stock exchange

1. A place where stocks, bonds, or other securities are bought and sold.
2. An association of stockbrokers who meet to buy and sell stocks and bonds according to fixed regulations.

For more information on stock exchange, visit Britannica.com.

Organized marketplace in which stocks, Common Stock Equivalents and bonds are traded by members of the exchange, acting both as agents (brokers) and as principals (dealers or traders). Most exchanges have a physical location where brokers and dealers meet to execute orders from institutional and individual investors to buy and sell securities. Each exchange sets its own requirements for membership; the New York Stock Exchange has the most stringent requirements. See also American Stock Exchange; Listing Requirements; New York Stock Exchange; Regional Stock Exchanges; Securities and Commodities Exchanges.

A stock exchange is a forum for trading in securities representing shares of firms. An exchange provides ways by which financing is raised by the sale of shares to outside investors. It provides a mechanism for the valuation of companies through the process of price discovery and a means by which such information is disseminated.

A formal definition of the term exchange is a critical component of law and regulation regarding securities trading markets, discussed by Domowitz (1996) and Lee (1998). In the United States, the New York Stock Exchange (NYSE) is legally an exchange, while the markets operated by the National Association of Securities Dealers (NASDAQ) and Instinet, an electronic communications network (ECN), are not. All three examples nevertheless satisfy the definition of a stock exchange given above. Given differences across countries with respect to legal definitions, a more unified approach is needed to focus the discussion.

The approach taken here is to identify important attributes and functions of institutions satisfying the basic definition in practice. Exchanges provide trading systems and may offer more than one. Types of trading systems are sometimes differentiated by the form of market intermediation provided by entities with direct access to the system. The nature of competition between exchanges is a defining feature, since exchanges may adopt varying market structures in order to compete in different fashions. A stock exchange is a business entity, and the form of its governance arrangements is important in understanding its nature and conduct.

Trading Systems

Trading markets may be defined as systems consisting of an order routing system, an information network, and a trade execution mechanism (Stoll, 1992). A trading system is a communications technology for passing allowable messages between traders, together with a set of rules that transform traders' messages into transactions prices and allocations of quantities of stock among market participants.

The nature of allowable messages varies with the exchange's rules and technology. A typical message consists of an offer to buy, or to sell, a given number of shares at a certain price. The NYSE, for example, permits such messages, as well as orders, to buy some amount of stock at current market prices. The OptiMark system of the Pacific Stock Exchange also allows traders to submit a message indicating the strength of the traders' desire to transact an amount of stock at a particular price. Orders for the shares of a company, contingent on the completion of transactions in other companies, are possible. As technology advances, the ability of trading systems to offer more flexible messages increases.

The transformation of messages and information from the system into a price and a set of quantity allocations is governed by another set of rules. In open outcry auctions, bids and offers are orally exchanged by traders standing in a single physical location. The acceptance of a bid or offer by another trader generates a transaction. In dealer systems, such as NASDAQ, dealers accept orders by telephone or computerized routing, and transact at prices they themselves set. In batch auctions, such as that of the Arizona Stock Exchange, price is set by maximizing trading volume, given order submission at the time of the auction. In most computerized markets, traders submit orders to a central limit order book, and a mathematical algorithm determines prices and quantities. Examples include the CAC system of the Paris Bourse and the OMsystem of the Stockholm Stock Exchange. The range of possibilities here is large, and a taxonomy of rules is given in Domowitz (1993).

Market Intermediation

Investors are generally not given free access to trading systems. Entry into the exchange's systems is intermediated by brokers. Brokers may simply route orders to exchanges. They sometimes make decisions as to what exchange, and what system within the exchange, should process various parts of an order. In open outcry markets, brokers also physically represent orders on the floor of the exchange.

Exchanges are differentiated most by a class of intermediaries known as market makers. Market makers trade for their own accounts, usually providing an offer to sell and an offer to buy at the same time, but at different prices. In doing so, they both contribute to the pricing process and supply immediacy to the market by a willingness to be a counterparty to an order for which another investor may not be immediately available.

On some exchanges, most notably the NYSE, there is one primary market maker designated by the exchange, known as the specialist. The specialist obtains consideration for the supply of immediacy and the maintenance of an orderly market by having private access to order-flow information through the order book for the stock.

