Stock Exchange

Financial Dictionary -> Investing -> Stock Exchange

A stock exchange is a financial institution, association, or organization that facilitates an open market place where stocks, bonds, options, futures, commodities and other financial instruments are traded, bought and sold. Traditionally buyers and sellers join together to trade at specific hours of business days, although the 24/7 nature of the internet is changing this. Exchanges exercise rules and regulations on the investors, traders, firms and brokers that are involved with the system. Almost all major regions of the world have stock exchanges, such as the London Stock Exchange (serving the UK and Europe and the NASDAQ in the United States).

If a particular company's stock or other instruments are traded on a stock exchange, it is referred to as a "listed" company and is public to anyone. There is no rule that forces companies to issue stock via a stock exchange itself; stock can in theory be traded independently. Companies that are not listed on the stock exchange are said to sell over the counter; these are usually smaller companies with a high level of risk, such as penny stock. This is the usual way that bonds are traded.

Stock exchanges have huge impacts on their economies and the stability of the world's economy. They can help raise capital for businesses through stock and offer investment opportunities for the everyday person on the street. Although it is cliche, fortunes are often made and lost on the stock exchange.