand, but which is supplied without qualitative differentiation across a market. It is fungible, i.e. equivalent no matter who produces it. Examples are petroleum, notebook paper, milk or copper. The price of copper is universal, and fluctuates daily based on global supply and demand. Stereo systems, on traders in Bruges gathered inside the house of a man called Van der Burse, and in 1309 they institutionalized this until now informal meeting and became the "Bruges Bourse." The idea spread quickly around Flanders Flanders (Dutch: Vlaanderen , French: Flandre, German: Flandern) is the (political) community of the Flemings but also one of the institutions in Belgium, and a geographical region located in parts of present-day Belgium, France, and the Netherlands. Over the course of history, the geographical territory that was called "Flanders" has and neighbouring counties and "Bourses" soon opened in Ghent Ghent is a city and a municipality located in the Flemish region of Belgium. It is the capital and biggest city of the East Flanders province. The city started as a settlement at the confluence of the Rivers Scheldt and Lys and in the Middle Ages became one of the largest and richest cities of northern Europe. Today it is a busy city with a port and Amsterdam Amsterdam (pronounced /ˈæmstərdæm/; Dutch [ɑmstərˈdɑm] ) is the capital and largest city of the Netherlands, located in the province of North Holland in the west of the country. The city, which had a population (including suburbs) of 1.36 million on 1 January 2008, comprises the northern part of the Randstad, the sixth-largest metropolitan.

In the middle of the 13th century, Venetian Venice (Italian: Venezia [veˈnɛttsia] , Venetian: Venesia) is a city in northern Italy known both for tourism and for industry, and is the capital of the region Veneto, with a population of 271,367 (census estimate 1 January 2004). Together with Padua, the city is included in the Padua-Venice Metropolitan Area (population 1,600,000). The name is bankers began to trade in government securities. In 1351, the Venetian Government outlawed spreading rumors intended to lower the price of government funds. There were people in Pisa Pisa listen (English pronunciation: /ˈpiːzə/; Italian pronunciation: [ˈpisa]) is a city in Tuscany, Central Italy, on the right bank of the mouth of the River Arno on the Ligurian Sea. It is the capital city of the Province of Pisa. Although Pisa is known worldwide for its Leaning Tower (the bell tower of the city's cathedral), the city of, Verona Verona listen (Italian pronunciation: [veˈro(ː)na]) is a city in Veneto, northern Italy, home to approx. 265,000 inhabitants and one of the seven provincial capitals of the region. It is the second most populated municipality of the region and the third of North-East Italy. The metro area of Verona has an area of 1.426 km2 (0.55 sq mi) and has a, Genoa Genoa (Italian: Genova listen , pronounced [ˈdʒɛːnova]; in Genoese and Ligurian: Zena, pronounced [ˈzeːna]; in Latin and, archaically, in English: Genua) is a city and an important seaport in northern Italy, the capital of the Province of Genoa and of the region of Liguria. The city has a population of about 610,000 and the urban area has a and Florence Florence (Italian: Firenze listen , pronounced [fiˈrɛntse]; alternative obsolete spelling: Fiorenza, Latin: Florentia) is the capital city of the Italian region of Tuscany and of the province of Florence. It is the most populous city in Tuscany, with 367,569 inhabitants (1,500,000 in the metropolitan area) who also began trading in government securities during the 14th century. This was only possible because these were independent city states ruled by a council of influential citizens, not by a duke.

