A stock exchange - what is it?

Stock exchanges are central pilars of the national economy. They offer regulated market places for trading securities and thus give companies access to capital, to finance themselves and investors to invest money.

Stock exchanges serve as trading places for property rights, e.g. in the equity of companies in the form of shares or receivables in the form of bonds. A central feature of stock exchanges is supervised pricing with the aim of creating transparent and efficient markets with the lowest possible transaction costs and protection against manipulation.

They bring together the orders of a large number of buyers and sellers in one place, without them knowing each other or meeting in person, and without the need to physically hand over the trading items.

On the stock exchange in Frankfurt - unlike on the market square of a city - no goods or commodities are traded, but securities such as shares or bonds.

Stock exchanges are important for the economy: they help companies seeking capital to be found by anyone who wants to invest money. With this money, companies can, for example, research new products, buy machines or create new jobs.

Any person with legal capacity can buy shares on the stock exchange via a financial service provider (e.g. a bank), thereby becoming a co-owner of companies and participating in their economic success.

The stock exchange ...

• brings seller and buyer - i.e. supply and demand - together.
• operates trading platforms such as the Frankfurt Stock Exchange floor or the Xetra electronic trading system and ensures transparent, fair and secure trading.
• is responsible for ensuring that securities can be traded at any time and transferred from sellers to buyers as new owners against payment of the purchase price.
• determines a price based on supply and demand.
• publishes information and figures on securities trading and thus additionally increases its transparency and attractiveness.

Company ...

• use the stock exchange to come into contact with national and international investors in order to raise capital for their business and thus remain competitive.
• offer investors the tradability of their securities via the stock exchange.
• receive a valuation of their company on the stock exchange.
• become better known through their activity on the stock exchange.

Investors ...

• find investment opportunities via the stock exchange: They can buy and sell securities, e.g. shares in companies.
• benefit from uniform trading rules that are uniform for all market participants.
• can obtain information about companies and their securities on the basis of data provided by the stock exchange.

The economy can grow because companies ...

• thanks to the inflow of capital on the sale of shares and bonds
• invest and grow in turn
• as well as secure/create jobs

Stock exchanges as part of money, capital and derivatives markets

Stock exchanges are important pillars of an economy's financial markets. These can be easily differentiated according to the investment horizon:

• Short-term investments are made on the money market. These include, for example, cash, call money, bonds with a very short remaining term, money market funds, foreign exchange.
• The capital market comprises all tradable securities for longer-term financing: longer-term bonds, corporate investments in the form of equities, funds and certificates.
• Securities, commodities or foreign exchange are traded on the futures market and are delivered within three days at the earliest. These are mainly options and futures.
• On the money and capital markets, the traded securities are delivered within two days. This is why it is also called the cash market.

© May 2019 - Deutsche Börse AG