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  • Explanation of the (stock) exchange – THIS IS WHAT YOU NEED TO KNOW!
  • Explanation of the (stock) exchange – THIS IS WHAT YOU NEED TO KNOW!

Explanation of the (stock) exchange – THIS IS WHAT YOU NEED TO KNOW!

The stock market: what exactly is it?

When people talk about the stock exchange, they often mean the stock exchange. This is an institution where trading takes place in all kinds of financial products such as shares, options, futures, bonds or agricultural futures contracts. For the Netherlands, it is the NYSE Euronext that brings together supply and demand for securities. You could say that the NYSE Euronext is a financial organisation whose business activity is to operate the AEX, AMX and the AScX. A comparison with football for clarification. The KNVB can be compared to the NYSE Euronext and the Eredivisie to the AEX. Companies in the AEX in which you can buy shares can be compared to the clubs in the Eredivisie. Finally, you can see companies in the AMX as the clubs in the lower competition.

The stock exchange trading in securities

At first glance, the stock exchange seems like a rather impressive collection of stock prices, financial statements, graphs and difficult technical terms. But in fact, it is nothing more than a place where supply and demand meet in an organised manner (and with strict rules). In the Netherlands, the stock exchange is located at Beursplein 5, on the Damrak in Amsterdam.

The most famous stock exchange in the entire world, the New York Stock Exchange, is located on the famous Wall Street in New York. This is known for the Dow Jones Index, a similar  index  to the AEX but a fraction larger. Since the 19th century, stock exchange trading has taken place in New York City. It started on the street, on the now famous Wall Street in Manhattan, where traders and buyers were looking to realize a favorable price for their securities. Under a tree, which is no longer there, securities were traded.

The development of the stock exchange

The stock exchange has undergone enormous development over the years. In many places, physical stock exchange trading has been replaced by electronic trading, also known as screen trading. Trading in securities has become increasingly computer-controlled. The typical image of screaming traders on a real stock exchange floor has largely made way for trading via highly advanced and fast computers and with the help of smart algorithms. This current trading in securities also takes place at various online brokers. Use the  comparator  to find out which broker suits you best!

The history of the stock exchange

It all started in Northern Italy, where in the late Middle Ages trade was already conducted using means that formed the basis of the financial means in today’s modern banking system, such as bills of exchange and banknotes.

Through trade with Bruges, these trading methods were introduced in North-Western Europe. Bruges is therefore a trading place of great value to the Italians, because of its favourable location, to be able to trade with Northern Europe. In that period, the innkeepers, who offered shelter to the traders, fulfilled the current function of broker or intermediary, with which they represented the traders. Several inns in Bruges were owned by the Van der Buerse family, who as innkeepers also acted as brokers. This can be seen in their family crest with the image of 3 money bags. The expression “ter beeurs ze gaan” (to go to the stock exchange) and the term beursplein are derived from this.

The stock exchanges as we know them today originated in the early 19th century. In 1801, the London Stock Exchange was officially established and in 1817, the Stock Exchange on Wall Street in New York was established.

The future of the stock exchange

With the advent of advanced computers, we increasingly see that the importance of a physical stock exchange is starting to decrease and that with a computer, stock exchange trading is much more effective, faster and easier. All you need is a computer with an internet connection. This makes it possible to trade on the stock exchange 24 hours a day, anywhere in the world, without having to be there physically. In addition, stock exchange trading has become even more attractive because it involves lower transaction costs.

More and more new, digital exchanges are entering the market, such as TOM, BATS Chi- X, Turquoise, Equiduct and Alpha Trading Systems. This is a positive development, because more competition will lower prices. The emergence of alternative exchanges will therefore contribute to more favourable pricing in the future.

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