Submitted by nsscadmin on
By Surbhi Sharma
The stock exchange is an essential component of the global financial system, but how stock exchanges operate can be confusing to novice investors. In this blog series we’ll look at the basics of stock exchanges in Canada, starting out with how they operate and their purpose, and then look at the differences between exchanges that are available to Canadian investors.
Let’s begin with “what is a stock exchange?” A stock exchange is a marketplace where buyers and sellers come together to trade securities such as stocks, debentures, and exchange-traded funds. The shares of publicly traded companies’ can be listed on an exchange for investors to purchase. Anyone holding stocks listed on a specific exchange can also find prospective buyers there. The Canadian market includes several stock exchanges. The Toronto Stock exchange (TSX) is the most prominent and well-known.
Purpose of stock exchanges:
The purpose of stock exchanges is to provide a marketplace where different securities such as stocks, debentures, and exchange-traded funds can be bought and sold. The key purposes of stock exchanges include:
- Stock exchanges provide investors with a regulated platform to buy and sell securities efficiently.
- Stock exchanges bear the burden of ensuring that prices are transparent, and that trading is fair. Exchanges provide up-to-date information on the price of stocks and other securities listed on the exchange.
- Another key purpose of stock exchanges is to provide liquidity to investors. During trading hours investors can list their securities for sale or obtain securities listed for purchase.
- Stock exchanges can provide an indication on sentiment within an economy as they will often signal the markets expectations on the outlook for future growth.
Understanding the role and purpose of the stock exchange is essential if you’re looking to participate in and understand the complexities of Canada’s financial markets.
In the continuation of our blog series on stock exchanges we will take a closer look at the different stock exchanges that operate in Canada and their main characteristics. This will include:
CBOE Canada Exchange