What is the Stock Exchange?

A stock exchange is an important factor in the capital market. It is a secure place where trading is done in a systematic way. Here, the securities are bought and sold as per well-structured rules and regulations. Securities mentioned here includes debenture and share issued by a public company that is correctly listed at the stock exchange, debenture and bonds issued by the government bodies, municipal and public bodies.

Typically bonds are traded Over-the-Counter (OTC), but few corporate bonds are sold in a stock exchange. Stock exchange can enforce rules and regulation on the brokers and firms that are enrolled with them. In other words, a stock exchange is a forum where securities like bonds and stocks are purchased and traded. Stock exchange can be both online trading platform and offline(physical location).

Features of Stock Exchange:

  • A market for securities- It is a wholesome market where securities of government, corporate companies, semi-government companies are bought and sold.
  • Second-hand securities- It associates with bonds, shares that have already been announced by the company once previously.
  • Regulate trade in securities- The exchange does not sell and buy bonds and shares on its own account. The broker or exchange members do the trade on the company’s behalf.
  • Dealings only in registered securities- Only listed securities recorded in the exchange office can be traded.
  • Transaction- Only through authorised brokers and members the transaction for securities can be made.
  • Recognition- Stock exchange requires to be recognized by the central government.
  • Measuring device- It develops and indicates the growth and security of a business in the index of a stock exchange.
  • Operates as per rules– All the security dealings at the stock exchange are controlled by exchange rules and regulations and SEBI guidelines.

The above mentioned is the concept, that is elucidated in detail about ‘What is stock exchange?’ for the Commerce students. To know more, stay tuned to BYJU’S.