There may be multiple market makers in a given stock, regardless of the precise form of trading system. The prototype example is that of dealer markets, in which the dealers are the market makers. They post bids and offers, and trade out of their own inventory.

Electronic limit order book markets offer the possibility of trading without such financial intermediation. In practice, however, market makers exist on electronic markets as well. Multiple market makers in a security are often designated by an exchange, fulfill obligations not dissimilar to those of a specialist, and receive some consideration for the service. Anyone with direct access to the trading system can function as a market maker, however, simply by continuously offering quotes for stock on both sides of the market.

Competition

Exchanges have two clienteles: companies, which list their shares, and investors, who trade on the exchange. Historically, the product (a listing) offered to companies was a bundle, consisting of(1) liquidity, (2) monitoring of trading against forms of fraud, (3) standard-form rules of trading, (4) a signal that a listing firm's stock is of high quality, and (5) a clearing function to ensure timely payment and delivery of shares (Macey and O'Hara, 1999). The product offered to investors consists of a combination of liquidity and pricing information, as well as any benefits accruing to the investor from the bundle offered to companies.

Government regulation and increased competition from automated trading systems lessen the importance of exchange monitoring and standardized rules. Technological advances in information processing allow better signals about company quality than simple listings, permit wide distribution of pricing information outside exchanges, and enable separation of the clearing function from other exchange operations. The result is that exchanges now compete solely along the dimensions of liquidity and cost of trading (Domowitz and Stell, 1999; Macey and O'Hara 1999).

Competition through liquidity and cost has led to increased automation of the exchange trade execution process. Automated exchanges are less costly to build and operate, and provide lower-cost trade execution. Liquidity is enhanced by the ability to establish wide networks of traders through communications systems with an automated execution system at the nexus. The drive for increased liquidity through computerization has led to new developments in the structure of the exchange services industry, most notably including mergers and alliances between automated exchanges for increased order flow.

Communications technology and the computerization of trade execution have also globalized trading. The physical location and boundaries of an exchange floor are no longer important to traders. A company does not need to be listed, or even traded, on a domestic exchange. Not only are there many possible execution services providers, but electronic exchanges place their own terminals on foreign soil, allowing direct access to overseas listings, regardless of the nationality of the companies involved. An example is the U.K. electronic exchange, Tradepoint, which conducts operations in the United States.

Governance

Exchanges historically have been organized as not-for-profit membership cooperatives. Exchange governance is shifting to a for-profit corporate structure. Ten such demutualizations globally are listed in Domowitz and Stell (1999), and such initiatives are under investigation by many traditional exchanges, including NASDAQ and the NYSE. Three rationales for this change have been proposed.

Increased competition between exchanges forces the change in ownership structure (Hart and Moore, 1996). This is the view of the exchange services industry, as well. The industry argument is simply that a corporate structure with a profit motive enables faster initiatives in response to competitive advances than a committee-and voting-oriented membership organization.

Changes in the contractual relationship between exchanges and listing companies might outweigh competition as a force behind the shift from cooperative to corporate ownership arrangements (Macey and O'Hara, 1999). The long-term mutual dependency between companies and exchanges no longer exists, and market makers do not make firm-specific investments that might be fostered under a cooperative umbrella.

The third view is that communications and computerized execution technology permit and encourage the change in governance structure (Domowitz and Stell, 1999). Traditional ex changes are limited by floor space, and access is rationed through the sale of limited memberships. In an automated auction, there are no barriers to providing unlimited direct access, with a transactions-fee pricing structure, which in turn lends itself to corporate for-profit operations. All examples of the change in governance begin with a conversion from floor trading technology to automated trade execution. For trade execution services with no prior history of cooperative governance structure, the mutual structure is routinely avoided in favor of a for-profit joint-stock corporation.

Bibliography

Domowitz, Ian. (1993). "A Taxonomy of Automated Trade Execution Systems." Journal of International Money and Finance 12:607-631.

Domowitz, Ian. (1996). "An Exchange Is a Many Splendored Thing: The Classification and Regulation of Automated Trading Systems." In Andrew Lo, ed., The Industrial Organization and Regulation of Securities Markets. Chicago: University of Chicago Press.

