Definition of Stock exchange

Stock exchange is a market or exchange where traders and brokers purchase and sell shares or stocks, bonds and other securities. Stock exchange does not own stocks, instead it is a platform or meet point for buyers and sellers of stock.

The securities mainly traded on it are shares of listed companies. Others include bonds and investment products as well.

Brief Explanation of Stock exchange

The exchange market can be split in two categories

Primary Market and Secondary Market

Primary Market: When any company conducts, its initial public offering the stocks are sold through stock exchange. A company initially selling share to public (initial public offering IPO) is known as primary market.

Secondary Market: Once floated amongst the public, these shares can now be bought and sold between investors. This is called secondary market.

It works on demand and supply theory.

For example, if you (a broker) sees bid price of stock A as $ 10, this means that there is a buyer present who is willing to purchase stock A in $ 10 and hence bidding his price on stock exchange platform.

Same time if you see asking price of stock A as $ 12, this means there is a seller available willing to sell this stock in $12.

The New York Stock Exchange NYSE is the biggest, most powerful and prestigious stock exchange of the world.

Stocks these days are in electronic form rather than having any physical substance.