2-01 What Are Stock Exchanges?

So what exactly are “Wall Street” and the “New York Stock ExchangeStock exchanges are simply organizations that allow people the ability to buy and sell stocks.“? You have probably heard these words thousands of times, but unless you are a stock owner they might have gone in one ear and out the other.

Stock exchanges are simply organizations that allow people the ability to buy and sell stocks, and a stock is simply a representation of fractional ownership in a company. Think of a stock exchange as a cross between a neighborhood flea market and an auction. The flea market part of the analogy is to show that there is a central gathering place for buyers and sellers of various products, and the auction part is to show that whatever is being bought and sold is done so at the best possible price for all of those in attendance.

Each day at the exchange (flea market) brings a new group of individuals with different expectations and different amounts and quality of products to sell. These differences result in slight prices changes each day.

The stock exchanges, through the use of computers, allow for simultaneous auctions going on for every stock that trades on the exchange every second that the exchanges are open. When the buyers and sellers agree on a price, a trade occurs; when buyers and sellers don’t agree on a price, a trade does not occur, but the computers show what price the buyers are willing to pay and what price the sellers are willing to sell.

The stock exchanges provide a convenient environment that allows buyers to buy and sellers to sell quickly and easily. The super sophistication and speed of computers has only helped all investors and stockbrokers receive up-to-the-second prices and execute trades faster.