stock exchange

Banking Terms -> stock exchange

• Stock exchange is a term for entities that offer services to traders and stock brokers seeking to trade bonds, stocks, and other types of securities. Stock exchanges are also equipped with facilities for the issuing and redemption of various capital events, financial instruments, and securities. These include payments of dividends and income. A number of securities are bought and sold on the stock exchanges, including derivatives, unit trusts, shares, and various pooled investment products. Unit trusts are a type of collective investment established under a trust. Derivatives, on the other hand, are a financial instrument, with value based on underlying variables. Common derivatives include swaps, options, and futures, as well as stock, commodities, weather derivatives, and others. There is often a location for the purpose of record keeping but nowadays, trading is not as associated with physical space. Electronic networks stand for the modern markets and offer plenty of advantages. Reduced cost of transaction and speed are among them.
  
  One of the major stock exchanges in the United States is the New York Stock Exchange. NYSE Euronext was created as a holding company by Euronext N.V. and NYSE Group in 2007. It is an equities exchange group encompassing derivatives and equities exchanges across Europe and the United States, trading options, futures, cash equities, exchange-traded products, and fixed-income products. NYSE Euronext boasts over 8,000 listed issues and is the home to large international companies. The stock exchange gives access to liquidity so that companies can grow, collaborate, and compete. Another stock exchange in the US is NASDAQ OMX. Other big exchanges around the world are the London Stock Exchange, the Tokyo Stock Exchange, the Shanghai Stock Exchange, and the Toronto Stock Exchange, among others.
  
  An exchange is generally an association, organization, or institution that hosts a market for securities and commodities to be traded. Sellers and buyers (traders) come together on business days and trade during opening hours. There are certain rules and regulations in place on exchanges, imposed on the brokers and companies involved there. For example, in order to trade securities on a stock exchange, companies have to be listed on it. Companies are called listed when they are traded on a stock exchange. Businesses are traded over-the counter when they are not listed on an exchanges. Companies with shares traded over-the-counter are often riskier and smaller. These do not meet certain requirements for being listed on an exchange. Given that traders are not willing to sell and buy unlisted securities, dealers and brokers have to negotiate directly with one another. They do so online or by phone. NASDAQ aims to monitor all transactions to prevent stock price manipulations and illegal activity in general.
  
  As mentioned, companies that want to have their shares listed and traded have to comply with certain rules. For example, businesses that want to have their shares listed on NYSE should have a minimum market cap, a minimum price per share, and certain number of shareholders. If a corporation cannot meet these requirements at some point, it can be delisted. This means that the shares of this corporation will not be traded on the stock exchange any longer. Delisting has been a major problem of many businesses after the 2000 dot-com crash. Facing bankruptcies, the shares of a number of technology companies were traded for less than $1. This was in violation of the requirement for a minimum price-per-share. Many companies decided to declare reverse splits to prevent this from happening. In general, delisting is a sign of a major managerial or financial problem, casing the price of stock to go down.

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