• The Stock Exchange

What is the stock exchange ? Everyone knows the stock exchange, or heard about it. There are the one of Paris, London, Tokyo, New York and many other, but do we really know what happen there and what is exactly their use? Everyone has his personal view about the stock exchange according to his own experience.

The stock exchange is first of all a place where firm sellers and buyers of stocks meet and exchange; it plays a primary role in the countries economy.

The Stock Exchange is the most important institution in the funds market, it concentrates at the same time the demand and the supply of securities negotiated openly, free and permanent based on known rules.

In the Stock Exchange, transactions are made with valuable stocks issued on the primary market of the capital. The Stock Exchange is a barometer very sensitive and accurate in the economic field; the price is set after a negotiation on the secondary market. The value of a stock reflects the financial and economic of the firm that issued it.

The most important role of a stock exchange is the financing of the economy that enables firms to find the financial means needed to develop.

Historical view

The words stock exchange refers to the public place where merchants, bankers, exchange agents and brokers gather, at certain hours, to do business.
Historically, the origine of the stock exchange goes back to the Antiquity, but it is during the Middle Age that the concept of modern stock exchange appears, little by little. Many centuries passed before the basis of modern stock exchange appeared in Europe, more precisely in Belgium.

Stock exchange or "Bourse" comes from the name of an important person of the Belgian bourgeoisie from Bruges, Van den Burse. The first stock exchange place appeared in France at the beginning of the 16th century (1595 in Lyon).

Before the technologic revolution and apparition of the new communication tools we currently know. Stock exchange represented an open space to financial actors such as the State and the firms listed on the marked or to their mandated representatives. Nowadays, the Stock Exchange is a place for financial exchanges entirely computerized.

Its functioning

In the economic sense, a stock exchange is an institution, private or public, that enables to make exchanges of goods or standardized assets that then permit to fix the price. It is a financial market where stocks (shares) can be bought or sold. Those shares are parts of the capital of a firm and they therefore correspond to a certain sum.

Until the 1980s, transactions between buyers and sellers were made at “auction”. However, today, new technologies have replaced the famous « trading floor » around which traders used to do their « market » and now everything works with computers, buyers and sellers confront themselves through a central computer. The exchanges are about shares, bonds or about other listed securities. Buyers and sellers submit their orders to authorized intermediaries (banks and stockbrokers). The market price of the stock exchange sprung from the confrontation of these exchanges. The electronic treatment is faster and the risks of making mistakes are minimal.

To make a stock exchange order you have to know:

· the nature of the stocks, goods or derived concerned
· the sens of operating (selling or buying),
· the quantity offered or claimed,
· eventually a due date and a limited price to execute the order.
· the market on which the operation must be done .

You cannot directly make a stock exchange order on the market. You necessarily have to go through your intermediary (eventually through e-mails) who is responsible to check any transmission on the market.

Concerning transactions, the Stock Exchange is separated into several « markets » each representing a category of listed firms classified according to their size, their number of issued stocks, and so on… They are the: Primary Market, Secondary Market, New Market, Free Market and the others.
The Stock Exchange market works on workdays continuously from 9 am to 5.30 pm.

Exchanged stocks

In the Stock Exchange several types of stocks are exchanged between firms: the shares that represent a part of the capital of a firm, the bonds that represent a claim that the holders have on a each firm for which they possess such stocks and thanks to which they get (in general, every year) interests until the complete suppression of the debt of the firm. Shares and bonds are the main stocks that we know but others exist and circulate at the Stock Exchange: they are the options, warrants, certificates, trackers and the UCITS (Undertaking for Collective Investment in Transferable Securities).