What Is a Stock Exchange?
A stock exchange is a marketplace where shares of companies are bought and sold. It matches buyers with sellers and makes sure trades follow the rules.
A stock exchange in simple words
Think of a farmers market, but for stocks. Sellers say what price they want. Buyers say what they will pay. When the two prices meet, a trade happens. Today almost all of this is done by computers in a fraction of a second.
How a stock exchange works
- A company joins the exchange through an IPO and gets a ticker.
- Your broker sends your order to the exchange.
- The exchange matches it with someone on the other side.
- The price of the last trade becomes the price you see.
Stock market vs stock exchange
The stock market is the whole idea of buying and selling company shares. A stock exchange is one specific place where it happens. The New York Stock Exchange and the Nasdaq are the two biggest exchanges in the US.
How do exchanges make money?
Exchanges are businesses too. They charge companies to be listed, charge fees on trades, and sell price data. Some exchange owners are themselves listed on the stock market.
See it in real companies
Open a company to see what it sells and how it makes money.