Table Of Content
What Is a Stock Exchange?
A stock exchange is a regulated marketplace where investors can buy and sell shares of publicly traded companies.
These platforms provide the infrastructure, technology, and oversight needed for smooth, transparent transactions between buyers and sellers.
In the U.S., major exchanges include the New York Stock Exchange (NYSE) and Nasdaq, which together handle billions of dollars in trades daily.
When a company wants to raise capital, it can go public through an Initial Public Offering (IPO) and list its shares on a stock exchange. After that, the shares can be bought and sold by retail and institutional investors.
Stock exchanges play a vital role in the economy by enabling price discovery, improving liquidity, and fostering investor confidence through regulation and transparency.
How Does It Operate?
Stock exchanges act as digital auction houses, ensuring that trades are executed efficiently, fairly, and at market-driven prices.
Order Matching System: Exchanges use automated systems to match buy and sell orders. For example, if Investor A wants to buy 100 shares of Apple at $180 and Investor B wants to sell at that price, the exchange matches the two instantly.
Market Makers: In less liquid stocks, market makers help by quoting both buy and sell prices. For instance, on Nasdaq, designated firms ensure trades can happen even if buyer/seller demand is low.
Price Discovery: Stock exchanges constantly update prices based on real-time supply and demand. This is why Apple stock might fluctuate minute-by-minute—new investor actions change the current market price.
Clearing and Settlement: Once trades are matched, the exchange coordinates the transfer of shares and cash through clearinghouses.
This seamless structure builds investor trust and helps markets function reliably.
Major Global Stock Exchanges
Across the world, several major stock exchanges serve as financial hubs where companies raise capital and investors trade securities.
Stock Exchange | Market Capitalization (USD Trillions) | Notable Listed Companies |
|---|---|---|
New York Stock Exchange (NYSE) | 25.0 | Coca-Cola, ExxonMobil |
Nasdaq | 21.7 | Apple, Microsoft, Amazon |
Shanghai Stock Exchange (SSE) | 6.7 | PetroChina, Industrial and Commercial Bank of China |
Japan Exchange Group (Tokyo Stock Exchange) | 5.9 | Toyota, Sony |
London Stock Exchange (LSE) | 3.4 | BP, HSBC |
Hong Kong Exchanges and Clearing (HKEX) | 4.2 | Tencent, Alibaba |
National Stock Exchange of India (NSE) | 3.5 | Reliance Industries, Tata Consultancy Services |
Shenzhen Stock Exchange (SZSE) | 4.5 | Ping An Insurance, BYD Company |
Deutsche Börse | 2.1 | Volkswagen, Siemens |
- New York Stock Exchange (NYSE): The largest exchange globally by market capitalization, home to giants like Coca-Cola and ExxonMobil.
Nasdaq: Known for its tech-heavy listings such as Apple, Microsoft, and Amazon. It’s a fully electronic exchange.
London Stock Exchange (LSE): A key player in Europe, listing major multinational firms including BP and HSBC.
Tokyo Stock Exchange (TSE): Japan’s leading exchange and home to corporations like Toyota and Sony.
Shanghai Stock Exchange (SSE): One of China’s two main exchanges, hosting firms such as PetroChina and ICBC.
Hong Kong Stock Exchange (HKEX): Acts as a gateway between China and international markets; Tencent and Alibaba have listed here.
These exchanges differ in rules, trading hours, and listed sectors, but all play crucial roles in global capital flows.
How a Company Gets Listed on a Stock Exchange
To trade publicly on a stock exchange, a company must go through an Initial Public Offering (IPO)—a process of offering shares to the public for the first time.
The company works with investment banks to underwrite the IPO, file required documentation with regulatory bodies (like the SEC in the U.S.), and meet listing standards for the chosen exchange.
Each exchange has specific listing requirements. For example, the NYSE requires a minimum of $10 million in pre-tax earnings over the past three years, while Nasdaq's Capital Market tier focuses more on cash flow and equity thresholds.
Company | IPO Date | Exchange | Amount Raised (USD Billions) | Notable Details |
|---|---|---|---|---|
Arm Holdings | Sep 2023 | Nasdaq | 5.0 | British semiconductor firm; largest IPO worldwide in 2023. |
CoreWeave | Mar 2025 | Nasdaq | 1.5 | AI cloud firm; priced IPO at $40/share amid market downturn. |
Reddit | Feb 2024 | NYSE | 0.8 | Social media platform; stock doubled since debut. |
Viking Holdings | Jan 2024 | Nasdaq | 1.2 | Cruise line operator; shares surged by 58% post-IPO. |
Venture Global LNG | Nov 2023 | NYSE | 2.0 | Energy company; stock declined by 55.7% post-IPO. |
Stock Exchanges vs. Over-the-Counter (OTC) Markets
Stock exchanges and over-the-counter (OTC) markets are both venues for trading securities, but they operate very differently.
- Stock exchanges are centralized, regulated platforms like NYSE and Nasdaq where companies must meet strict listing standards.
- OTC markets, by contrast, are decentralized and often used for trading smaller or foreign companies that do not qualify for major exchanges.
For example, large-cap stocks like Apple or Google are traded on Nasdaq, while penny stocks or foreign companies like Nestlé may be traded OTC via platforms like the OTC Markets Group.
Investors on OTC markets face higher risk due to lower liquidity and fewer reporting requirements. Here's a comparison:
Feature | Stock Exchange | OTC Market |
|---|---|---|
Regulation | Highly regulated; strict listing standards (e.g., SEC in the U.S.) | Lightly regulated; minimal listing requirements |
Transparency | High disclosure and auditing standards | Varies; often less transparency |
Liquidity | High liquidity; easier to buy/sell shares | Lower liquidity; may be harder to trade shares |
Examples | NYSE (e.g., Coca-Cola), Nasdaq (e.g., Apple) | OTCQX (e.g., Nestlé ADRs) |
FAQ
A stock exchange provides a regulated platform where buyers and sellers trade securities like stocks and bonds. It ensures transparency, efficiency, and fair pricing.
Stock exchanges earn revenue through listing fees, transaction charges, and data services. Companies pay to list, while brokers and traders pay to access and use the platform.
The U.S. Securities and Exchange Commission (SEC) oversees exchanges like the NYSE and Nasdaq. It ensures compliance with federal securities laws to protect investors.
Yes, any individual can trade on a stock exchange through a registered broker or trading platform. Direct access is typically limited to institutions and brokerage firms.
Once listed, a company's shares become publicly tradable. It must meet ongoing reporting requirements and is subject to market forces like investor demand and news.
Prices are set by supply and demand in real-time. If more people want to buy than sell, the price rises—and vice versa.
Many exchanges today operate electronically, like Nasdaq. Others, like the NYSE, use a hybrid model that includes both electronic systems and human floor traders.
The stock market is a general term for all buying and selling of stocks. A stock exchange is a specific venue where that trading takes place.
Investors access exchanges through brokerage accounts. Online platforms like Fidelity, Charles Schwab, or Robinhood connect users directly to market orders.
