Introduction
You may be wondering what is stock exchange. Here is an explication of the term that has been used a lot in today’s economy world. Stock exchange is also called Stock Market or Share Market. It is an organized market created by and for the purposes of buying and selling industrial and financial security. The stock exchange is a platform that provides a capable and convenient place where the trading of securities takes place in a manner that is both systematic and methodical. It is also conducted by professional stock brokers.
About stock exchange
There are a number of entities whose participation is stock exchange. They include individual retail investors, institutional investors like mutual funds, banks and so on. Other participants are also publicly traded corporations which trade in their own shares, which is stock exchange incorporated. Stock exchange is an important source of making or raising money, for companies. Therefore, companies and businesses participate in public trading in order o raise more capital for expansion. They do this by selling shares to the public market. This stock is also liquid in order for the investors to be able to buy and sell their shares easily and conveniently. This makes this sort of investment more attracting because it is easy to get into and equally easy to leave, as opposed to some investments, for example real estate, which are more binding and not liquid.
Stocks, as economical indicators
The interesting thing is stock exchange has become an indicator of economic activity, and since money makes the world go round, has also become a variable that serves as the marionette strings to the social mood of a society. The stock is often an indicator of how well a country is doing economically, and in that regard, globally. It is a major determinant to the classification of countries according to classes, which is a reflection of the country’s economic prowess.
Stock exchange and the share prices cause a ripple effect that is eventually felt in the domestic households. For instance, share prices tend to affect the wealth of households measured by their consumption. And this is because the rise of share process is related to the increased business investment, and vice versa.
Another important aspect is stock exchange is considered the art and act of clearing the house for each transaction. This means that the collection and delivery of shares as well as the guarantee of payment to the seller of a security happens here. It is thus very sensitive and highly active. All these activities lead to economic growth whereby lower costs and enterprise risks result in the promotion of the production of goods and service. This also promotes employment, though this is not a guarantee. Therefore, the importance that is stock exchange is immense and is correlated with being an enabling variable to the increment of prosperity.
Conclusion
Some of the features of stock exchange are that it is a market for securities which deals in second hand securities. It also allows dealings only in listed companies and the transactions are affected only through the members. Also important is stock exchange needs to be properly recognized by the Central Government and has to work by the stipulated rules, and must be located at a specific place.
