What is a Stock Exchange?

2 min read
Oct 22, 2023 12:23:02 PM

This blog post explores the inner workings of a stock exchange, shedding light on the pivotal role it plays for both investors and companies alike. Discover how stock exchanges operate, their significance for investment opportunities, and the crucial function they serve in enabling companies to raise capital for growth and expansion.

A stock exchange is an organized marketplace where shares of listed companies are publicly traded. It provides investors the opportunity to buy and sell shares of companies listed on the exchange. The goal of a stock exchange is to create a transparent and efficient market where buyers and sellers can meet and determine stock prices based on supply and demand.

How does a stock exchange work?

On a stock exchange, shares are traded by brokers working for securities firms. These brokers act as intermediaries between buyers and sellers, facilitating the trading of shares on the exchange. When an investor decides to buy shares, they instruct their broker to purchase the shares for them on the exchange. The broker then seeks out a seller willing to sell the shares and executes the transaction.

The price of a share on a stock exchange is determined by supply and demand. When there is high demand for a particular share, the price will rise. If there is more supply than demand, the price will fall. This makes a stock exchange a highly transparent and efficient market, where stock prices are determined in real-time.

Why is a stock exchange important?

A stock exchange is important for investors because it provides them with the opportunity to invest their money in companies that have the potential to grow and be profitable. By buying shares of listed companies, investors can benefit from the growth of these companies and potentially earn a return on their investment.

A stock exchange is also important for companies because it allows them to raise capital by issuing shares. By selling shares to the public, companies can raise the capital they need for expansion, investments, and other activities. This enables them to grow and achieve their goals.

How can Share Council help make others co-owners? 

The connection between both lies in the concept of share ownership. On a stock exchange, shares are traded among external investors, while the employee share platform offers employees the opportunity to acquire shares of their own company. In both cases, individuals acquire shares that grant them a piece of ownership in the company.

The key distinction is that on a stock exchange, shares are publicly traded, whereas with Share Council, shares are offered directly to employees as a form of reward, motivation, or long-term incentive.

The goal of making employees co-owners is to allow them to benefit from the growth and profitability of the company. This fosters a greater sense of engagement and motivates employees to work harder for the company. Book a non-committal demo with our CEO to see if this aligns with your company.