What Is A Stock Exchange?
Pedastrians wearing protective masks walk near the Bombay Stock Exchange (BSE) building stands in the background in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

What Is A Stock Exchange?

This is a series of explainers to educate and inform new investors. In association with Dun & Bradstreet India as knowledge partner.

Stock Exchange: Definition, Meaning & Basics

A stock exchange is a marketplace, where financial securities issued by companies are bought and sold. They are part of the broader capital market ecosystem. Securities issued by companies, such as shares and bonds, are traded on the stock exchanges, after they have been issued in the primary market.

A company, desirous of listing its securities on a stock exchange, has to enter into an agreement with the exchange to ensure that its securities are allowed for trading on that particular exchange.

Stock exchanges play a key role in creating liquidity for financial securities. Securities trading on stock exchanges, is based on an order matching algorithm, which ensures that the best buy order matches with the best sell order. Stock exchanges earn money by charging a fee to the trading members.

In India BSE, formerly known as Bombay Stock Exchange, and National Stock Exchange are two main stock exchanges.

The National Stock Exchange (NSE) in Bandra Kurla Complex (BKC) in Mumbai, India. The Nifty 50 uses free float market capitalisation to decide weightage of its 50 stocks. (Photographer: Dhiraj Singh/Bloomberg)
The National Stock Exchange (NSE) in Bandra Kurla Complex (BKC) in Mumbai, India. The Nifty 50 uses free float market capitalisation to decide weightage of its 50 stocks. (Photographer: Dhiraj Singh/Bloomberg)
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