What are stock exchanges In this post, we will talk about the stock exchange, how it works from the inside and how investors make their transactions on it.
It often seems to a beginner in investments that the stock market is something very complicated, and transactions on it are carried out exclusively by highly professional banking entities. This is not entirely true, let’s get into it.
The stock market is a market for securities such as stocks and bonds, ETFs and other investment instruments, and the stock exchange is an organized place where these transactions take place.
There are buyers and sellers on the stock exchange. Some want to buy securities, others, respectively, to sell. You cannot simply come to the stock exchange and sell 100 shares of a company, since there are special professional intermediaries between the buyer and the seller who have a license to conduct brokerage activities – brokers. They help a private investor to trade securities. All these activities are regulated by the Securities Act.
How do you buy and sell shares and where is the information about ownership stored
In the modern world, trading takes place online through special terminals. Imagine two people. One wants to sell shares, the other wants to buy. They go to their brokers. One submits an order to buy a certain number of shares of a company, and the seller, accordingly, submits an order to the broker to sell a certain number of shares.
Next, the broker checks whether a transaction between them is possible
(whether the buyer has enough money and the seller assets). When all the data match, the transaction is registered on the exchange. Then the information about the transaction goes to the national depository, where records of all securities are kept and they are transferred from the seller’s account to the buyer’s account.
That’s all. Stay tuned for our next posts to learn more about finance.
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