Stock exchange - this is what? Functions and participants of the stock exchange

In most modern states with market economies, stock exchanges operate. The activities of the relevant financial institutions involve the fulfillment of a large number of functions important for the national economy. What are they? What are the main principles of trading at the respective sites?

What is a stock exchange?

Stock exchange - is, in accordance with a common definition, a specialized organization that carries out activities to organize the bidding of various securities. It guarantees the legal validity of transactions, in some cases - the confidentiality of traders and other market players, provides payments to eligible individuals for certain compensations, provides bidders with various instruments for the sale and purchase of securities.

Stock exchange is an integral attribute of the modern market economy. It allows companies to raise funds from investors by placing shares in free circulation, and thus increase their own capitalization.

History of the origin of stock exchanges

It will be useful to study how the stock exchanges appeared . The history of the emergence of the corresponding financial institutions begins, according to modern researchers, from the 16th century. Then the first commodity exchanges appeared in the largest European trading cities. In 1531 - in Antwerp, in 1549 - in Toulouse, in 1556 - in London. However, the corresponding format of financial legal relationships did not immediately become popular, and these exchanges for various reasons closed.

At the same time, in 1611, a new exchange was opened in Amsterdam, which still functions. It initially carried out trades in goods, but over time, the subject of transactions on the exchange were securities. The first, actually, stock exchange was the corresponding organization in London, founded in 1773. In 1792, a similar structure was established in New York.

History of stock exchanges in Russia

It can be noted that the prototypes of stock exchanges in Russia appeared even in the time of Peter I. In 1789 the decree of Catherine II was issued, which approved the plan for the construction of the Gostiny Dvor in Moscow, where it was supposed to organize the functioning of the exchange. But in fact, this financial institution earned only after the Patriotic War of 1812. By the time, as historians note, the Odessa Stock Exchange has already opened, in particular, in 1796. In the 19th century, the corresponding format of financial legal relations in Russia was actively developing.

By 1917 there were about 115 stock exchanges in the Russian Empire. However, the revolution and subsequent events complicated the prospects for the development of the corresponding segment. The exchanges functioned during the NEP period, however, in 1930 their activities were terminated. The restoration of the institute of exchanges in Russia occurred only after the collapse of the USSR. Now in Russia there are several major stock exchanges. Among the most famous - RTS, MICEX. Their establishment is connected with the fact that the stock exchange is, as we noted above, an indispensable attribute of a market economy. As the national economy of the Russian Federation began to rebuild from a socialist model to a capitalist one, the establishment of corresponding financial institutions was carried out.

In more detail, what is the significance of stock exchanges for the state economy, we can consider in terms of the functions that they perform.

Functions of exchanges in the economy of the state

Modern experts distinguish their following list.

First, the functions of the stock exchange are the accumulation of significant amounts of capital in the national economy. This option greatly influences the investment attractiveness of enterprises operating in the state. At the same time, it should be noted that capitalization on stock exchanges does not always correlate with GDP dynamics. The participants of the stock exchange are traders and entrepreneurs who participate in the bidding, first of all, trying to earn something for themselves. At the same time, the acquisition by them of certain financial resources can become a factor of their reinvestment into business, and this, in turn, can have a positive impact on the GDP of the state.

Secondly, the stock exchange is an exchange where a significant role is played by foreign investors. Thus, the relevant financial institutions are of great importance from the point of view of the international economic activities of the state. Statistics of RZB and stock exchanges are, in some cases, significant economic indicators for foreign partners.

Thirdly, stock exchanges are, as a rule, very large organizations that form entire professional communities of traders. Members of the stock exchange are not only companies that trade shares, but, in principle, ordinary citizens who have access to the necessary financial instruments for the sale and purchase of securities. Thus, the financial institutions under consideration are also a socializing resource, a medium for self-realization of people, an instrument for ensuring employment of the population.

Stock exchange structure

Now we know that the stock exchange is a significant financial institution for the state economy. Let us now investigate the specific nature of its structure, and what basic processes are carried out in the course of trading. The stock exchange is the place where the purchase and sale of securities - most often, free shares issued by a private or public company - is carried out.

Quotes and Indices

Based on how things are going on in the market in general or in a specific business in particular, quotations of relevant shares are compiled. In total they make up the index of the stock exchange. This, in fact, the total value of securities traded on the relevant trading floor. This index is formed, as a rule, by the largest issuers of shares, and therefore, on its basis, the investor can assess how things are going in a particular branch of the country's national economy or the entire economy as a whole.

