Probably, with the word “exchange”, a picture of a huge hall immediately pops up before your eyes, where there are thousands of businessmen at tables with computers and phones, there is a terrible noise in the room due to the fact that someone is constantly screaming, and the numbers are changing on the walls on the scoreboard. To some extent, this is all true, but technology does not stand still, and trade is developing. What is a stock exchange, and what are its types? Read on to find out and find out more.
Definition
Exchanges at first were a place where orderly trading was conducted. But, obviously, over time this became not enough. What is an exchange today? This is much more than just a physical place to sell. These are huge financial organizations that establish their own rules governing trade and the movement of information about it.
Which are types of exchanges? Depending on the object of trade, they are commodity, stock, currency and mixed.
The exchange provides a meeting of supply and demand, contact between all market participants who can make purchase and sale transactions at the announced rate or offer their own. Depending on the rules of the organization, the means of communication may be voice, hand signal, private electronic messages or automated computer operations when the necessary parameters match.
When the two parties reach an agreement, the price at which the transaction was concluded is reported to the entire market. The result is equal and transparent conditions for all market participants, which allows them to buy as cheaply as possible and sell as expensive as possible within the limits established by the rules of the organization.
What is an exchange in the world of e-commerce?
The Internet has revolutionized commerce. Today, exchanges no longer need to have a certain physical room. Moreover, many traditional trading floors are closed, and communication between market participants occurs only online. The London Stock Exchange and the NASDAQ Stock Market are fully electronic platforms. Like Eurex, the world's second largest futures exchange. Many other organizations offer both types of trading. For example, the New York Stock Exchange has acquired an electronic trading platform called Archipelago and is increasingly moving towards moving online.
What is a forex exchange?
This is a giant in the field of currency trading. The name comes from combining the first letters of the term FOReign EXchange - "foreign exchange". But in English, it is used solely to describe the operations of international trade with currency.
Forex Exchange does not have a physical binding. The number of its participants and the operations they perform is huge. Forex participants are commercial, central, investment banks, government organizations, brokers and dealers. And, despite the fact that today it is a high-tech exchange, it will not be an exaggeration to say that it goes back to biblical times when people first encountered the need to exchange different currencies.
Forex is open 24 hours a day, because when it is night in New York, a new morning is already beginning in Japan, and therefore trading is in full swing. It would seem that with so many participants on this exchange, complete chaos should have come. But the situation is greatly facilitated by the fact that the lion's share of operations is carried out only with major currencies, of which there are only 8.Accordingly, there are predefined pairs, for example, dollar / euro, and the participants exchange them among themselves. In general, the purpose of trading is to obtain currency before increasing its value, and then selling it at a more favorable rate.
Financial giants
The securities market is huge, with multibillion-dollar capital. Do you know what a stock exchange is? This is an organized and regulated financial market where securities (bonds, bills, stocks) are bought and sold at prices established by current supply and demand.
Stock exchanges mainly act as:
- The primary market where corporations, governments, municipalities and others can raise capital and channel investors' savings into potentially profitable ventures. Depending on the rules of the exchange, certain requirements are made to such persons. For example: the size of the authorized capital, the availability of reports for a certain period, verified by external audit firms, the level of income received for previous periods, etc.
- The secondary market, where some investors can sell to others their securities for money, thereby reducing the possible risk of their investments and maintaining their own liquidity.
Bidding is conducted both in the trading floors of the exchange itself, where participants shout bets and orders, and by telephone or via the Internet.
Physical goods
But what about the trade in real objects: oil, wheat, rice? Progress did not stand still, and trading exchanges appeared. Their most famous representatives are the Chicago Board of Trade, the London Metal Exchange, the New York Coffee, Sugar and Cocoa Exchange, etc.
What is a commodity exchange? This is an organization that defines and enforces the rules for trade in products and related investments. It provides fair competition in the wholesale market.
The objects of trade are:
- precious metals;
- minerals;
- agricultural products (including food products - rice, coffee, cocoa, livestock, wool, cotton, etc.).
Labor market
In the classical sense, the labor exchange is different from other types of exchange trading. But it is not in vain that there is a proverb: "Hired that I sold myself." In general, the relationship between a potential employer and a job seeker can well be described as trading. In this case, what is a labor exchange? This is an organization that acts as an intermediary in the conclusion of an employment relationship. Previously, such an exchange was mainly a newspaper heading. But today, online employment resources are so often called, where you can find data on employers and resumes of job seekers.
State exchanges not only collect the database of vacancies and offer them to the population, but also keep records of the unemployed, provide benefits and free training. Unlike newspapers and websites that only provide information for both parties without checking it, they can offer job seekers only jobs that are consistent with labor laws.
Now you know what a stock exchange is and what its types are.
