If you are a new investor, you will know that your stock trades are in various stock exchanges. Therefore, before you go any further, you need to understand the meaning and the purpose of the stock exchange, first.
Defining a Stock Exchange
First of all, you need to understand the meaning of exchange. In a simple term, it is a locale where people trades things. In other words, it is where sellers and buyers, producers and consumers meet to buy and sell things.
Within the financial market, things range from bonds, stocks, currencies, commodities, and many more. In the past, the financial exchange is in open-outcry auctions on the streets of London or New York.
But, right now, modern financial exchanges have turned into a highly regulated and respected institution. Thus, the exchanges are now dominated by electronic trading.
Traders have two options to trade shares of stocks, one they can trade on a listed exchange, or they can also trade the over-the-counter (OTC) market.
The OTC market is, relatively, less formal and less regulated. Yet, the shares in this market typically involve a smaller (and riskier) companies, like penny stocks. These are the companies that face difficulties in fulfilling the requirement for the big and established stock exchanges.
The Purpose
As the owner of a business who issues shares, he or she may want to sell their stake at some point in the future. These stock exchanges appear to facilitate the owner to have a simpler way when they want to sell the stocks. They do not need to go around their friends, community or even family members hoping to find someone who is willing to buy.
With a stock exchange, you have the probability to sell your shares to people, who are even at the other end of the world. The need for that convenience led to the establishment of the various major stock exchanges in this world.
According to Investopedia, as of Sept. 30, 2019, we have 15 biggest stock exchanges in this world. That list includeThe New York Stock Exchange (NYSE), NASDAQ, Tokyo Stock Exchange, Shanghai Stock Exchange, Euronext, Hong Kong Exchange and Clearing, London Stock Exchange, TMX Group, Deutsche Börse AG, SIX Swiss Exchange, Nordic and Baltics, and ASK Australian Securities Exchange.