Domowitz, Ian, and Stell, Benn. (1999). "Automation, Trading Costs, and the Structure of the Securities Trading Industry." In Robert E. Litan and Anthony M. Santomero, eds., Brookings-Wharton Papers on Financial Services. Washington, DC: Brookings Institution.

Hart, Oliver, and Moore, John. (1996). "The Governance of Exchanges: Members' Cooperatives Versus Outside Ownership." Oxford Review of Economic Policy 12:53-69.

Lee, Ruben. (1998). What Is an Exchange? The Automation, Management, and Regulation of Financial Markets. Oxford: Oxford University Press.

Macey, Jonathan R., and O'Hara, Maureen. (1999). "Globalization, Exchange Governance, and the Future of Exchanges." In Robert E. Litan and Anthony M. Santomero, eds., Brookings-Wharton Papers on Financial Services. Washington, DC: Brookings Institution.

Stoll, Hans. (1992). "Principles of Trading Market Structure." Journal of Financial Services Research 6:75-107.

[Article by: IAN DOMOWITZ]

The London Stock Exchange was founded in 1802, providing a mechanism for the increasing volume and complexity of financial transactions which had developed in the 18th cent. The scale of formal investment increased massively in the second half of the 19th cent., with a marked orientation towards international operations which the city of London retains.

Stock market exchanges are a real or virtual location for the sale and purchase of private equities. A way for private enterprises to raise investment funds.

The first stock market exchange in post-Soviet Russia was primarily trade in privatization vouchers. As privatization proceeded apace, so did the volume of transactions on Russian exchanges. Shares in certain Russian enterprises, particularly those of oil and gas companies, were also increasingly offered on the market, but the stock market or markets in Russia have yet to offer enterprises significant sources of either domestic or foreign investment funds.

Initially, the Russian stock exchanges were wild and risky places to venture funds. The early days witnessed two major boom and bust cycles: 1994 - 96 and 1996 - 98. Following the financial crisis of 1989, the Russian stock market almost ceased to exist. The Russian government sought to regulate the market step by step. Prior to 1996 enterprises were not required by law to maintain independent, public registries of stock outstanding, and both domestic and foreign investors learned to their dismay that they could be defrauded of their equity claims. The 1996 Russian Federal Securities Act required public registries and created the Federal Securities Commission and charged it with coordinating the various federal agencies that were responsible for governing the securities market. Conditions have improved for investors, but much remains to be done to create a reasonable market in equities comparable with those in more advanced capitalist countries. It remains more a site for speculation than for raising significant amounts of investment funds.

Bibliography

Gregory, Paul R., and Stuart, Robert C. (2001). Russian and Soviet Economic Performance and Structure, 7th ed. New York: Addison Wesley.

Gustavson, Thane. (1999). Capitalism Russian-Style. New York: Cambridge University Press.

—JAMES R. MILLAR

Stock exchanges are formally organized secondary markets for financial assets that have already been issued in primary capital markets. Stock markets have become the hallmark of successful modern capitalist economies, despite the frequency of volatile price movements that lead to excessive speculation followed by panics and despite repeated scandals. They play an important role, however, for both the primary capital market and the mobilization of bank credit within any economy, basically by providing liquidity for the initial investors in government or corporate debt or in corporation stock. The assurance that a ready market exists for the sale of an investor's holdings in case of second thoughts, emergencies, or better alternatives for investment makes it easier to place debt or equity in the first place on the primary capital market. The daily pricing of all such financial products on a stock exchange also makes them ideal instruments as collateral for loans. In sum, stock exchanges are important complements to the efficient operation of the rest of an economy's financial sector.

The historical development of worldwide stock exchanges shows that three features are essential for their long-term success: a large stock of homogeneous, readily identified financial assets available to the public; a numerous and diverse customer base that is aware of the financial assets available; and a set of trustworthy intermediaries to handle trades of the various financial products among the customers.