The Dutch later started joint stock companies A joint stock company is a type of business entity: it is a type of corporation or partnership involving two or more legal persons. Certificates of ownership (or stocks) are issued by the company in return for each financial contribution, and the shareholders are free to transfer their ownership interest at any time by selling their stockholding, which let shareholders A mutual shareholder or stockholder is an individual or company that legally owns one or more shares of stock in a joint stock company. A company's shareholders collectively own that company and are the members of the company by signing the memorandum of association . Thus, the typical goal of such companies is to enhance shareholder value invest in business ventures and get a share of their profits—or losses. In 1602, the Dutch East India Company The Dutch East India Company was a chartered company established in 1602, when the States-General of the Netherlands granted it a 21-year monopoly to carry out colonial activities in Asia. It was the first multinational corporation in the world and the first company to issue stock. It was also arguably the world's first megacorporation, possessing issued the first shares on the Amsterdam Stock Exchange The Amsterdam Stock Exchange is the former name for the stock exchange based in Amsterdam. It merged on 22 September 2000 with the Brussels Stock Exchange and the Paris Stock Exchange to form Euronext, and is now known as Euronext Amsterdam. It was the first company to issue stocks The stock or capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors. Stock is distinct from the property and the assets of a business which may fluctuate in and bonds In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest and/or to repay the principal at a later date, termed maturity. A bond is a formal contract to repay borrowed money with interest at fixed intervals. In 1688, the trading of stocks began on a stock exchange in London London is a leading global city being the world's largest financial centre alongside New York City, and has the largest city GDP in Europe. Central London is home to the headquarters of most of the UK's top 100 listed companies and more than 100 of Europe's 500 largest. London's influence in politics, finance, education, entertainment, media,.

On May 17, 1792, in order to more easily trade cotton, twenty-four supply brokers signed the Buttonwood Agreement The Buttonwood Agreement, which took place on May 17, 1792, started the New York Stock & Exchange Board . This agreement was signed by twenty-four stock brokers outside of 68 Wall Street New York under a buttonwood tree. The organization drafted its constitution on March 8th, 1817, and named itself the "New York Stock & Exchange Board& outside 68 Wall Street in New York New York City, which is geographically the largest city in the state and most populous in the United States, is known for its history as a gateway for immigration to the United States and its status as a financial, cultural, transportation, and manufacturing center. According to the U.S. Department of Commerce, it is also a destination of choice underneath a buttonwood tree The American sycamore — also called American plane, Occidental plane and Buttonwood — is a common and familiar species native to North America. It is usually called a sycamore where it is endemic, a name that refers to other, unrelated trees in other parts of the world. On March 8, 1817, properties got renamed to New York Stock & Exchange Board. In the 19th century, exchanges (generally famous as futures exchanges A futures exchange or derivatives exchange is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future) got substantiated to trade futures contracts and then choices contracts.

There are now a large number of stock exchanges in the world.

The role of stock exchanges

Stock exchanges have multiple roles in the economy An economy consists of the economic system of a country or other area, the labor, capital and land resources, and the economic agents that socially participate in the production, exchange, distribution, and consumption of goods and services of that area. A given economy is the end result of a process that involves its technological evolution,. This may include the following:^[1]

Raising capital for businesses

The Stock Exchange provide companies In the United States, a company is a corporation—or, less commonly, an association, partnership, or union—that carries on an industrial enterprise." Generally, a company may be a "corporation, partnership, association, joint-stock company, trust, fund, or organized group of persons, whether incorporated or not, and any receiver, with the facility to raise capital In economics, capital, capital goods, or real capital are factors of production used to create goods or services that are not themselves significantly consumed in the production process. Capital goods may be acquired with money or financial capital for expansion through selling shares In financial markets, a share is a unit of account for various financial instruments including stocks , and investments in limited partnerships, and REITs. The common feature of all these is equity participation (limited in the case of preference shares) to the investing Investment is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in form of interest, income, or appreciation of the value of the instrument. It is related to saving or deferring consumption. Investment is involved in many areas of the economy, such as business management and public.^[2]

Mobilizing savings for investment

When people draw their savings and invest in shares, it leads to a more rational allocation of resources because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized and redirected to promote business activity with benefits for several economic sectors such as agriculture, commerce and industry, resulting in stronger economic growth and higher productivity levels of firms.

Facilitating company growth

Companies view acquisitions as an opportunity to expand product lines, increase distribution channels, hedge against volatility, increase its market share, or acquire other necessary business assets. A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways for a company to grow by acquisition or fusion.

