In principle, the mechanism of a stock exchange is very simple. The stock exchange is a market on which prices for securities or goods are formed according to supply and demand. Unlike in a market hall, people does not conduct trading on the stock exchange directly between buyers and sellers, but by authorized persons, the traders.
Importance for investors
Investors can buy and sell securities at any time on a stock exchange. Trading takes place according to certain rules that are the same for all market participants. The stock exchange ensures that you can buy or sell securities quickly.
Importance for companies
Going public brings companies additional capital. This allows investments, research and market developments to be financed. In this way, companies ensure their continued competitiveness.
The stock market strengthens the economy
The central task of the stock exchange is to bring together investors and entrepreneurs. It thus fulfils an important function for the entire economy. Well-functioning stock exchange makes it easier for companies to invest and thus secure existing jobs and create new ones.
A well-functioning capital market is an important success factor for every economy. How strong a capital market is in a country is shown, among other things, by the so-called market capitalization of the respective stock exchange. You can see the economy of a certain country or company through rebate programs (https://www.youreviewit.com/rebate-programs/rewards.mypet.com-rebate/).
In addition, the exchange fulfils other tasks:
- Provision of a trading platform
- Ensuring transparency about prices and sales
- Admission of new issues to stock exchange trading
- Calculation of indices (these are regarded as “mood barometers” of the stock market and economy)
Main players in the capital market
The main players on the capital market are those who seek capital, who want to finance investment projects and issue securities for this purpose, and the capital providers who want to invest their money profitably and therefore buy these securities. The exchange organizes the market under legal supervision. Finally, intermediaries who act as traders, advisors and liquidators facilitate the meeting of capital providers and buyers.
The capital providers
The capital providers on the capital market can be both private investors and institutional investors. Institutional investors are insurance companies, capital investment companies, financial institutions and other companies that invest the capital they manage profitably.