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What is stock exchange and how it works?

Posted by : NIFM
15 March, 2017, 4:33 PM
First you should know about the stock exchange. An exchange is an organization where shares, commodities, currency, future and options and bonds are traded. Only the members can deal to buy/sell in an exchange. An exchange is a place where buyers and sellers meet to trade in a specific commodity or stock during a specific time period with specific quantity. If you think it is possible in spot market also then why exchange need! The reason behind that if nobody will handle this kind of deals then it is possible that big players will try to do some kind of gambling in the market. In that case, small traders will lose their hard earn money. There are some rules and regulation which is made for the traders and brokers by exchange and SEBI. A stock exchange doesn’t own shares. The exchange provides the platform to a company to raises the fund through the primary market. A company conducts its IPO (Initial Public Offering). In an IPO company sells their share to the public through IPO in the primary market. After IPO, trades can sell and buy that stock through in secondary market. The exchange controls the flow of buyers and sellers to sets the fair value. The fair value is based on the demand and supply. In India it was established in 1850, that was Bombay Stock Exchange. There are more Indices in India like MCX, NSE etc. 


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