Stock Exchange

By:

James Knight

James is a lead editor for Invezz, where he covers topics from across the financial world, from the stock… read more.

Updated: Aug 20, 2021

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A market in which securities are bought and sold. There are stock exchanges in most capital cities, as well as in the largest provincial cities in many countries. The principal stock exchange in Britain is known as the Stock Exchange, and is located in Throgmorton Street in the City of London. There are also trading fllors in Glasgow, Liverpool, Birmingham, Belfast and, in Ireland Dublin.

The New York stock market is located in and is known as Wall Street. Continental European exchanges are often referred to as Bourses (Fr.). The economic importance of stock exchanges is that they facilitate savings and investment, first throught making it possible for investors to dispose of securities quickly if they wish to do so, and secondly in channelling savings into productive investments.

However, they are declining in importance as a source of new capital for industrial and commercial companies. Ready marketability requires that new issues should be made or backed by reputable borrowers or institutions, that information should be available on exisiting secrurities, and that there should be both a legal framework and market rules to prevent fraud and sharp practices.

Stock exchanges have their own rules and conventions, but their functioning depends also on the exsisitence of company and other law and financial intermediaries, such as issuing houses.

The British Stock Exchange, founded in 1773, developed from informal exchanges in coffe houses in the City of London. It is managed by a council of members. Stockbrokers act as agents for the public, and buy from an sell to jobbers. Members are formed into a declining number of large companies. Business is conducted entirely by word of mouth, and although jobbers and brokers keep their own registers and may record details of a ‘bargain’ (as all transactions are called)on the official list, they are not obliged to do so.

Reference: The Penguin Business Dictionary, 3rd edt.