Services Marketing

18/07/2013

Chapter 7

Introduction

A stock exchange is a place where a range of listed financial assets are bought and sold. The share market refers to that part of the stock exchange where companies are listed and are known as public corporations. The financial systems in most developed economies will include at least a stock exchange. The main class of financial asset quoted and traded on a stock exchange are ordinary shares or common stock. A share is a financial asset that represents an ownership share in a company.

The stock exchange

Copyright  2011 McGraw-Hill Australia Pty Ltd PPTs to accompany Viney, Financial Market Essentials

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Copyright  2011 McGraw-Hill Australia Pty Ltd PPTs to accompany Viney, Financial Market Essentials

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Learning objectives

LO 1 Consider the origins and purpose of a stock exchange (7.1) LO 2 Discuss the important roles carried out by a stock exchange, including: (7.2)

– – – – the primary market and secondary market roles the derivatives market role the interest rate market role the electronic trading and settlement systems used for share market transactions – the importance of information flows to the efficiency of share markets – the supervisory role that affects the behaviour of participants in the share market.

7.1 The stock exchange

The origins of the modern stock exchange can be traced back to 1553 with the establishment in England of the Muscovy Company.

– A number of merchants and suppliers became part-owners of this company and their ownership shares could be freely traded. – This company was established to find a northeast trade route to China and the Orient.

By the end of the seventeenth century there was substantial dealing in shares of 140 stock companies in London. Merchants who owned the shares or their agents met in coffee houses to trade. The world’s first stock exchange is said to have been established in 1700 in Jonathon’s Coffee House near Change Alley in London.

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