Stock Market & Stock Exchange

Stock Market & Stock Exchange: Understand the difference

Stock Exchange and Stock Market are terms used to denote platforms for trading in stocks. Although these terms are used interchangeably, nevertheless these terms are different and lay varied meanings in respect of each one of them.

Stock Market may be described as the overall financial platform and activity in respect of stocks and other investment assets, and Stock Exchange is the institutionalized form and it forms a part of the Stock Market.

Both the structure help immensely in the economy and creates liquidity which further facilitates economic activities in a country and across the globe.

Stock Exchange

A stock exchange is a centralized platform where the government, corporations, and investors come together to do trading in stocks. It facilitates trading and organizes buyers and sellers under one roof, virtually or physically.

Stock exchanges also are involved in the formulation of conditions, rules, and regulations for buyers, sellers, enlistment of companies, tracking price fluctuation in stocks and volumes. Most of the trading here takes place through a broker who facilitates the trading process.

Internationally, the New York Stock Exchange or NASDAQ is one the greatest platforms in the world where the stock market thrives through trading between the companies and their investors or shareholders.

In India, The National Stock Exchange and The Bombay Stock Exchange are two of the most important stock exchanges through which maximum volume of trading takes place.

Stock Market

It is the infrastructure for all activities related to buying and selling of stocks. It provides a platform for the companies to be enlisted and registered and be able to offer the shares of their company as equity to the public for building their own capital. It is a collection of markets and exchanges where trading takes place.

All financial services related to stocks happens in the eco-system of a stock market where the stock exchange is an integral part of it. Apart from trading in stocks or shares, buying and selling of derivatives, commodities, currencies, and investment in bonds also occur in this system.

The financial activities happen through over the top counter purchase and sell of stocks and other investment asset classes.

Differences

  1. The stock market is the common term that denotes all financial services related to trading including stocks. The stock exchange is a platform for trading in stocks or shares of an unlisted company and it is an important part of the Stock Market as well.
  2. Over the counter trading, stock exchange trading, and electronic trading are all a part of the stock market. Hence stock exchange represents an integral mechanism in the stock market.
  3. Stock market trading includes trading in commodities, derivatives, currencies, and bonds through OTC and electronic trading. Stock Exchange only deals with the buying and selling of stocks or shares of companies.
  4. Stock Exchanges record the volume of shares that have been traded in a company. It also keeps a record of overall stock market volume statistics. This can happen because of its organized structure. The Stock Market is more of the general ecosystem in which all these financial services structures dwell.

Hence, stock markets and stock exchange are interconnected, and while the former relates to the entire system of trading, the latter associates itself with only a type of trading, which is in stocks or shares of companies.

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