A stock exchange is a marketplace where stocks, bonds, and other securities are bought and sold, allowing companies to raise capital by issuing shares to the public and enabling investors to trade these shares. Key functions include:
- Listing of Securities: Companies list shares through an Initial Public Offering (IPO), allowing them to be traded.
- Trading of Securities: Investors buy and sell shares via stockbrokers, using electronic or traditional methods.
- Price Discovery: Prices are determined based on supply and demand.
- Regulation and Transparency: Government agencies regulate exchanges to ensure fair practices and require companies to disclose financial information.
- Liquidity: Exchanges provide liquidity, enabling quick conversion of shares to cash.
- Indexes: Exchanges maintain indexes like the S&P 500 or Dow Jones Industrial Average to track market performance.
Notable stock exchanges include the New York Stock Exchange (NYSE), NASDAQ, London Stock Exchange (LSE), and Tokyo Stock Exchange (TSE).
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