stock exchange

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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

or

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 ?
* THE RULES ARE THE RESULT OF A REPORT the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audits issued in February 1999 recommending the securities exchanges and the SEC implement rules providing audit committees with a self-regulatory framework emphasizing disclosure, transparency and accountability.
Over the ceremony, His Excellency Al Baloushi noted Abu Dhabi Securities Exchanges interests to build sustainable partnerships with the various governmental and private bodies and institutions in line with the Exchanges strategy and its effective contribution to the realization of Abu Dhabi Governments Future Vision 2030.
Abu Dhabi Securities Exchange (ADX) has inked a service level agreement with the Statistics Center of Abu Dhabi to reinforce and strengthen mutual cooperation and building a framework for the exchange and reissue of financial and statistical information and data, besides other works that are related to both sides work and level-specific services.
The proposed bill would modify the exclusivity restriction to allow certain hybrid products to trade either on a securities exchange or a futures exchange.
Walgreens decision to withdraw its common stock from listing on the NYSE and the CHX and from registration under the Exchange Act in respect of such exchanges and to list shares of Walgreens Boots Alliance common stock solely on The Nasdaq Stock Market LLC was based on its determination that, following the completion of the Reorg Merger, shares of Walgreens Boots Alliance common stock should trade on a single national securities exchange in order to, among other things, reduce the administrative costs and burdens associated with maintaining the listing on multiple national securities exchanges.
<br />Case No.: 16-3423<br />Officials: BAUER, FLAUM, and MANION, Circuit Judges.<br />Focus: Securities Exchange Fees SEC Lack of Jurisdiction <br />In Citadel Securities, LLC v.
Abu Dhabi Securities Exchange (ADX) has announced that it plans to hold its annual conference for the year 2015 under the title "Transformation to Public Companies: A Vision toward the Future".

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