stock exchange

(redirected from exchange market)
Also found in: Dictionary, Thesaurus, Legal, Encyclopedia, Wikipedia.

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 ?
The committee launched its regular Tokyo foreign exchange market transactions survey in 2006.
On the whole, states intervene on the exchange market only in either of two cases: either because a deficit of the balance of payments would induce strong devaluations, that is a drop in exchange rates, or else because a surplus of the balance of payments would induce strong revaluations, that is a rise in exchange rates on exchange markets.
Exchange market pressure (emp) reflects disequilibrium in money market.
The bank said automatic price-matching transactions will be maintained after the introduction of OTC transactions, enabling participants in the interbank foreign exchange market to choose between the two modes to conduct spot foreign exchange transactions.
Osler, 1994, "Evaluating Chart-Based Technical Analysis: The Head-and-Shoulders Pattern in Foreign Exchange Markets," Federal Reserve Bank of New York Research Paper, 9414, 30.
Unlike the genuine article, Betfair never loses on a race and their client layers fail to qualify because they are not registered, they do not observe the rules for racecourse bookmakers and, realistically, they cannot possibly make a book on the exchange markets even for some, let alone all, of the time.
I heard monetary authorities in the United States and Europe are cooperating closely'' to deal with drastic moves in the foreign exchange market, he added.
Also, market participants initially viewed Secretary Rubin's June 11 remarks in a congressional hearing on economic conditions in Japan as stressing the negative effects of Japanese economic fundamentals and downplaying prospects for coordinated intervention in the foreign exchange market.
Health Information Exchange Market Engineering Measurements and Market Dynamics
Many of those involved in monetary policy and the exchange market believe that Tarek Amer, the new governor of the Central Bank of Egypt (CBE) who is to officially take office on 27 November, will amend the management style of these two files.
Shanghai International Energy Exchange Limited (INE) and DBS Bank signed an agreement of strategic cooperation in Shanghai yesterday to boost the internationalisation of China s energy futures exchange market.
Key Topics Covered: 1 Introduction 2 Executive Summary 3 Premium Insights 4 Market Overview 5 Healthcare Information Exchange Market, By Type 6 Healthcare Information Exchange Market, By Vendor Type 7 Healthcare Information Exchange Market, By Implementation Model 8 Healthcare Information Exchange Market, By Application 9 Geographic Analysis 10 Competitive Landscape 11 Company Profiles

Full browser ?