The first feature arose with the creation of large-scale government debt, initially by Italian city-states such as Venice, Florence, and Genoa in the fourteenth and fifteenth centuries. While a secondary market of sorts existed, the city debts do not appear to have been widely held, as they took the form of forced loans from the wealthiest merchants and gentry. The second feature appeared with the creation of the joint stock of the Dutch East India Company or VOC (Vereenigde Oost-Indische Compagnie) in 1602, which was a forced amalgamation of a series of trading ventures organized within six different cities of the United Provinces. The existing shareholders were numerous and varied greatly in wealth and investment objectives; many were unhappy at the forced amalgamation and loss of voice in the management of the company. Active trading in the shares arose soon afterward, and a group of specialists in trading VOC shares appeared on the Amsterdam Beurs, which was the general wholesale market for commodities. According to de le Vega, these traders met in a corner of the exchange when it was open and continued business after hours in nearby coffeehouses. But this grouping does not appear to have had a formal organization or many other trading opportunities in other securities. Even though each city and province in the Netherlands issued large amounts of debt, each issue was closely held and seldom traded outside the city or province of origin. Not until 1795, when the Batavian Republic instituted reforms inspired by the French Revolution, did a regularly printed list of stock prices appear in Amsterdam, even though Dutch newspapers had reported prices of the leading securities since at least 1723.

In 1688, when Dutch financial techniques were grafted onto the English system of central government with parliamentary control over a constitutional monarch, the new British governments rapidly increased both their debt and the transferable stock of corporations holding government debt, such as the Bank of England, the New East India Company, and the South Sea Company. Despite the general collapse of share prices after the South Sea Bubble of 1720, the customer base for English securities was large and increasingly diverse, comprising foreigners as well as provincial customers throughout England. Dedicated professional traders appeared who usually acted as brokers and often as dealers holding stock on their own account as well. Not until 1773, however, do we find documented evidence that they had a formal organization to assure confidence in trading with each other and on behalf of the general public.

With the substantial increases in government debt during the Napoleonic Wars, however, a formal exchange was created: the London Stock Exchange, with its self-regulated set of trading rules and information system. In response, the Paris Bourse, which had come under strict government control in 1726 after the collapse of the Mississippi Bubble in 1720, and then fell into disuse during the financial disruptions caused by the French Revolution, was revitalized by the French government and maintained under Napoleon. In the United States, the creation of federal debt in 1790 led to the appearance of the New York Stock Exchange, as well as other exchanges in Philadelphia, Boston, and elsewhere, eventually leading to over two hundred regional exchanges in the United States by World War I.

Bibliography

Dickson, P. G. M. The Financial Revolution in England: A Study in the Development of Public Credit, 1688–1756. London, 1967.

Garber, Peter. Famous First Bubbles: The Fundamentals of Early Manias. Cambridge, Mass., 2000.

Neal, Larry. The Rise of Financial Capitalism: International Capital Markets in the Age of Reason. New York, 1990.

t'Hart, Marjolein, Joost Jonker, and Jan Luiten van Zanden, eds. A Financial History of the Netherlands. Cambridge, U.K., and New York, 1997.

Vega, Josseph de la. Confusion de Confusiones. Translated by M. F. J. Smith. The Hague, 1939.

Vidal, Emmanuel. The History and Methods of the Paris Bourse. Washington, D.C., 1910.

—LARRY D. NEAL

A market maintained for the purpose of buying and selling securities. Under the Securities Exchange Act of 1934 ("the 1934 Act") an "exchange" is defined as any organization, association, or group of persons, whether incorporated or unincorporated, that constitutes, maintains, or provides a marketplace or facilities for bringing together buyers and sellers of securities or for otherwise performing with respect to securities the functions commonly performed by a stock exchange as that term is generally understood, and includes the marketplace and the market facilities maintained by such exchange. 15 U.S.C. §78c(a)(1). Several stock exchanges exist throughout the country, the most prominent of which is the New York Stock Exchange. Under the 1934 Act, every stock exchange is subject to registration with the Securities and Exchange Commission, which may be denied unless the exchange adopts rules providing for the discipline, suspension, or expulsion of a member who engages in conduct inconsistent with just and equitable principles of trade. 15 U.S.C. §78f; Jaffe, Broker Dealers and Securities Markets §§10.01-10.02 (1977). See also American Stock Exchange; regional stock exchange.

A place where stocks, bonds, and other securities are bought and sold.

