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Stock exchange
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A stock exchange is an entity 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[hide]
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 Gallery
8 See also
8.1 Lists
9 Notes
10 External links
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[edit] The first stock exchanges
In 12th 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" came 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, in order to more easily trade cotton picked by slaves, 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.
[edit] The role of stock exchanges
Stock exchanges have multiple roles in the economy. This may include the following:[1]
[edit] 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]
[edit] 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.
[edit] 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.
[edit] 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.
[edit] 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).
Despite this claim, 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 late 1990's, 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), Bear Stearns (2008), Lehman Brothers (2008), General Motors (2009) and Satyam Computer Services (2009) were among the most widely scrutinized by the media.
However, when poor financial, ethical or managerial records are known by the stock investors, the stock and the company tend to lose value. In the stock exchanges, shareholders of underperforming firms are often penalized by significant share price decline, and they tend as well to dismiss incompetent management teams.
[edit] 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.
[edit] 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.
[edit] 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.
[edit] Major stock exchanges

London Stock Exchange, the City of London

New York Stock Exchange, New York City

Sao Paulo Stock Exchange, Sao Paulo

Australian Securities Exchange's Sydney Exchange Centre, Sydney

Borsa Italiana, Milan Stock Exchange

Tokyo Stock Exchange, Tokyo

Toronto Stock Exchange, Toronto

Frankfurt Stock Exchange, Frankfurt

Paris Stock Exchange, Paris

SWX Swiss Exchange, Zurich

Mexican Stock Exchange, Mexico City
20 Major Stock Exchanges : Year ended 31 December 2009Source: World Federation of Exchanges - Statistics/Monthly
Economy
Stock Exchange
Trade Value(USD Billions)
Market Capitalization(USD Billions)
United States
New York Stock Exchange
17521
11838
Japan
Tokyo Stock Exchange
3704
3306
United States
NASDAQ
13608
3239
Europe
Euronext
1935
2869
United Kingdom
London Stock Exchange
1772
2796
China
Shanghai Stock Exchange
5056
2705
Hong Kong
Hong Kong Stock Exchange
1416
2305
Canada
Toronto Stock Exchange
1245
1677
Spain
BME Spanish Exchanges
1259
1435
Brazil
BM&F Bovespa
645
1337
India
Bombay Stock Exchange
264
1307
Germany
Deutsche Börse
1517
1292
Australia
Australian Securities Exchange
799
1225
India
National Stock Exchange of India
792
1225
Switzerland
SIX Swiss Exchange
740
1065
China
Shenzhen Stock Exchange
2772
868
Korea
Korea Exchange
1570
835
Nordic Countries
NASDAQ OMX Nordic Exchange
697
817
South Africa
JSE Limited
271
799
Taiwan
Taiwan Stock Exchange
905
658
Italy
Borsa Italiana
948
656
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
Bulgarian Stock Exchange - Sofia
Cairo & Alexandria Stock Exchange
Casablanca Stock Exchange
Channel Islands Stock Exchange
Chicago Stock Exchange
Czech Stock Exchange - RM-SYSTÉM
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
National Stock Exchange of India
New York Stock Exchange
New Zealand Exchange
Nigerian 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
[edit] 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.
[edit] 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]
[edit] 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.
[edit] 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.
[edit] Gallery

London Stock Exchange

Bombay Stock Exchange

New York Stock Exchange

Toronto Stock Exchange

Sydney Stock Exchange

Milan Stock Exchange

Frankfurt Stock Exchange

Paris Stock Exchange

Hong Kong Stock Exchange

Madrid Stock Exchange

SWX Swiss Exchange

Osaka Securities Exchange

São Paulo Stock Exchange

Taiwan Stock Exchange

Shanghai Stock Exchange

Philippine Stock Exchange
[edit] See also

Look up bourse or stock exchange in Wiktionary, the free dictionary.
Auction
Capital market
Commodities exchange
Financial regulation
International Organization of Securities Commissions
List of financial regulatory authorities by country
List of Swiss financial market legislation
Securities
Shareholder
Stock investor
Stock market
Trader (finance)
Stock exchanges for developing countries
[edit] 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
[edit] Notes
^ 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.
^ 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.
^ About Us
^ NASDAQ Corporate -NASDAQ Listing Information
^ http://www.nyse.com/Frameset.html?displayPage=/listed/1022540125610.html
Federations of Exchanges
[edit] External links

Wikimedia Commons has media related to: Category:Stock exchanges
Stock exchange at the Open Directory Project
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v • d • eStock market
Types of stocks
Stock · Common stock · Preferred stock · Outstanding stock · Treasury stock · Authorised stock · Restricted stock · Concentrated stock · Golden share
Participants
Investor · Stock trader/investor · Market maker · Floor trader · Floor broker · Broker-dealer
Exchanges
Stock exchange · List of stock exchanges · Over-the-counter · Electronic communication network
Stock valuation
Gordon model · Dividend yield · Earnings per share · Book value · Earnings yield · Beta · Alpha · CAPM · Arbitrage pricing theory · T-Model
Financial ratios
P/CF ratio · P/E · PEG · P/S ratio · P/B ratio · D/E ratio · Dividend payout ratio · Dividend cover · SGR · ROIC · ROCE · ROE · ROA · EV/EBITDA · RSI · RAROC · Sharpe ratio · Treynor ratio · Cap rate
Trading theoriesand strategies
Efficient-market hypothesis · Fundamental analysis · Technical analysis · Modern portfolio theory · Post-modern portfolio theory · Mosaic theory · Pairs trade
Related terms
Dividend · Stock split · Reverse stock split · Growth stock · Speculation · Trade · IPO · Market trend · Short selling · Momentum · Day trading · DuPont Model · Dark liquidity · Market depth · Margin · Rally · Volatility · Free float