and traders. They trade company stocks and other securities. Stock exchanges
the payment of income and dividends.
The securities traded on a stock
exchange include: shares issued by companies, unit trusts and other
pooled investment products and bonds. To be able to trade a security
on a certain stock exchange, it has to be listed there. Usually there
is a central location at least for recordkeeping, but trade is less
and less linked to such a physical place, as modern markets are electronic
networks, which gives them advantages of speed and cost of transactions.
Trade on an exchange is by members only. The initial offering of stocks
and bonds to investors is by definition done in the primary market
and subsequent trading is done in the secondary market. A stock exchange
is often the most important component of a stock market. Supply and
demand in stock markets is driven by various factors which, as in
all free markets, affect the price of stocks (see stock valuation).
There is usually no compulsion to issue stock via the stock exchange
itself, nor must stock be subsequently traded on the exchange. Such
trading is said to be off exchange or over-the-counter. This is the
usual way that bonds are traded. Increasingly, stock exchanges are
part of a global market for securities.