Profit sharing

Both casual and professional stock investors, through dividends and stock price increases that may result in capital gains, will share in the wealth of profitable businesses.

Corporate governance

By having a wide and varied scope of owners, companies generally tend to improve on their management standards and efficiency in order to satisfy the demands of these shareholders and the more stringent rules for public corporations imposed by public stock exchanges and the government. Consequently, it is alleged that public companies (companies that are owned by shareholders who are members of the general public and trade shares on public exchanges) tend to have better management records than privately held companies (those companies where shares are not publicly traded, often owned by the company founders and/or their families and heirs, or otherwise by a small group of investors).

Despite this claim, some well-documented cases are known where it is alleged that there has been considerable slippage in corporate governance on the part of some public companies. The dot-com bubble in the late 1990's, and the subprime mortgage crisis in 2007-08, are classical examples of corporate mismanagement. Companies like Pets.com (2000), Enron Corporation (2001), One.Tel (2001), Sunbeam (2001), Webvan (2001), Adelphia (2002), MCI WorldCom (2002), Parmalat (2003), American International Group (2008), Bear Stearns (2008), Lehman Brothers (2008), General Motors (2009) and Satyam Computer Services (2009) were among the most widely scrutinized by the media.

However, when poor financial, ethical or managerial records are known by the stock investors, the stock and the company tend to lose value. In the stock exchanges, shareholders of underperforming firms are often penalized by significant share price decline, and they tend as well to dismiss incompetent management teams.

Creating investment opportunities for small investors

As opposed to other businesses that require huge capital outlay, investing in shares is open to both the large and small stock investors because a person buys the number of shares they can afford. Therefore the Stock Exchange provides the opportunity for small investors to own shares of the same companies as large investors.

Government capital-raising for development projects

Governments at various levels may decide to borrow money in order to finance infrastructure projects such as sewage and water treatment works or housing estates by selling another category of securities known as bonds. These bonds can be raised through the Stock Exchange whereby members of the public buy them, thus loaning money to the government. The issuance of such bonds can obviate the need to directly tax the citizens in order to finance development, although by securing such bonds with the full faith and credit of the government instead of with collateral, the result is that the government must tax the citizens or otherwise raise additional funds to make any regular coupon payments and refund the principal when the bonds mature.

Barometer of the economy

At the stock exchange, share prices rise and fall depending, largely, on market forces. Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth. An economic recession, depression, or financial crisis could eventually lead to a stock market crash. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy.

Major stock exchanges

20 Major Stock Exchanges : Year ended 31 December 2009 Source: World Federation of Exchanges - Statistics/Monthly

The main stock exchanges:

• American Stock Exchange
• Australian Securities Exchange
• Athens Stock Exchange
• Belgrade Stock Exchange
• Berliner Börse
• Bermuda Stock Exchange
• Bolsa Mexicana de Valores
• Bolsa de Valores de Colombia
• Bolsa de Valores de Lima
• Bombay Stock Exchange
• Bucharest Stock Exchange
• Budapest Stock Exchange
• Bulgarian Stock Exchange - Sofia
• Cairo & Alexandria Stock Exchange
• Casablanca Stock Exchange
• Channel Islands Stock Exchange
• Chicago Stock Exchange
• Czech Stock Exchange - RM-SYSTÉM
• Euronext Amsterdam
• Euronext Brussels
• Euronext Lisbon
• Euronext Paris
• Frankfurt Stock Exchange
• Ghana Stock Exchange
• Helsinki Stock Exchange
• Hong Kong Stock Exchange
• Indonesia Stock Exchange
• Istanbul Stock Exchange
• JASDAQ
• JSE Securities Exchange
• Karachi Stock Exchange
• Korea Stock Exchange
• Kuwait Stock Exchange
• London Stock Exchange
• Madrid Stock Exchange
• Malaysia Stock Exchange
• Milan Stock Exchange
• Montreal Stock Exchange
• Nagoya Stock Exchange
• National Stock Exchange of India
• New York Stock Exchange
• New Zealand Exchange
• Nigerian Stock Exchange
• Osaka Securities Exchange
• Philippine Stock Exchange
• Santiago Stock Exchange
• São Paulo Stock Exchange (BOVESPA)
• Shanghai Stock Exchange
• Shenzhen Stock Exchange
• Singapore Exchange
• Stockholm Stock Exchange
• Stock Exchange of Thailand
• Taiwan Stock Exchange
• Tehran Stock Exchange
• Tel Aviv Stock Exchange
• Tokyo Stock Exchange
• Toronto Stock Exchange
• Warsaw Stock Exchange
• Zurich Stock Exchange

