stock exchange

Also found in: Dictionary, Thesaurus, Medical, Legal, Acronyms, Encyclopedia, Wikipedia.
Related to stock exchange: stock market

Stock Exchange

A place, whether physical or electronic, where stocks, bonds, and/or derivatives in listed companies are bought and sold. A stock exchange may be a private company, a non-profit, or a publicly-traded company (some exchanges have shares that trade on their own floors). A stock exchange provides a regulated place where brokers and companies may meet in order to make investments on neutral ground. The concept traces its roots back to medieval France and the Low Countries, where agricultural goods were traded for cash or debt. Most countries have a main exchange and many also have smaller, regional exchanges. A stock exchange is also called a bourse or simply an exchange.

stock exchange

stock exchange

a MARKET which deals in the buying and selling of company stocks and shares and government bonds. See STOCK MARKET entry for fuller discussion.

stock exchange


stock market

A MARKET that deals in the buying and selling of company STOCKS and SHARES and government BONDS. The stock exchange and the MONEY MARKET (which deals in short-term company and government securities) are the main source of external capital to industry and the government.

Institutions that are involved in the UK stock exchange include MARKET MAKERS (who act as JOBBERS and STOCKBROKERS), specialist stockbrokers, ISSUING HOUSES, MERCHANT BANKS and, as general buyers and sellers of securities, the CENTRAL BANK, COMMERCIAL BANKS, PENSION FUNDS, INSURANCE COMPANIES, UNIT TRUSTS and INVESTMENT TRUST COMPANIES, together with private individuals, industrial companies and overseas investors and institutions.

The stock exchange performs two principal functions. It provides:

  1. a primary or ‘new issue’ market where capital for investment and other purposes can be raised by the issue of new stocks, shares and bonds (see SHARE ISSUE), and;
  2. a ‘secondary’ market for dealings in existing securities, including forward dealings (see FUTURES MARKET), which facilitates the easy transferability of securities from sellers to buyers.

Day-to-day movements in the prices of shares (and other securities) are recorded by various SHARE PRICE INDICES (for example, the FTSE-100 share index).

The stock exchange thus occupies an important position in a country's FINANCIAL SYSTEM by providing a mechanism for channelling savings into physical and portfolio investment.

In the UK, the London Stock Exchange is the country's centre for dealings in securities, and the LONDON INTERNATIONAL FINANCIAL FUTURES EXCHANGE provides a market for commodities, currencies, etc.

In order to obtain a full listing or quotation on the London Stock Exchange for their shares, companies must satisfy various requirements, including proof of their financial standing and previous business history, and be prepared to issue at least 25% of their shares to the investing public. Additionally, more flexible arrangements have been introduced to allow smaller companies to raise capital without obtaining a full listing (see UNLISTED SECURITIES MARKET).

In recent years, stock markets worldwide, such as those based in London, New York, Tokyo, Zurich and Paris, have become increasingly interdependent with the growth of multinational companies, whose shares are traded on a number of exchanges, while financial institutions and securities firms themselves have become more internationally based. This has led to an increase in competitive pressures, which has brought about a number of important changes, particularly in the case of the UK stock exchange, including:

  1. the so-called ‘big bang’ - the termination (under the prodding of the OFFICE OF FAIR TRADING) of the cartel arrangements for fixing minimum commissions on securities transactions and the ending of the traditional division between the stockbroking and jobbing functions;
  2. various mergers and joint ventures between UK securities firms and international securities and banking groups so as to provide clients with a more diversified range of financial services and geographical spread;
  3. the computerization of dealing systems, using the Stock Exchange Automatic Quotations System (SEAQ), which provides a mechanism for linking buying and selling transactions on a global basis. This has largely transferred day-to-day business from a physical presence on the stock-exchange floor to telephone exchanges and the use of VDU computer terminals in dealing rooms.

In recognition of the growth in international dealings, the London Stock Exchange merged in the 1990s with the International Securities Regulatory Organization (ISRO), which represented the big international securities firms. In November 1999, a new competitive stimulus emerged when the London Stock Exchange set up a new sub-exchange (Techmark) for the listing of shares in high-tech companies, only to be followed days later by NASDAQ (the US high-tech stock exchange) setting up a rival exchange in London as part of its plan to build up a pan-European operation. In addition, the London Stock Exchange has faced competition from Tradepoint, an electronic stock exchange based in London and owned by a consortium headed by Reuters and a number of American investment banks and fund management groups. Like Nasdaq, Tradepoint aims to build a pan-European trading system.

In 2000 the Paris, Amsterdam and Brussels stock exchanges merged to form the ‘Euronext’ exchange, and SWX, the Swiss stock exchange, joined up with Tradepoint to form the Virt-X exchange. Also in 2000, a proposed plan to merge the London Stock Exchange and the Frankfurt Deutsche Bourse to form the ‘iX’ exchange fell through following a hostile takeover bid for the London Stock Exchange by the OM group, which also fell through. In 2005, however, the Deutsche Bourse put in a further bid for the LSE, with Euronext also putting in a hostile bid (watch this space!).

The UK stock market is regulated by the Financial Services Authority in accordance with various standards of good practice laid down by the FINANCIAL SERVICES ACT 1986. See CAPITAL MARKET, CITY CODE, SPECULATOR, SHARE PURCHASE/SALE, SHARE PRICE INDEX, INSIDER TRADING, PORTFOLIO, TRACKER FUND, INDIVIDUAL SAVINGS ACCOUNT (ISA).

References in periodicals archive ?
3 February 2006 Stock Exchange Standard Life increases interest to
ISE Stock Exchange, launched in September 2006 with strategic partners, includes an innovative MidPoint Match[TM] platform which offers investors continuous price improvement.
ISE Stock Exchange, launched in September 2006 with strategic partners, includes an innovative MidPoint Match(TM) platform which offers investors continuous price improvement.
NYSE:NYX) operates two securities exchanges: the New York Stock Exchange LLC (the "NYSE") and NYSE Arca, Inc.
13/12/2010 Stock Exchange Bodycote PLC Standard Life notify voting
The Chicago Stock Exchange and its wholly owned subsidiaries (which will retain their current names) provide a variety of services to the securities industry.
The signing of this co-operation agreement with the London Stock Exchange is an important step in the long term development of the Tel Aviv Stock Exchange and the Israeli economy.
24 March 2009 Stock Exchange Norges Bank voting rights at 3.
The nine original ISG members are the American Stock Exchange, Boston Stock Exchange, Cincinnati Stock Exchange, Midwest Stock Exchange, New York Stock Exchange, Pacific Stock Exchange, Philadelphia Stock Exchange, Chicago Board Options Exchange and the National Association of Securities Dealers.
LONDON -- The Tel Aviv Stock Exchange and Embassy of Israel in London announce the successful opening of the Israel Opportunity 2007 investor conference in London today.
28 March 2008 Stock Exchange Annual report and accounts
Company Commences Trading on Frankfurt Stock Exchange

Full browser ?