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v • d • e

A stock exchange is a mutual organization which provides "trading" facilities for stock brokers and traders, to trade stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends. The securities traded on a stock exchange include: shares issued by companies, unit trusts, derivatives, pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there. Usually there is a central location at least for recordkeeping, but trade is less and less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of speed and cost of transactions. Trade on an exchange is by members only. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. Supply and demand in stock markets is driven by various factors which, as in all free markets, affect the price of stocks (see stock valuation).

There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that derivatives and bonds are traded. Increasingly, stock exchanges are part of a global market for securities.

Contents 1 The First Stock Exchanges 2 The role of stock exchanges 2.1 Raising capital for businesses 2.2 Mobilizing savings for investment 2.3 Facilitating company growth 2.4 Profit sharing 2.5 Corporate governance 2.6 Creating investment opportunities for small investors 2.7 Government capital-raising for development projects 2.8 Barometer of the economy 3 Major stock exchanges 4 Listing requirements 4.1 Requirements by stock exchange 5 Ownership 6 Other types of exchanges 7 The future of stock exchanges 8 Gallery 9 See also 9.1 Lists 10 Notes 11 External links

The First Stock Exchanges

In 11th century France the courtiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. As these men also traded in debts, they could be called the first brokers.

Some stories suggest that the origins of the term "bourse" come from the Latin bursa meaning a bag because, in 13th century Bruges, the sign of a purse (or perhaps three purses), hung on the front of the house where merchants met.

House Ter Beurze in Bruges, Belgium.

However, it is more likely that in the late 13th century commodity traders in Bruges gathered inside the house of a man called Van der Burse, and in 1309 they institutionalized this until now informal meeting and became the "Bruges Bourse". The idea spread quickly around Flanders and neighbouring counties and "Bourses" soon opened in Ghent and Amsterdam.

In the middle of the 13th century, Venetian bankers began to trade in government securities. In 1351, the Venetian Government outlawed spreading rumors intended to lower the price of government funds. There were people in Pisa, Verona, Genoa and Florence who also began trading in government securities during the 14th century. This was only possible because these were independent city states ruled by a council of influential citizens, not by a duke.

The Dutch later started joint stock companies, which let shareholders invest in business ventures and get a share of their profits—or losses. In 1602, the Dutch East India Company issued the first shares on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds. In 1688, the trading of stocks began on a stock exchange in London.

On May 17, 1792, twenty-four supply brokers signed the Buttonwood Agreement outside 68 Wall Street in New York underneath a buttonwood tree. On March 8, 1817, properties got renamed to New York Stock & Exchange Board. In the 19th century, exchanges (generally famous as futures exchanges) got substantiated to trade futures contracts and then choices contracts.

There are now a large number of stock exchanges in the world.

The role of stock exchanges

Stock exchanges have multiple roles in the economy, this may include the following:^[1]

Raising capital for businesses

The Stock Exchange provide companies with the facility to raise capital for expansion through selling shares to the investing public.^[2]

Mobilizing savings for investment

When people draw their savings and invest in shares, it leads to a more rational allocation of resources because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized and redirected to promote business activity with benefits for several economic sectors such as agriculture, commerce and industry, resulting in stronger economic growth and higher productivity levels of firms.

Facilitating company growth

Companies view acquisitions as an opportunity to expand product lines, increase distribution channels, hedge against volatility, increase its market share, or acquire other necessary business assets. A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways for a company to grow by acquisition or fusion.

Profit sharing

Both casual and professional stock investors, through dividends and stock price increases that may result in capital gains, will share in the wealth of profitable businesses.

Corporate governance

By having a wide and varied scope of owners, companies generally tend to improve on their management standards and efficiency in order to satisfy the demands of these shareholders and the more stringent rules for public corporations imposed by public stock exchanges and the government. Consequently, it is alleged that public companies (companies that are owned by shareholders who are members of the general public and trade shares on public exchanges) tend to have better management records than privately-held companies (those companies where shares are not publicly traded, often owned by the company founders and/or their families and heirs, or otherwise by a small group of investors). However, some well-documented cases are known where it is alleged that there has been considerable slippage in corporate governance on the part of some public companies. The dot-com bubble in the early 2000s, and the subprime mortgage crisis in 2007-08, are classical examples of corporate mismanagement. Companies like Pets.com (2000), Enron Corporation (2001), One.Tel (2001), Sunbeam (2001), Webvan (2001), Adelphia (2002), MCI WorldCom (2002), Parmalat (2003), American International Group (2008), Lehman Brothers (2008), and Satyam Computer Services (2009) were among the most widely scrutinized by the media.

