{"id":4117,"date":"2021-08-24T18:10:00","date_gmt":"2021-08-24T12:40:00","guid":{"rendered":"https:\/\/www.tickertape.in\/blog\/?p=4117"},"modified":"2022-05-25T18:38:33","modified_gmt":"2022-05-25T13:08:33","slug":"stock-exchange","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/stock-exchange\/","title":{"rendered":"Stock Exchange Guide 2022 \u2013 What is Stock Exchange, How It Works and Importance"},"content":{"rendered":"\n<p>Marketplaces bring sellers and buyers together. They allow sellers to sell their offerings and buyers to buy such offerings. If you need to shop for vegetables, you head to a vegetable market or your local vegetable seller. For groceries, you shop at the local Kirana store or departmental stores. Where do you go if you want to buy <a href=\"https:\/\/www.tickertape.in\/blog\/fundamental-analysis\/?utm_source=blog&amp;utm_medium=article\">stock<\/a> or <a href=\"https:\/\/www.tickertape.in\/blog\/at1-bonds-explained\/?utm_source=blog&amp;utm_medium=article\">bonds<\/a>?<\/p>\n\n\n\n<p>The answer is a stock exchange.&nbsp;In today\u2019s blog we dive deep into what a <a href=\"https:\/\/www.tickertape.in\/blog\/stock-exchanges-in-india\/?utm_source=blog&amp;utm_medium=article\">stock exchange<\/a> is and how it works.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/stock-exchange\/#Stock-exchange-meaning-%E2%80%93-What-is-stock-exchange\" title=\"Stock exchange meaning &#8211; What is stock exchange?\">Stock exchange meaning &#8211; What is stock exchange?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/stock-exchange\/#How-do-stock-exchanges-work\" title=\"How do stock exchanges work?\">How do stock exchanges work?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/stock-exchange\/#Importance-of-the-stock-exchange\" title=\"Importance of the stock exchange\">Importance of the stock exchange<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/stock-exchange\/#From-the-perspective-of-a-company\" title=\"From the perspective of a company\">From the perspective of a company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/stock-exchange\/#From-the-perspective-of-investors-and-traders\" title=\"From the perspective of investors and traders\">From the perspective of investors and traders<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/stock-exchange\/#Leading-stock-exchanges-of-India-and-the-world\" title=\"Leading stock exchanges of India and the world\">Leading stock exchanges of India and the world<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/blog\/stock-exchange\/#Wrapping-it-up\" title=\"Wrapping it up\">Wrapping it up<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\" id=\"what\"><span class=\"ez-toc-section\" id=\"Stock-exchange-meaning-%E2%80%93-What-is-stock-exchange\"><\/span><strong>Stock exchange meaning &#8211; What is stock exchange?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A stock exchange is a marketplace to buy and sell stock and other financial instruments. It is a platform where <a href=\"https:\/\/www.tickertape.in\/blog\/shareholders\/\">shareholders<\/a> interact with other shareholders to buy or sell shares. Besides shares, stock exchanges also allow <a href=\"https:\/\/www.tickertape.in\/blog\/trading-vs-investing\/?utm_source=blog&amp;utm_medium=article\">trading<\/a> in commodities, bonds, and Exchange-Traded Funds (<a href=\"https:\/\/www.tickertape.in\/blog\/etf-checklist\/?utm_source=blog&amp;utm_medium=article\">ETFs<\/a>), among other financial instruments.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"how\"><span class=\"ez-toc-section\" id=\"How-do-stock-exchanges-work\"><\/span><strong>How do stock exchanges work?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Now that you know the meaning of <a href=\"https:\/\/www.tickertape.in\/blog\/social-stock-exchange\/?utm_source=blog&amp;utm_medium=article\">stock exchange<\/a>, let\u2019s understand how it works.<\/p>\n\n\n\n<p>Primarily, there are two types of financial markets &#8211; the primary market and the secondary market. The primary market is where companies issue their stock to the public for the first time through an <a href=\"https:\/\/www.tickertape.in\/blog\/most-successful-ipos-in-the-last-3-years\/?utm_source=blog&amp;utm_medium=article\">IPO<\/a>. Thereafter, once the stock is allotted to interested buyers, it is listed on the secondary market. The stock exchange is the secondary market where stocks and other instruments are listed and traded.