Purpose and Meaning of Stock Exchange

TORONTO - Feb. 17, 2014 - PRLog -- Exchanges are there to make money, companies’ raises money by listing their shares on the exchanges and investors makes money by trading on the stock that are listed on the exchanges. Price reflected in the stock exchange of a particular share states the current value of the company in the market and if the investors feels it’s under prices then they make buying decision or those investors who fees that stock are highly overpriced then they make the selling decision. In both the cases exchange helps the investor for the completed a complete trade i.e. buyer of a stock gets seller vice versa. Bigger the exchanges better the liquidity of the stock. There are lots of factors which company has to consider before listing its shares on the exchanges. Companies has to maintain certain rules regarding the trading of the securities, releasing quarterly results and disclosing small changes in the production or any other information of the company through press releases. This creates competition among the companies as data of the listed companies are easily available on the exchanges and can be accessed by the competitors.

The stock exchanges helps in trading the equity security listed, and the one who possess the security at any point of time is said to be the owner of the shares. The process of buying and selling of the listed security on exchanges incurs the cost which is generally know as brokerage, whereas the price of the shares is determined by the demand and the supply of the particular security. Price of the stock will increase if the demand of the stock rises in the short term and thus will increase the market capitalization of the company which is given by Share Price x Number of Shares traded publically. The price is determined by the demand and supply and along with it there are many other factors like GDP, inflation or quarterly results impacts the price of the company. There are many stock exchanges around the world some are huge like New York Stock Exchange and it is very difficult for the companies to get their shares listed on such big exchanges unless they meet certain criteria.  There are many exchanges that have different type of trading activity. Few exchanges trades only stock and shares either futures or options, while there are many exchanges that trades bonds and interest rates.

Therefore Stock Exchanges are very important in the growth and development of economy entirely. Companies can raise money for fulfilling their plan can easily be done through stock exchanges.

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