Creating investment opportunities for small investors

As opposed to other businesses that require huge capital outlay, investing in shares is open to both the large and small stock investors because a person buys the number of shares they can afford. Therefore the Stock Exchange provides the opportunity for small investors to own shares of the same companies as large investors.

Government capital-raising for development projects

Governments at various levels may decide to borrow money in order to finance infrastructure projects such as sewage and water treatment works or housing estates by selling another category of securities known as bonds. These bonds can be raised through the Stock Exchange whereby members of the public buy them, thus loaning money to the government. The issuance of such bonds can obviate the need to directly tax the citizens in order to finance development, although by securing such bonds with the full faith and credit of the government instead of with collateral, the result is that the government must tax the citizens or otherwise raise additional funds to make any regular coupon payments and refund the principal when the bonds mature.

Barometer of the economy

At the stock exchange, share prices rise and fall depending, largely, on market forces. Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth. An economic recession, depression, or financial crisis could eventually lead to a stock market crash. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy.

Major stock exchanges

Twenty Major Stock Exchanges In The World: Market Capitalization & Year-to-date Total Turnover at the end of August 2009

Region	Stock Exchange	Market Value (millions USD)	Total Share Turnover (millions USD)
Africa	Johannesburg Securities Exchange	690,797.5	210,180.8
Americas	NASDAQ	2,847,535.2	19,343,868.3
Americas	São Paulo Stock Exchange	1,032,518.4	361,959.0
Americas	Toronto Stock Exchange	1,432,877.0	798,193.1
Americas	New York Stock Exchange	10,842,001.9	12,158,620.6
Asia-Pacific	Australian Securities Exchange	1,066,513.2	560,912.8
Asia-Pacific	Bombay Stock Exchange	1,082,572.0	171,176.2
Asia-Pacific	Hong Kong Stock Exchange	1,945,517.7	970,227.6
Asia-Pacific	Korea Exchange	727,125.3	1,050,473.8
Asia-Pacific	National Stock Exchange of India	1,019,109.0	506,652.3
Asia-Pacific	Shanghai Stock Exchange	2,142,756.8	3,315,768.5
Asia-Pacific	Shenzhen Stock Exchange	596,320.2	1,701,256.8
Asia-Pacific	Tokyo Stock Exchange	3,478,602.5	2,675,983.3
Europe	Euronext	2,605,097.6	1,195,962.2
Europe	Frankfurt Stock Exchange (Deutsche Börse)	1,204,292.0	1,589,736.7
Europe	London Stock Exchange	2,560,491.1	2,321,518.5
Europe	Madrid Stock Exchange (Bolsas y Mercados Españoles)	1,178,525.6	1,040,751.1
Europe	Milan Stock Exchange (Borsa Italiana)	636,674.8	565,759.3
Europe	Nordic Stock Exchange Group OMX1	781,146.3	503,049.9
Europe	Swiss Exchange	992,356.4	520,867.5

^Note 1  includes the Copenhagen, Helsinki, Iceland, Stockholm, Tallinn, Riga and Vilnius Stock Exchanges

• Sources: World Federation of Exchanges - Statistics/Monthly
• Remarks: There are 2 pending major mergers: NASDAQ with OMX; and London Stock Exchange with Milan Stock Exchange

The London Stock Exchange in the City of London

New York Stock Exchange, New York City

Australian Securities Exchange's Sydney Exchange Centre in Sydney

The Tokyo Stock Exchange in Tokyo

Bombay Stock Exchange, Mumbai

São Paulo Stock Exchange in São Paulo

The Johannesburg Securities Exchange in the City of Johannesburg

The main stock exchanges:

