what is an exchange 
an exchange is a marketplace where securities commodities derivatives and other financial instruments are traded the core function of an exchange is to ensure fair and orderly trading and the efficient dissemination of price information for any securities trading on that exchange exchanges give companies governments and other groups a platform from which to sell securities to the investing public exchanges explainedan exchange may be a physical location where traders meet to conduct business or an electronic platform they also may be referred to as a share exchange or bourse depending on the geographical location exchanges are located in most countries worldwide the more prominent exchanges include the new york stock exchange nyse the nasdaq the london stock exchange lse and the tokyo stock exchange tse electronic exchangesin the most recent decade trading has transitioned to fully electronic exchanges sophisticated algorithmic price matching can ensure fair trading without requiring all members to be physically present on a centralized trading floor day to day operations are normally performed over multiple exchange networks though some orders may be processed in a physical location like the nyse the great majority of trades are completed through electronic means without regard to a physical location this process has resulted in a substantial increase in high frequency trading programs and the use of complex algorithms by traders on exchanges listing requirementseach exchange has specific listing requirements for any company or group that wishes to offer securities for trading some exchanges are more rigid than others but the basic requirements for stock exchanges include regular financial reports audited earning reports and minimum capital requirements for example the nyse has a key listing requirement that stipulates a company must have a minimum of 4 million in shareholder s equity se exchanges provide access to capitala stock exchange is used to raise capital for companies seeking to grow and expand their operations the first sale of stock by a private company to the public is referred to as an initial public offering ipo companies listed on the stock exchange typically have an enhanced profile having more visibility may attract new customers talented employees and suppliers who are eager to conduct business with a prominent industry leader private companies often rely on venture capitalists for investment and this usually results in the loss of operational control for example a seed funding firm may require that a representative from the funding firm hold a prominent position on the board alternatively companies listed on a stock exchange have more control and autonomy because investors who purchase shares have limited rights real world example of an exchangethe new york stock exchange is perhaps the most well known of exchanges in the u s located on wall street in manhattan in new york and it saw its first trade in 1792 1 the floor of the nyse sees stock transactions taking place in a continuous auction format mondays through fridays from 9 30 a m 4 p m 2 historically brokers employed by members of the nyse would facilitate trades by auctioning off shares the process started to become automated in the 1990s and by 2007 nearly all stocks became available via an electronic market the only exceptions are a few stocks with very high prices until 2005 only owners of seats on the exchange could trade directly on the exchange those seats now are leased on one year terms 