It is a public central place through which company shares and financial bonds are bought and sold, and banknotes are exchanged at the approp...
It is a public central place through which company shares and financial bonds are bought and sold, and banknotes are exchanged at the appropriate price available in real-time for demand and supply, This is done either by traditional methods (being at the place of exchange) or through electronic platforms, which is the most widespread method at present.
Transparency, efficiency, and speed in completing transactions in record time. It is an integral part of the market, It organizes organized exchanges in an atmosphere of transparency and efficiency.
Looking at the history of the stock exchange, since ancient times it depended on a place and physical spaces in which dealers stand and give orders to buy and sell by shouting, but nowadays, most of the stock exchanges have become virtual, where transactions are dealt with electronically behind a computer, on an electronic exchange.
How does the stock exchange work?
First, to understand the mechanism of the stock market, we must understand what the primary market and secondary market mean .
Primary market: companies offer new shares to investors for the first time, and this process is symbolized by (IPO). One of the most important things that characterize the primary market is the purchase of securities directly from the company.
Secondary market: In this market, investors buy and sell securities with each other in the place designated for exchanges. It is also symbolized by the name "the stock market", which shows the true value of shares through the process of supply and demand, the most famous of which is the New York Stock Exchange and the Nasdaq Stock Exchange, which are considered as secondary markets.
Through the above, we can say that the stock exchange operates as a market for auctions or as a market for traders.
Auction market, in which traders bid more on prices and try to get them at the lowest possible price to achieve good benefits, while sellers do a comprehensive evaluation of their products.
In the market for traders, companies publish their initial prices, showing the differences between the prices offered and the costs that can be borne by investors. This provides liquidity and makes trading faster and easier.
Generally, trading on the stock exchange is safer than the market outside the stock exchange because the transaction takes place directly between the two parties without the intervention of any intermediary.
The government agency also ensures that companies are not defrauded through strict regulations and supervision of the registration of new securities and detailed reports of profits.