What are the tasks of the organizers of the exchange?

As we noted above, stock indices do not always correlate with GDP, but they can provide guidance on the growth prospects of the corresponding macroeconomic indicator. Therefore, the compilation of a quotation list on the stock exchange is not an easy task for financiers, which should, on the one hand, determine the list of the largest companies on the basis of objective criteria, on the other hand, ensure the representativeness of their presence in the exchange index. Specialists in trade operations can at the same time be guided by both international standards and norms, and those that reflect the national specifics of transactions with securities.

The compilation of a quotation list on a stock exchange is not the only significant task of financiers organizing the relevant bidding. They also must ensure the full legitimacy of transactions, the correctness of the placement of shares, the entry and withdrawal of funds from the point of view of international and national legislation in the field of finance. Thus, the organization of open trades in securities involves the participation of the following key players: issuers of shares, traders, financiers making up quotation lists, as well as securing legitimacy of securities purchase and sale transactions.

Principles of trading on the stock exchange

Let's consider now, proceeding from what principles the auctions on corresponding platforms are carried out. The stock exchange is a market, albeit somewhat localized. That is, the pricing of the goods that are offered on it - in this case securities of companies - is carried out based on the ratio of demand and supply to the relevant assets. Any administrative regulation of prices on stock exchanges is not practiced. The enterprise takes out its shares on the market, intending to attract investors, first of all, with its own achievements in building a business model.

The stock exchange is an organized market functioning according to certain rules and norms. In order to enter it, the company-issuer of shares must meet a number of criteria, as well as other firms that place securities on the relevant trading floors. Traditionally, traders should adhere to similar rules.

Openness as a key attribute of trading

At the same time, the relevant financial institutions tend to be as open to investors as possible. In particular - for those who represent foreign countries. The International Stock Exchange is one of the most effective financial instruments for attracting capital to the state. Therefore, its founders are trying not to bureaucratize too much access to trading for foreign citizens.

Due to what the quotes on the stock exchanges grow?

The next aspect that will be useful to consider is that, due to what the growth of stock quotes of the company, which is present at the stock exchange, is ensured. Above we noted that the financial organizations under consideration are fully market structures that practically exclude the influence of the administrative factor on pricing mechanisms. The index of the stock exchange is an indicator reflecting the investor's interest in placing money in shares of certain companies, rather than any others. But how does the treasure determine whether the investments are reliable? And at what point does he decide to sell the acquired shares?

A large number of factors play a role here.

First, the published data on the state of affairs in the business of the company-issuer of shares are taken into account. It can be the accounting reporting, results of auditor checks, the analytical articles concerning an estimation of efficiency of a business model of firm.

Secondly, a very significant benchmark for the trader - the macroeconomic indicators. If the investor sees that the state of affairs in the national economy of the country in which the issuing company operates is far from ideal, he may decide to sell shares of all or most of the firms of the state.

Thirdly, a significant aspect of the decision of a trader to purchase or sell securities is the political situation in a particular region. A sudden change of power to the state or the emergence of tension in relations with neighbors is a factor in the fact that the investor may revise his estimates of the prospects for investing in the shares of firms operating in a particular country.

What is the motivation of traders and issuers on the exchange?

We will study one more aspect of work of stock exchanges - motivational. Actually, what motivates the companies-issuers and traders who want to participate in trading in securities? The activities of the stock exchange are, first of all, the organization of a legitimate interaction of the investor - a person who seeks to preserve and increase his capital, and a commercial enterprise, which in turn wants to increase its own turnover, develop new industries, ensure the recognition of its brand at the national and Foreign markets. Both sides, of course, are primarily interested in making a profit, and this is their main motivation.

Are stock exchanges legal?

Traders often find the opinion that a stock exchange is a hoax, and securities purchase and sale transactions are extremely rarely profitable. However, as we noted above, the organizers of trading in securities, first of all, provide just the full legitimacy of the relevant transactions, give the relevant mechanisms as much transparency as possible. Therefore, there is no need to talk about deception, but only a competent trader is able to convince himself of this. Which, investing their funds in securities, realizes that in the event of a decline in quotations, losses are possible. As well as the appearance of tangible profits, if the purchased shares of the company will grow in price.