What Are Stock Exchanges?

stock exchangesSo what exactly are “Wall Street” and the “New York Stock Exchange“? You have probably heard these words thousands of times. Unless you are a stock owner they might have gone in one ear and out the other.

Stock exchanges are simply organizations that allow people the ability to buy and sell stocks. A stock is simply a representation of fractional ownership in a company. Think of a stock exchange as a cross between a neighborhood flea market and an auction. The flea market part of the analogy is to show that there is a central gathering place for buyers and sellers of various products. The auction part is to show that whatever is being bought and sold is done at the best possible price.

Each day at the exchange (flea market) brings a new group of individuals with different expectations. It also brings different amounts and quality of products to sell. These differences result in slight prices changes each day.

The stock exchanges, through the use of computers, allow for simultaneous auctions going on for every stock. Trades are made on the exchanges every second that the exchanges are open. When the buyers and sellers agree on a price, a trade occurs. When buyers and sellers don’t agree on a price, a trade does not occur. The computers show what price the buyers are willing to pay and what price the sellers are willing to sell.

The stock exchanges provide a convenient environment that allows buyers to buy and sellers to sell. The speed of computers has helped all investors and stockbrokers receive up-to-the-second prices. It allows trades to execute faster.

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