Stock exchange (share market, bourse)

Core characteristics

Exchanges perform several basic functions important to modern finance. They provide price discovery by matching supply and demand, liquidity so investors can buy or sell quickly, and transparency through public reporting. Companies list to raise capital while investors trade on expectations and information.

How they operate

On an exchange, orders from participants are matched according to rules set by the exchange and regulators. Markets trade units called shares representing ownership interests. The instruments traded include common and preferred stock, exchange-traded funds, bonds and derivatives. A company issues company stock in a primary offering; later transactions occur in the secondary market among investors.

History and development

Formal stock trading began centuries ago with merchant exchanges where obligations were transferred. Over time, specialized institutions evolved into national exchanges such as the New York Stock Exchange and electronic venues like NASDAQ. Technology and regulation have steadily shifted activity toward high-speed electronic systems.

Uses and examples

• Capital raising: companies issue shares or bonds to fund growth.
• Investment and speculation: individuals and institutions seek returns.
• Risk management: derivatives allow hedging of positions.

Exchanges differ by rules, listing requirements and the types of securities they host. Understanding the role of a stock exchange helps explain how capital flows, how prices form and why markets matter to economies and savers alike.