<\/p>\n\n\n\n<p>So, when you buy and sell shares or other instruments on the stock exchange, you don\u2019t transact with the company. You transact with existing shareholders. Investors who wish to sell off their assets look for buyers and buyers looking to <a href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/\">invest<\/a> in such assets look for sellers. The stock exchange offers a platform where these sellers and buyers can come together to conduct trade. The instruments are listed on the stock exchange market and buyers and sellers can place buy and sell orders (respectively).<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"importance\"><span class=\"ez-toc-section\" id=\"Importance-of-the-stock-exchange\"><\/span><strong>Importance of the stock exchange<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The meaning of stock exchange also highlights its importance. The stock exchange is an important platform both for companies that list their stocks and for investors. Let\u2019s understand why:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"From-the-perspective-of-a-company\"><\/span><strong>From the perspective of a company<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>If a company wants to list its shares, it needs a stock exchange. So, the exchange is important for the company for the following reasons:<\/p>\n\n\n\n<ul><li><strong>A source of raising funds<\/strong><\/li><\/ul>\n\n\n\n<p><a href=\"https:\/\/www.tickertape.in\/blog\/equity-investment\/?utm_source=blog&amp;utm_medium=article\">Equity<\/a> is the most cost-effective way for a company to raise funds for operations and growth. Even though the <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-equity\/\">equity<\/a> stock is issued in the primary market, it ultimately gets listed on the stock exchange which is the secondary market. Moreover, the company can issue more shares through the exchange for additional capital. So, the stock exchange allows companies to raise funds.<\/p>\n\n\n\n<ul><li><strong>Better visibility and perception<\/strong><\/li><\/ul>\n\n\n\n<p>Companies whose stocks are listed and traded on the stock exchange have better visibility as they are known to investors. Moreover, when the company delivers a good performance, it is reflected in the value of its shares which boosts a favourable market perception and helps the company earn goodwill and grow.&nbsp;<\/p>\n\n\n\n<ul><li><strong>The facility of ESOPs<\/strong><\/li><\/ul>\n\n\n\n<p>Companies can attract talented employees with Employee Stock Ownership Plans (ESOPs) if their stock is listed on the stock exchange. This allows companies to cut down on their acquisition costs, get good employees and also motivate employees to be productive.&nbsp;<\/p>\n\n\n\n<ul><li><strong>Compliance with the legal framework<\/strong><\/li><\/ul>\n\n\n\n<p>The Securities and Exchange Board of India (<a href=\"https:\/\/www.tickertape.in\/blog\/stock-exchanges-in-india\/?utm_source=blog&amp;utm_medium=article\">SEBI<\/a>) is the regulatory authority of the capital market. As such, companies listed on the stock exchange have to comply with <a href=\"https:\/\/www.tickertape.in\/blog\/securities-and-exchange-board-of-india-functions-powers-and-regulations-of-sebi\/?utm_source=blog&amp;utm_medium=article\">SEBI<\/a>\u2019s rules and regulations. It ensures corporate governance and weeds out unfair practices.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"From-the-perspective-of-investors-and-traders\"><\/span><strong>From the perspective of investors and traders<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>For investors and traders trading on the stock exchange, the importance of the platform is underlined in the following points:<\/p>\n\n\n\n<ul><li><strong>Trading opportunities<\/strong><\/li><\/ul>\n\n\n\n<p>First and foremost, stock exchanges give traders and investors a platform to trade. Interested investors can invest in potential assets to generate returns on their investments. On the other hand, potential sellers can sell their assets to book profits, realise funds, or cut down on losses. By providing a platform of interaction between buyers and sellers, stock exchanges provide different trading opportunities.