A stock exchange is an organized marketplace where investors buy and sell shares in publicly listed companies. It brings buyers and sellers together, sets prices through supply and demand, and ensures trades happen transparently and efficiently. Without exchanges, buying and selling shares would be fragmented, opaque, and far riskier.

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How a stock exchange works

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At its core, a stock exchange matches buyers with sellers. When you place a buy order, the exchange looks for a matching sell order at your price. When both sides agree, the trade executes and the price updates for everyone watching.

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Key terms worth knowing:

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• Bid, the highest price a buyer is willing to pay

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• Ask, the lowest price a seller will accept

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• Spread, the gap between bid and ask; a smaller spread usually means more liquidity

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• Market order, buy or sell immediately at the best available price

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• Limit order, set a maximum (for buying) or minimum (for selling) price; the trade only executes if that price is reached

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This process runs continuously during trading hours, creating the live prices you see on your screen.

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Primary and secondary markets

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Stock exchanges operate across two distinct markets:

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• Primary market, where new shares are issued for the first time, typically through an Initial Public Offering (IPO). Companies raise fresh capital here.

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• Secondary market, where investors trade existing shares with each other. Most everyday stock trading happens in the secondary market.

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The world's largest exchanges include the New York Stock Exchange (NYSE), Nasdaq, and the London Stock Exchange (LSE). Despite their differences in size and location, they all serve the same purpose: efficient, transparent trading for buyers and sellers everywhere.

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Why stock exchanges matter

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Exchanges solve three problems at once:

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• Price discovery, real-time prices that reflect what buyers and sellers actually agree on

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• Liquidity, you can usually buy or sell quickly, rather than waiting to find a willing counterparty yourself

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• Safety, regulated exchanges enforce rules that protect all participants and ensure trades settle correctly

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Multiple types of participants keep the market moving. Retail investors (everyday people) trade alongside institutional investors (pension funds, asset managers) and market makers, firms that constantly buy and sell to ensure there's always a counterparty available.

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When you invest through bunq, your trades connect to these exchanges automatically. Explore bunq Stocks to start investing from your bank account.

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Frequently asked questions

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• Is the stock exchange the same as the stock market? Not exactly. The stock market is the broader concept; stock exchanges are the specific platforms where trading takes place.

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• Can anyone access a stock exchange? Individual investors typically access exchanges through brokers or investment apps, not directly.

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• What happens outside trading hours? Most exchanges have fixed hours; prices don't update in real time overnight, though pre-market and after-hours sessions exist on some platforms.

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• Why do different exchanges exist? Different exchanges serve different regions, regulatory environments, and types of companies. Some specialize in technology stocks; others focus on large established companies or specific asset classes.

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