What Are Stock Exchanges?

Source Credit : Portfolio Prints

A stock exchange is a centralized marketplace where buyers and sellers trade shares of publicly listed companies. It serves as a platform that allows businesses to raise capital by issuing shares and provides investors a venue to buy and sell those shares. The stock exchange operates under a set of regulations and policies that ensure fair and orderly trading, making it a critical component of the global financial system.

Functions of a Stock Exchange

• Capital Formation: Enables businesses to raise funds by issuing new shares.


• Liquidity: Provides a market for buying and selling shares, making it easier for investors to liquidate their holdings.


• Price Discovery: Helps in determining the market value of a security through supply and demand dynamics.


• Regulation: Enforces rules that protect investors and maintain market integrity.


• Risk Management: Provides tools for hedging and managing financial risk.


• Information Distribution: Acts as a conduit for the dissemination of financial information and corporate disclosures.


• Economic Barometer: Reflects the economic health and growth prospects of a country through stock price movements.

Largest Stock Exchanges in the World

Rank	Stock Exchange	Country/Region	Market Cap
1	New York Stock Exchange	USA	$31 T
2	NASDAQ	USA	$30 T
3	Shanghai Stock Exchange	China	$7 T
4	Tokyo Stock Exchange	Japan	$6 T
5	National Stock Exchange of India	India	$5 T
6	Euronext	Europe	$5 T
7	Hong Kong Exchanges and Clearing	Hong Kong	$4 T
8	Shenzhen Stock Exchange	China	$4 T
9	Toronto Stock Exchange	Canada	$3 T
10	Saudi Exchange (Tadawul)	Saudi Arabia	$2 T

Data By : Portfolio Prints

Overview

Stock exchanges play a pivotal role in the economic growth and development of nations by facilitating the flow of capital and providing a regulated environment for securities trading. Understanding their functions and significance can help investors make informed decisions, diversify their portfolios, and contribute to the global financial ecosystem. By acting as a barometer of economic health and providing vital services such as risk management and information distribution, stock exchanges remain integral to the world of finance.