When most people in the United States refer to the stock exchange, they mean the New York Stock Exchange (NYSE). However, the NYSE is only one of many stock exchanges around the world, such as the Paris Bourse, and the London and Tokyo stock exchanges. The NYSE is the model other stock exchanges follow, and is the largest in the world (approximately half of all the shares of stock sold in the United States are traded on the NYSE). Today it’s also the center of a transformation occurring among stock exchanges. With the increasing importance of Internet trading, the stock exchange is moving more and more from a physical trading floor to a global network of exchanges linked electronically through cyberspace.
Identification
The stock exchange is a place where investors can buy and sell shares of stock in any company that is listed on that exchange.
Significance
By providing a centralized market, a stock exchange promotes liquidity (ease of selling stock). This promotes economic growth by giving companies ready access to capital for expansion.
Function
Leading stock exchanges like the NYSE only list companies that meet strict standards. This protects investors from fraud and improves the credibility of listed companies.
History
Modern stock exchanges date to 1792 when securities trading began in New York City on an organized basis. Just 5 securities were originally traded on what became the NYSE.
Brokers
To use the stock exchange, investors place orders with a stockbroker to buy or sell. It’s the broker’s responsibility to process the order and find a buyer or seller.
Floor Traders
The floor trader physically present on the stock exchange trading floor takes orders from brokers and finds a buyer (or seller) to complete the transaction.
Changes
The NYSE is the center of a network of stock exchanges in the United States and Europe called NYSE/Euronext, made possible by electronic fund transfers via the Internet (see Resources).
References
- NASDAQ. “About NASDAQ.” Accessed May 26, 2020.
- NYSE. “Markets - NYSE.” Accessed May 26, 2020.
- NYSE. “Behind the Scenes — An insider’s guide to the NYSE closing auction.” Accessed May 26, 2020.
- NYSE. “Why International Companies Choose NYSE.” Accessed May 26, 2020.
- NYSE. “Trading Information.” Accessed May 26, 2020.
- NYSE. “Choosing the Right Listing.” Accessed May 26, 2020.
- NYSE. “Frequently asked questions on Equity Compensation Plans,” Page 1. Accessed May 28, 2020.
- NYSE. “NYSE Listed Company Manual Section 303A Corporate Governance Standards Frequently Asked Questions,” Pages 1 and 12. Accessed May 28, 2020.
- U.S. Securities and Exchange Commission. “Trade Execution.” Accessed May 28, 2020.
- NASDAQ. “Initial Listing Guide - January 2020,” Page 9. Accessed May 28, 2020.
- U.S. Securities and Exchange Commission. “Listing and Delisting Requirements.” Accessed May 28, 2020.
- U.S. Securities and Exchange Commission. “Electronic Communication Networks (ECNs).” Accessed May 28, 2020.
- Lita Epstein, Grayson D. Rose. “Trading for Dummies,” Page 26. John Wiley & Sons, 2017.
- FINRA. “OTCBB Frequently Asked Questions.” Accessed May 28, 2020.
- U.S. Securities and Exchange Commission. “OTC Link LLC.” Accessed May 28, 2020.
- Fortune. “These Stocks Sidestep Sarbanes-Oxley Idiocies.” Accessed May 28, 2020.
Writer Bio
Based in Atlanta, Georgia, W D Adkins has been writing professionally since 2008. He writes about business, personal finance and careers. Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.