![]() ![]() In July 2018, China announced additional plans to allow foreign investors to access A shares through domestic brokerages. Shares are quoted in RMB, with trading in A shares historically restricted to domestic investors. There are two types of stocks listed on the SSE, ‘A shares’ and ‘B shares’. It reported a market capitalization of US$5.01 trillion in March 2018. Shanghai Stock Exchange (SSE)įounded in November 1990, the Shanghai Stock Exchange is the fourth-largest exchange in the world. Many tech and growth firms choose to be listed on the NASDAQ. With a market capitalization of US$10.93 trillion as of March 2018, it is the second-largest in the world by market capitalization. NASDAQįounded in 1971, NASDAQ is a US-based stock exchange. As of March 2018, the NYSE’s market capitalization was US$23.12 trillion. New York Stock Exchange (NYSE)įounded in 1792, the New York Stock Exchange is by far the largest exchange in the world. By providing liquidity and real-time price information on company shares, the stock exchange also encourages an efficient market by allowing investors to actively decide the value of companies through supply and demand. In addition, exchanges also provide liquidity, as it is relatively easy to sell one’s holdings. This means that the capital that would otherwise be untouched is utilized towards economic benefits, resulting in a more efficient economy. Stock exchanges provide an avenue for individuals to invest their cash, as opposed to merely saving these funds. In addition to encouraging management efficiency, exchanges also facilitate economic efficiency through the allocation of capital. Public reporting helps ensure that management will make decisions that benefit the goals of the company and its shareholders, thereby acting efficiently. The actions of a company’s management are constantly under public scrutiny and directly affect the value of the company. This includes having to regularly and publicly report their financial statements and earnings to their shareholders. Corporate GovernanceĬompanies that are publicly listed on a stock exchange must conform to reporting standards that are set by regulating bodies. This provides companies with avenues to increase growth. Through initial public offerings (IPO) or issuing of new shares, companies are able to raise capital to fund operations and expansion projects. Below are some of the ways exchanges contribute: 1. Stock exchanges act as an agent for the economy by facilitating trade and disseminating information. Become a world-class financial analyst with CFI’s Financial Modeling & Valuation Analyst (FMVA)™ certification program! Though people are typically familiar with the image of the trading floor, many exchanges now use electronic trading.īe on the trading floor yourself. Exchanges can be a physical location or an electronic trading platform. Stock exchanges allow companies to raise capital and investors to make informed decisions using real-time price information. Bonds are typically traded Over-the-Counter (OTC), but some corporate bonds can be traded on stock exchanges. A stock exchange is a marketplace where securities, such as stocks and bonds, are bought and sold. ![]()
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