Stock exchanges such as the New York Stock Exchange, Nasdaq, and other exchanges around the world allow companies around the world to raise money. Today, they are mostly electronic markets, where stock brokerage companies are licensed and traders represent them buying and selling stocks. Through the exchange, private companies sell shares in the form of publicly traded shares. Those who want to invest in securities place buy or sell orders through managed brokerage companies. These companies act as intermediaries to the public, providing an efficient and strictly regulated trading market.
The main function of the stock exchange is to help companies raise money. To carry out this task, ownership in a private company is sold to the public in the form of shares. The funds received from the sale of shares contributed to the formation of the company’s capital. Companies plan to use newly raised funds to invest in efficient business assets and increase revenue and profits. This active business expansion can then be reflected in higher stock trading prices.
An organized and regulated stock exchange will facilitate the effective trading of stocks and other investment vehicles. Without this highly coordinated and controlled stock exchange, global stock trading would not be possible. Through the stock exchange, any individual or company can buy or sell shares of another company. In fact, at any given time, there are thousands of company shares traded through millions of individual transactions. The stock exchange, especially the high volume computerized electronic trading platform, serves as the necessary infrastructure to effectively connect both buyers and sellers globally.
Security and transparency
The sale of legitimate shares on any exchange requires accurate and reliable information. By demanding a high level of transparency from all trading companies, the stock exchange creates a safer environment for investors, helping them identify risks when investing.
A stock exchange operates in close cooperation with government agencies and officials. Uns controlled markets can have a negative impact on capital formation. Strict regulation of stock exchanges allows strangers from all over the world to respect contracts made in daily stock trading. The goal of securities market regulations is also to prevent criminal activity in financial markets. By protecting investors and promoting transparency, the stock market accelerates the process of capital formation.
The U.S. Securities and Exchange Commission handles oversight and regulation of all stock exchanges and investments in the United States. The SEC’s long-term management is focused on protecting investors and maintaining legitimate trading operations, thus boosting capital formation. Similar agencies regulate stock markets around the world.