Stock Exchange Definition

Stock Exchange

Stock Exchange is a marketplace where shares/ stocks, bonds and other similar financial instruments are traded. The advent of stock exchanges and listing of companies’ shares on the exchanges brought immense liquidity for the investors. Before coming into existence of stock exchanges investors were stuck with the shares and bonds, as it was very difficult for them to find and reach out to suitable buyers.

The world’s first stock exchange is supposed to be ‘The Amsterdam Stock Exchange’ established in 1602 by the Ditch East India Company, though this disputed by some (source: Wikipedia).

Engraving depicting the Amsterdam Stock Exchange, built by Hendrik de Keyser c. 1612. Artist  Claes Jansz. Visscher, Source: Wikipedia 

In India, during the manual trading days, many regional stock exchanges used to flourish, namely:

1. Bombay Stock Exchange (BSE)
2. Delhi Stock Exchange (DSE)
3. Madras Stock Exchange (MSE)
4. The Calcutta Stock Exchange (CSE)

The National Stock Exchange (NSE) was established in 1992 which for the first time provided a modern, fully automated screen-based electronic trading system, BSE and other exchanges followed suit and today BSE and NSE are the most popular stock exchanges operating in India.

Stock Definition

Stock Definition

‘Companies’ and ‘Shares’ with limited liability were devised during the colonial period to mitigate high risk and uncertainty involved in the seafaring ventures. Shares enabled raising huge sums required to fund expeditions from many small investors and limited liability protected the investors from creditors accessing their personal properties in case of a failed venture. Thus a share is ownership of a company into a tiny unit or block.

With the advent of stock exchanges the shares got listed on the exchanges bringing a great amount of liquidity to shares.

Stock is a term used to describe shares in general while the word share is used in the context of a particular company. For example you own shares of NMDC Ltd. or SJVN Ltd. You also own stocks of a great number of Indian companies.

It is not uncommon, at least in India that the two terms stocks and shares are used interchangeably.

A Share of 'The Empire Jute Company Limited"