What Are the Benefits of Stock Exchanges?
The benefits of stock exchanges are far reaching. A stock exchange allows execution of buy and sell orders, leading to the creation of wealth. Companies also can raise money for growth.
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Regulation
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A stock exchange is an organized market that abides by certain regulations. In the United States, the Securities and Exchange Commission (SEC) oversees financial markets, including stock exchanges.
Significance
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Stock trading activity may reflect economic conditions. Expansion, for instance, fuels production, which can lead to greater profits and benefits to stockholders from rising stock prices or through company dividends.
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Types
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The major U.S. stock exchanges are the New York Stock Exchange (NYSE) and Nasdaq. The NYSE traces its origins back to 1792, and is now a marketplace where some 8,500 stocks trade. More than 3,000 stocks trade on the Nasdaq, the first all-electronic stock exchange formed in 1971.
Technology
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Fueled by technology, stock exchanges have largely migrated to automated trading, for faster execution of trades. The NYSE also operates an open outcry system, employing trading specialists.
Size
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Companies including Intel and Microsoft list shares on the NYSE and Nasdaq. According to Motley Fool, companies listed on the NYSE have a combined market capitalization of $19.2 trillion as of July 2009, while the Nasdaq stood at $3.7 trillion.
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- Photo Credit Image by Flickr.com, courtesy of David Ohmer
