economy

definition of stock exchange

Organizations that buy and sell publicly traded stocks

The Stock Exchange is that private organization that offers its members, in accordance with the mandates of its clients, the necessary facilities so that they can, among other things, enter orders, carry out negotiations for the purchase and sale of shares, such as shares of corporations or corporations, public and private bonds, participation titles, certificates and a wide variety of investment instruments.

The securities negotiations in the various stock markets that these organizations carry out are carried out by taking known and determined prices in real time, always around a climate of maximum security and confidence for investors, because the mechanism of any transaction that takes place do is duly regulated in advance, which of course guarantees this security that we mentioned.

One of the functions of the Stock Exchanges is to strengthen the capital market and promote both financial and economic development in the part of the world in which they are established. Many of them have even existed for several decades, while the first entities of this type were created during the early seventeenth century.

Actors who actively participate in the operations of the Stock Exchanges

There are three actors that actively participate in the operations of the Stock Exchanges: capital claimants (companies, public or private organizations and other entities), the capital providers (savers, investors) and intermediaries.

The stockbroker is the legal person authorized to advise or carry out investments and transactions

The negotiation of securities in the stock market is then done through the members, popularly known as brokers, securities brokerage companies, brokerage houses, agents, commission agents.

The stock broker or brokerage house or broker is the legal person that after a prior agreement is authorized to advise or carry out on behalf of companies, both investments and transactions in the corresponding stock exchange.

It is a condition sine quanom that these agents carry out a capacity examination and also demonstrate to the competent body their solvency in order to operate in compliance.

In order to access the listing of their securities on the Stock Market, companies must first make their financial statements public because it will be through these that the indicators that allow knowing the financial situation of a certain company can be determined.

The regulation of the Stock Exchanges is the responsibility of the National State.

Other functions they perform in the stock market

Other functions that a Stock Exchange can perform: put companies or state entities in need of resources in contact with savers who are willing to invest, confer liquidity to the investment, allowing them to convert their shares into money, certify prices in the market , favor the efficient allocation of resources and contribute to the valuation of financial assets.

Forecasting methods, basis of operation

Currently, the Stock Exchanges work through what are known as forecasting methods, which are those that allow companies and investors to have a complete and accurate idea of ​​how the market will behave in the future. , and then knowingly make the best decisions to maximize profits.

Historical and mathematical data are the basis for these methods.

Today almost all stock exchanges use these methods, however, we must mark that although they are quite accurate and correct in their forecasts, they present a deficiency in the prediction of those situations or economic phenomena that know how to significantly alter the economic state and that as such they are not easy to forecast.

Meanwhile, the techniques that they apply are of two types, on the one hand, the qualitative ones that are understood by the opinions and knowledge of experts in the field, and on the other hand, the quantitative ones are constituted by statistical data that reveal past times. .

Origin of the term

The denomination of Stock Exchange arises in the city of Bruges several centuries ago, where an aristocratic family with the surname Van Der Buërse used to hold commercial and commercial meetings in a building of their property. The shield that represented this family consisted of the image of three leather bags, then, that added to the fact that they carried out important commercial operations is that the term Buërse was taken to name precisely the places where transactions of products or securities.

The first formal stock exchanges first appeared in Belgium, in the 15th century, and in the 17th century in the city of Amsterdam, the latter being the oldest that exists to date.