The word “Stock Exchange” may bring down chilling shivers to many people. It is actually a form of exchange that provide job to stock brokers, and traders facilitating the exchange of Bonds, Stocks and Securities. This practice can be traced to origin in the Mesopotamian clay tablets in the ancient world. Then the commodity exchanges started to flourish between countries. The world’s first stock exchange is a book that tells about the stock market and exchanges that took place in the seventeenth-century Amsterdam. The existing security markets took centuries to develop almost. These exchanges have played very important role in deciding many politic decisions. Even today it plays as an important decision maker. Each country has their own stock market exchange with the New York stock exchange topping them all.
What role does it play in a country?
To answer this question, we should first know its roles in an economy. The roles could be listed as,
1. Providing Capital for business:
The stock market exchange provides finances for smaller companies for expansion by establishing shares to the public. This enables the people to become partners in developing companies and small companies to establishing their roots. They provide opportunities for the companies to venture capital. They allow them to raise money through partnerships. They track the performances of the companies, and publish them to their public investors through stock indexes. The stock exchanges provide possibilities for newly venturing companies to be a partner with largely established companies. They also enable the large companies for acquisition of less profiting companies which might be mutually beneficial in most cases and develop across countries.
2. Funding the government:
The stock market exchange also helps the government lending hand for developing infrastructures through a security procedure known as Bonds. These bonds are sold to the public and are used to raise money. These bonds are repaid to citizens when they mature and for which the government must eventually tax citizens or otherwise raise other funds.
3. Serves as a Barometer of the economy:
The stock exchanges play an important role to measure the economic state of a country. When the companies of a country which play an important role in the economy of the country are stable, the share price which implies the stock market is stable. When the prices fall, it may result in economic crisis such as, economic recession or depression. These are published through the indexes of the stock exchange.Thus, the stock market exchange in general is an important criterion that decides the economy of a country.
Who owns these stock exchanges?
These stock exchanges started as mutual organizations where the board consisted mainly of Share brokers. But now the trend is beginning to change and it is to demutualize the organization where the brokers tend to sell their shares in an initial public offering thereby making the organization to be a corporation and the corporation is expected to hold the shares of the lists in the exchange.
What does it take for a company to be listed on the stock exchange?
For a company to be listed on the stock exchange it must have some requirements met. These requirements are pre-defined by the exchange board. The following are the pre-defined criteria in some of the stock exchanges. The criteria for a few exchanges have been listed below.
New York Stock Exchange: For a company to be listed on the New York Stock Exchange also known as the NYSE it must have issued at least a million shares of stock worth $100 million and should have earned more than $10 million over the last three years.
NASDAQ Stock Exchange: For a company to be listed on the NASDAQ the company must have issued at least 1.25 million shares of stock worth at least $70 million and should have earned more than $11 million over the last three years.
Bombay Stock Exchange: Bombay Stock Exchange or the BSE has defined the requirements to be listed as a minimum market capitalization of 250 million and a minimum public float of 100 million.
What is the role of internet in the stock exchange?
Internet has proved its role in many of the recent developments and there is no exception for the stock exchange programs. The immediate communication has resulted in drastic increase or entire collapse of the stock markets in seconds. It has also enabled to trade a stock in a millionth of a second. The New York Times says that powerful computers allow high-frequency traders to send hundreds of thousands of orders to be processed at unparalleled stock exchange speeds.Thus in a whole the stock exchange is nothing but a platform mutually benefiting the people who wants to sell more and to people who want to buy more along with deciding the fate of many people and countries.