&nbsp;<\/p>\n\n\n\n<ul><li><strong>Liquidity&nbsp;<\/strong><\/li><\/ul>\n\n\n\n<p>Instruments listed on the stock exchange market are highly <a href=\"https:\/\/www.tickertape.in\/blog\/liquid-stocks\/?utm_source=blog&amp;utm_medium=article\">liquid<\/a>. You can sell them and get funds whenever you need them. So, in an emergency, you can sell your holdings to get <a href=\"https:\/\/www.tickertape.in\/blog\/what-are-liquid-funds\/\">liquid funds<\/a> to meet your financial obligations. Moreover, if your investment strategy changes, you can easily reshuffle your portfolio by trading your assets on the exchange.&nbsp;<\/p>\n\n\n\n<ul><li><strong>Collateral assets<\/strong><\/li><\/ul>\n\n\n\n<p>The instruments listed on the stock exchange serve as collateral assets and allow you to raise funds against their value. This is helpful when you need funds for emergencies or other financial obligations.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"world\"><span class=\"ez-toc-section\" id=\"Leading-stock-exchanges-of-India-and-the-world\"><\/span><strong>Leading stock exchanges of India and the world<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Here are some of the notable stock exchanges across the world as well as in India:<\/p>\n\n\n\n<ul><li><strong>International stock exchanges<\/strong><ul><li>NASDAQ<\/li><li>New York Stock Exchange<\/li><li>Shanghai Stock Exchange<\/li><li>London Stock Exchange<\/li><li>Tokyo Stock Exchange<\/li><li>HongKong Stock Exchange<\/li><\/ul><\/li><li><strong>Stock exchanges of India<\/strong><ul><li>Bombay Stock Exchange (<a href=\"https:\/\/www.tickertape.in\/blog\/difference-between-nse-and-bse\/?utm_source=blog&amp;utm_medium=article\">BSE<\/a>)<\/li><li>National Stock Exchange (<a href=\"https:\/\/www.tickertape.in\/blog\/national-stock-exchange\/?utm_source=blog&amp;utm_medium=article\">NSE<\/a>)<\/li><li>Calcutta Stock Exchange (CSE)<\/li><li>India International Exchange (INX)<\/li><\/ul><\/li><\/ul>\n\n\n<span class='bctt-click-to-tweet'><span class='bctt-ctt-text'><a href='https:\/\/twitter.com\/intent\/tweet?url=https%3A%2F%2Fwww.tickertape.in%2Fblog%2Fstock-exchange%2F&#038;text=Investors%20or%20traders%2C%20understanding%20the%20working%20and%20benefits%20of%20the%20stock%20exchange%20is%20essential%20for%20all.&#038;via=TickertapeIN&#038;related=TickertapeIN' target='_blank'rel=\"noopener noreferrer\">Investors or traders, understanding the working and benefits of the stock exchange is essential for all. <\/a><\/span><a href='https:\/\/twitter.com\/intent\/tweet?url=https%3A%2F%2Fwww.tickertape.in%2Fblog%2Fstock-exchange%2F&#038;text=Investors%20or%20traders%2C%20understanding%20the%20working%20and%20benefits%20of%20the%20stock%20exchange%20is%20essential%20for%20all.&#038;via=TickertapeIN&#038;related=TickertapeIN' target='_blank' class='bctt-ctt-btn'rel=\"noopener noreferrer\">Click To Tweet<\/a><\/span>\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Wrapping-it-up\"><\/span><strong>Wrapping it up<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It is essential to develop an understanding of how the exchange works and the benefits that it holds for you as an investor or trader. Then, choose a suitable exchange wherein you want to trade. The stock exchange offers a variety of instruments so that you can build up a diversified portfolio to minimise risks and increase the potential of returns.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>A stock exchange is a marketplace to buy and sell stock and other financial instruments. Read on to know all about stock exchanges, their significance and how they work.<\/p>\n","protected":false},"author":54,"featured_media":3864,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[9],"tags":[575,574,573],"acf":[],"modified_by":"Neera Bhardwaj","jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/08\/Stock-Market-3.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/4117"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/54"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=4117"}],"version-history":[{"count":8,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/4117\/revisions"}],"predecessor-version":[{"id":8845,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/4117\/revisions\/8845"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/3864"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=4117"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=4117"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=4117"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}