Roles and Functions of Stock Exchanges

The chief function of a stock exchange is to facilitate the buying and selling of stock. By having a generally accepted place for exchange, the costs of buying and selling stock is dramatically reduced. This efficiency saves considerable resources when compared to the option of a seller trying to locate a buyer on his own.

Monitoring by Stock Exchanges

Stock exchanges have increasingly been tasked with regulating transactions, in addition to being the marketplace for the transaction. For example, the New York Stock Exchange has more than 1,000 pages of rules and regulations about transactions. Likewise, the Securities and Exchange Commission and American stock exchanges work closely to assure that trading activity comports with various rules and regulations.

Economic Development Resulting from Stock Exchanges

There is evidence that the existence of a stock exchange will improve economic growth in a nation. A study published by the Atlanta Federal Reserve Bank shows that stock exchanges improve the allocation of resources such that productivity is improved. This, in turn, increases the wealth of the nation.

History of Stock Exchanges

It is not clear exactly when or where the first stock exchange was established. There are records of exchanges, largely focused on agricultural debts, as early as the 12th and 13th century in France, Belgium and Italy. The New York Stock Exchange was the first stock exchange in the United States, formed May 17, 1792.

Largest Stock Exchanges in the World

The largest stock exchanges in the world are: (1) New York Stock Exchange; (2) National Association of Securities Dealers Automated Quotation (NASDAQ); (3) London Stock Exchange; (4) Tokyo Stock Exchange; (5) Euronext.