stock exchange

1. a building or place where stocks and other securities are bought and sold.

2. an association of brokers and dealers in stocks and bonds who meet together and transact business according to fixed rules.

[1765-75]

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or stock market or(in continental Europe) Bourse

Organized market for the sale and purchase of securities (seesecurity) such as stocks and bonds.

Trading is done in various ways: it may occur on a continuous auction basis, it may involve brokers buying from and selling to dealers in certain types of stock, or it may be conducted through specialists in a particular stock. Some stock exchanges, such as the New York Stock Exchange (NYSE), sell seats (the right to trade) to a limited number of members who must meet eligibility requirements. Stocks must likewise meet and maintain certain requirements or risk being delisted. Stock exchanges differ from country to country in eligibility requirements and in the degree to which the government participates in their management. The London Stock Exchange, for example, is an independent institution, free from government regulation. In Europe, members of the exchanges are often appointed by government officials and have semigovernmental status. In the U.S., stock exchanges are not directly run by the government but are regulated by law. Technological developments have greatly influenced the nature of trading. In a traditional full-service brokerage, a customer placed an order with a broker or member of a stock exchange, who in turn passed it on to a specialist on the floor of the exchange, who then concluded the transaction. By the 21st century, increased access to the Internet and the proliferation of electronic communications networks (ECNs) altered the investment world. Through e-trading, the customer enters an order directly on-line, and software automatically matches orders to achieve the best price available without the intervention of specialists or market makers. In effect, the ECN is a stock exchange for off-the-floor trading.

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▪ finance

also called  stock market , or (in continental Europe)  bourse 

      organized market for the sale and purchase of securities such as shares, stocks, and bonds.

      In most countries the stock exchange has two important functions. As a ready market for securities, it ensures their liquidity and thus encourages people to channel savings into corporate investment. As a pricing mechanism, it allocates capital among firms by determining prices that reflect the true investment value of a company's stock. (Ideally, this price represents the present value of the stream of expected income per share.)

      Membership requirements of stock exchanges vary among countries, mainly with respect to the number of members, the degree of bank participation, the rigour of the eligibility requirements, and the level of government involvement. Trading is done in various ways: it may occur on a continuous auction basis, involve brokers buying from and selling to dealers in certain types of stock, or be conducted through specialists in a particular stock.

      Technological developments have greatly influenced the nature of trading (market). By the 21st century, increased access to the Internet and the proliferation of electronic communications networks (ECNs) had allowed electronic trading, or e-trading, to alter the investment world. These computerized ECNs made it possible to match the orders of buyers and sellers of securities without the intervention of specialists or market makers. In a traditional full-service or discount brokerage, a customer places an order with a broker member of a stock exchange, who in turn passes it on to a specialist on the floor of the exchange who actually concludes the transaction.

      The traditional specialist makes a market for a stock on the exchange by matching buy and sell orders in his exclusive “book” and establishing a price for the trade. In the over-the-counter market, market makers establish prices by setting “bid” and “asked” spreads with a commitment to complete trades in a given security. In e-trading the customer enters an order directly online, and specialized software automatically matches orders to achieve the best price available. In effect, the ECN is a stock exchange for off-the-floor trading. As a result, the operations of some stock exchanges, such as NASDAQ, need not be centralized in one location but can be coordinated electronically from a number of locations.

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