ROLE AND FUNCTIONING OF STOCKMARKETS

Role and Functioning of Stock markets



Role and Functioning of Stock markets

Introduction

The main purpose of this paper is to understand the role and functions of the stock exchange. This paper also discusses the different advantages of stock market for corporations and investors.

Discussion

The stock exchange is the most organized part of the securities market. It has characteristics of following uniform rules for securities transactions. According to their legal status the stock exchanges may be associations (USA), joint stock companies (UK, Japan) or the governmental bodies subordinate to the Ministry of Finance (France). Members of the exchange can only be specialized in securities trading exchange (brokerage) firms. Key positions on the principal stock exchanges normally take 10-15 lead brokers, each of which has an enormous equity (Backer, 2007, p. 377). The business environment of stock exchanges has changed considerably in the last decade. The typical government or member owned, national stock exchanges have largely been replaced by for-profit, publicly listed exchanges. These transformed stock exchanges increasingly operate at an international level, offering world-wide menus rather than merely serving a national appetite. The transition has a company by an immense increase in international stock exchange integration and co-operation. For example, stock exchanges have established strong operational ties with the usage of joint trading systems and the harmonization of regulations (Eiteman, 2001, p. 112). Interestingly, this increased level of integration has recently taken a new turn as stock exchanges have sought partners to create fully merged identities. The most significant merger activities include the Euro next merger, the OMX merger, the NYSE-Euro next merger, the NASDAQ-OMX merger and the merger between the London Stock Exchange and Borsa Italiana.

London Stock Market

LSE (London Stock Exchange, abbreviated LSE) is one of the largest and oldest stock exchanges in Europe; it has its official foundation in 1801.

The London Stock Exchange has two levels of markets: the so-called primary and alternative investment market (AIM). At the first market registered and traded companies with large capitalization and on the AIM market are small and medium-sized companies, as well as developing the organization. For all that AIM provides the issuer access to investment resources of the largest European capital market, whose volume has estimation at 470 billion dollars (Steven, 1999, p. 61). The issuer is also an opportunity to declare it a large number of potential investors and get the funding needed for further development.

The LSE got founded in 1570 as a capital market organized and officially regulated by some brokers and some types of contracts, where operations of buying and selling of stocks and bonds (Paudyal, 2005, p. 78). From the beginning, this stock is beginning to acquire a generous size until the late seventeenth century became the dominant world. In 1698, John Castaing begins to publish a list of stock prices, raising the first organized trading in marketable securities in London. In 1761, it comprises an area of 150 runners, forming a partnership to buy and sell and soon build their own building they give ...