See also: Category:Stock exchanges

Listing requirements

Listing requirements are the set of conditions imposed by a given stock exchange upon companies that want to be listed on that exchange. Such conditions sometimes include minimum number of shares outstanding, minimum market capitalization, and minimum annual income.

Requirements by stock exchange

Companies have to meet the requirements of the exchange in order to have their stocks and shares listed and traded there, but requirements vary by stock exchange:

• Bombay Stock Exchange: Bombay Stock Exchange (BSE) has requirements for a minimum market capitalization of Rs.250 Million and minimum public float equivalent to Rs.100 Million.^[3]
• London Stock Exchange: The main market of the London Stock Exchange has requirements for a minimum market capitalization (£700,000), three years of audited financial statements, minimum public float (25 per cent) and sufficient working capital for at least 12 months from the date of listing.
• NASDAQ Stock Exchange: To be listed on the NASDAQ a company must have issued at least 1.25 million shares of stock worth at least $70 million and must have earned more than $11 million over the last three years.^[4]
• New York Stock Exchange: To be listed on the New York Stock Exchange (NYSE) a company must have issued at least a million shares of stock worth $100 million and must have earned more than $10 million over the last three years.^[5]

Ownership

Stock exchanges originated as mutual organizations, owned by its member stock brokers. There has been a recent trend for stock exchanges to demutualize, where the members sell their shares in an initial public offering. In this way the mutual organization becomes a corporation, with shares that are listed on a stock exchange. Examples are Australian Securities Exchange (1998), Euronext (merged with New York Stock Exchange), NASDAQ (2002), the New York Stock Exchange (2005), Bolsas y Mercados Españoles, and the São Paulo Stock Exchange (2007). The Shenzhen and Shanghai stock exchanges can been characterized as quasi-state institutions insofar as they were created by government bodies in China and their leading personnel are directly appointed by the China Securities Regulatory Commission.

Other types of exchanges

In the 19th century, exchanges were opened to trade forward contracts on commodities. Exchange traded forward contracts are called futures contracts. These commodity exchanges later started offering future contracts on other products, such as interest rates and shares, as well as options contracts. They are now generally known as futures exchanges.

Gallery

See also

• Auction
• Capital market
• Commodities exchange
• Financial regulation
• International Organization of Securities Commissions
• List of financial regulatory authorities by country
• List of Swiss financial market legislation
• Securities
• Shareholder
• Stock investor
• Stock market
• Trader (finance)
• Stock exchanges for developing countries

Lists

• List of stock exchanges
• List of stock market indices
• List of marketing topics
• List of management topics
• List of economics topics
• List of accounting topics
• List of finance topics

Notes

1. ^ Diamond, Peter A. (1967). "The Role of a Stock Market in a General Equilibrium Model with Technological Uncertainty". American Economic Review 57 (4): 759–776. http://www.jstor.org/pss/1815367.
2. ^ Gilson, Ronald J.; Black, Bernard S. (1998). "Venture Capital and the Structure of Capital Markets: Banks Versus Stock Markets". Journal of Financial Economics 47: 243–277. doi:10.2139/ssrn.46909.
3. ^ About Us
4. ^ NASDAQ Corporate -NASDAQ Listing Information
5. ^ http://www.nyse.com/Frameset.html?displayPage=/listed/1022540125610.html

• Federations of Exchanges

External links

• Stock exchange at the Open Directory Project

Categories: Stock market | Stock exchanges

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