• American Stock Exchange
• Australian Securities Exchange
• Athens Stock Exchange
• Belgrade Stock Exchange
• Berliner Börse
• Bermuda Stock Exchange
• Bolsa Mexicana de Valores
• Bolsa de Valores de Colombia
• Bolsa de Valores de Lima
• Bombay Stock Exchange
• Bucharest Stock Exchange
• Budapest Stock Exchange
• Cairo & Alexandria Stock Exchange
• Casablanca Stock Exchange
• Channel Islands Stock Exchange
• Chicago Stock Exchange
• Euronext Amsterdam
• Euronext Brussels
• Euronext Lisbon
• Euronext Paris
• Frankfurt Stock Exchange
• Ghana Stock Exchange
• Helsinki Stock Exchange
• Hong Kong Stock Exchange
• Indonesia Stock Exchange
• Istanbul Stock Exchange
• JASDAQ
• JSE Securities Exchange
• Karachi Stock Exchange
• Korea Stock Exchange
• Kuwait Stock Exchange
• London Stock Exchange
• Madrid Stock Exchange
• Malaysia Stock Exchange
• Milan Stock Exchange
• Montreal Stock Exchange
• Nagoya Stock Exchange
• Nigerian Stock Exchange
• National Stock Exchange of India
• New York Stock Exchange
• Osaka Securities Exchange
• Philippine Stock Exchange
• Santiago Stock Exchange
• São Paulo Stock Exchange (BOVESPA)
• Shanghai Stock Exchange
• Shenzhen Stock Exchange
• Singapore Exchange
• Stockholm Stock Exchange
• Stock Exchange of Thailand
• Taiwan Stock Exchange
• Tehran Stock Exchange
• Tel Aviv Stock Exchange
• Tokyo Stock Exchange
• Toronto Stock Exchange
• Warsaw Stock Exchange
• Zurich Stock Exchange

See also: Category:Stock exchanges

Listing requirements

Listing requirements are the set of conditions imposed by a given stock exchange upon companies that want to be listed on that exchange. Such conditions sometimes include minimum number of shares outstanding, minimum market capitalization, and minimum annual income.

Requirements by stock exchange

Companies have to meet the requirements of the exchange in order to have their stocks and shares listed and traded there, but requirements vary by stock exchange:

• Bombay Stock Exchange: Bombay Stock Exchange (BSE) has requirements for a minimum market capitalization of Rs.250 Million and minimum public float equivalent to Rs.100 Million.^[3]
• London Stock Exchange: The main market of the London Stock Exchange has requirements for a minimum market capitalization (£700,000), three years of audited financial statements, minimum public float (25 per cent) and sufficient working capital for at least 12 months from the date of listing.
• NASDAQ Stock Exchange: To be listed on the NASDAQ a company must have issued at least 1.25 million shares of stock worth at least $70 million and must have earned more than $11 million over the last three years.^[4]
• New York Stock Exchange: To be listed on the New York Stock Exchange (NYSE) a company must have issued at least a million shares of stock worth $100 million and must have earned more than $10 million over the last three years.^[5]

Ownership

Stock exchanges originated as mutual organizations, owned by its member stock brokers. There has been a recent trend for stock exchanges to demutualize, where the members sell their shares in an initial public offering. In this way the mutual organization becomes a corporation, with shares that are listed on a stock exchange. Examples are Australian Securities Exchange (1998), Euronext (merged with New York Stock Exchange), NASDAQ (2002), the New York Stock Exchange (2005), Bolsas y Mercados Españoles, and the São Paulo Stock Exchange (2007). The Shenzhen and Shanghai stock exchanges can been characterized as quasi-state institutions insofar as they were created by government bodies in China and their leading personnel are directly appointed by the China Securities Regulatory Commission.

Other types of exchanges

In the 19th century, exchanges were opened to trade forward contracts on commodities. Exchange traded forward contracts are called futures contracts. These commodity exchanges later started offering future contracts on other products, such as interest rates and shares, as well as options contracts. They are now generally known as futures exchanges.

The future of stock exchanges

The future of stock trading appears to be electronic, as competition is continually growing between the remaining traditional New York Stock Exchange specialist system against the relatively new, all Electronic Communications Networks, or ECNs. ECNs point to their speedy execution of large block trades, while specialist system proponents cite the role of specialists in maintaining orderly markets, especially under extraordinary conditions or for special types of orders. UK based exchanges such as PLUS Markets are increasing competition with traditional exhanges.

