The Role of Stock Exchanges

Stock exchanges are the backbone of the financial markets, providing a platform for buying and selling stocks.

How Exchanges Work:

1. Listings:
   • Companies must meet strict requirements to list their shares (e.g., minimum market cap, financial performance).
   • Example: To list on the NYSE, a company must have at least $100 million in market capitalization.
2. Trading:
   • Buyers and sellers place orders through brokers, and the exchange matches them.
   • Example: If you want to buy Apple stock, your broker sends the order to the NASDAQ, where it’s matched with a seller.
3. Market Makers:
   • These are firms that provide liquidity by buying and selling stocks.
   • Example: A market maker might buy Apple stock at 149andsellitat149andsellitat150, earning the spread.

Major Exchanges:

1. NYSE (New York Stock Exchange):
   • The largest exchange in the world by market capitalization.
   • Example: Companies like Coca-Cola and Walmart are listed on the NYSE.
2. NASDAQ:
   • Known for tech companies like Apple, Google, and Amazon.
   • Example: NASDAQ is home to many high-growth, innovative companies.
3. London Stock Exchange (LSE):
   • A major exchange in Europe, listing companies like BP and Unilever.
   • Example: The LSE is a hub for international investors.

Electronic Trading:

• Most trading today is done electronically, with algorithms matching buyers and sellers in milliseconds.
• Example: High-frequency trading firms use algorithms to execute thousands of trades per second.