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Traditionally, an exchange has been a physical location for trading securities. Trading is handled, at least in part, by an open outcry or dual auction system.
Two examples in the United States are the New York Stock Exchange (NYSE), which has the largest trading floor in the world, and the Chicago Board Options Exchange (CBOE).
However, the definition is evolving. Traditional exchanges handle an increasing number of trades electronically, off the floor. Nasdaq and other totally electronic securities markets, without trading floors, have exchange status.
As a result, the terms exchange and market are being used interchangeably to mean any environment in which listed products are traded.
The term exchange also refers to the act of moving assets from one fund to another in the same fund family or from one variable annuity subaccount to another offered through the same contract.
exchangesee MARKET, BARTER.
- 1the transfer of the right to own or use goods and services. Exchange is necessary in specialized economies (see SPECIALIZATION). In simpler specialized economies, exchange can take the form of BARTER. In more complex specialized economies exchange is undertaken through MARKETS, where the right to own or use goods and services is bought and sold. See TRANSACTION.
- the means of financing the purchase of goods and services in a market. See MONEY, FOREIGN EXCHANGE.
Parties may exchange like-kind properties and not pay any income taxes at the time of the exchange but, instead, defer them until the later sale of the exchanged property. See 1031 exchange.