The ECNs contend that an array of special interests profit at the expense of investors in even the most mundane exchange-directed trades. Machine-based systems, they argue, are much more efficient, because they speed up the execution mechanism and eliminate the need to deal with an intermediary.

Historically, the 'market' (which, as noted, encompasses the totality of stock trading on all exchanges) has been slow to respond to technological innovation, thus allowing growing pure speculation to continue. Conversion to all-electronic trading could erode/eliminate the trading profits of floor specialists and the NYSE's "upstairs traders", who, like in September and October 2008, earned billions of dollars by short selling, causing a precipitous drop in the market.^{[citation needed]}

William Lupien, founder of the Instinet trading system and the OptiMark system, has been quoted as saying "I'd definitely say the ECNs are winning... Things happen awfully fast once you reach the tipping point. We're now at the tipping point."

One example of improved efficiency of ECNs is the prevention of front running, by which manual Wall Street traders use knowledge of a customer's incoming order to place their own orders so as to benefit from the perceived change to market direction that the introduction of a large order will cause. By executing large trades at lightning speed without manual intervention, ECNs make impossible this illegal practice, for which several NYSE floor brokers were investigated and severely fined in recent years.^[6] Under the specialist system, when the market sees a large trade in a name, other buyers are immediately able to look to see how big the trader is in the name, and make inferences about why s/he is selling or buying. All traders who are quick enough are able to use that information to anticipate price movements.

ECNs have changed ordinary stock transaction processing (like brokerage services before them) into a commodity-type business. ECNs could regulate the fairness of initial public offerings (IPOs), oversee Hambrecht's OpenIPO process, or measure the effectiveness of securities research and use transaction fees to subsidize small- and mid-cap research efforts.

Some^[who?], however, believe the answer will be some combination of the best of technology and "upstairs trading" — in other words, a hybrid model.

Trading 25,000 shares of General Electric stock (recent^[when?] quote: $7.54; recent^[when?] volume: 216,266,000) would be a relatively simple e-commerce transaction; trading 100 shares of Berkshire Hathaway Class A stock (recent quote: $72,625.00; recent volume: 877) may never be. The choice of system should be clear (but always that of the trader), based on the characteristics of the security to be traded.

Even with ECNs forming an important part of a national market system, opportunities presumably remain to profit from the spread between the bid and offer price. That is especially true for investment managers that direct huge trading volume, and own a stake in an ECN or specialist firm. For example, in its individual stock-brokerage accounts, "Fidelity Investments runs 29% of its undesignated orders in NYSE-listed stocks, and 37% of its undesignated market orders through the Boston Stock Exchange, where an affiliate controls a specialist post."

Gallery

London Stock Exchange	New York Stock Exchange	Montreal Stock Exchange	Frankfurt Stock Exchange
Paris Stock Exchange	Milan Stock Exchange	Hong Kong Stock Exchange	Madrid Stock Exchange
SWX Swiss Exchange	Osaka Securities Exchange	Bombay Stock Exchange	Taiwan Stock Exchange
Shanghai Stock Exchange	Philippine Stock Exchange

See also

Look up bourse or stock exchange in Wiktionary, the free dictionary.

• Auction
• Capital market
• Commodities exchange
• Securities
• Shareholder
• Stock investor
• Stock market
• Trader (finance)
• Stock exchanges for developing countries

Lists

• List of stock exchanges
• List of stock market indices
• List of marketing topics
• List of management topics
• List of economics topics
• List of accounting topics
• List of finance topics

Notes

1. ^ Diamond, Peter A. (1967). "The Role of a Stock Market in a General Equilibrium Model with Technological Uncertainty". American Economic Review 57 (4): 759–776. http://www.jstor.org/pss/1815367. 
2. ^ Gilson, Ronald J.; Black, Bernard S. (1998). "Venture Capital and the Structure of Capital Markets: Banks Versus Stock Markets". Journal of Financial Economics 47: 243–277. doi:10.2139/ssrn.46909. 
3. ^ About Us
4. ^ NASDAQ Corporate -NASDAQ Listing Information
5. ^ http://www.nyse.com/Frameset.html?displayPage=/listed/1022540125610.html
6. ^ NYSE SPECIALIST FACES 27 MONTHS FOR TRADES

7. Federations of Exchanges

External links

• Stock exchange at the Open Directory Project

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