The Stock Exchange

You may have known the difference between money market and stock exchange. Money market is the body of persons, bankers, financiers,etc. Whose operations decide the rate of interest on borrowed capital. Stock exhange is a place where stocks and shares are bought and sold, such as the New York stock exchange, the London stock exchange and the Jakarta stock exchange. So New York, or London or Jakarta is a financial center.

                Much of the world’s business activity would be impossible without stocks and bonds. Stock and bonds are certificates that corporations sell to the public to raise money. To start a new company or to buy a new equipment for an existing company usually requires a very large amount of money. The amount may be too large to borrow from a bank or from a few private individuals. The company’s finance should be strong enough to develop produvtivity. To raise the money, the company sell thousands sometimes millions of shares of stocks or hundreds of thousands of rupiahs’ worth of bonds.

Stocks and bonds are also called securities the people who buy securities are called investors. So they invest money. By careful investment of their capital, each of them will obtaina good income.  A stock exchange is a form of exchange which provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and dividends. Securities traded on a stock exchange include shares issued by companies, unit trusts, derivatives, pooled investment products and bonds.

To be able to trade a security on a certain stock exchange, it must be listed there. Usually, there is a central location at least for record keeping, but trade is increasingly less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of increased speed and reduced cost of transactions. Trade on an exchange is by members only.