Financial Exchange: Functions, Benefits And Requirements

by Garima Sharma

In order to lead a company, we must have some knowledge about Foreign Exchange as this will increase your company’s worth as well as make it grow. So, let’s have a look at Finance Exchange and its functions, benefits, and requirements.

What is an ‘Exchange’?

A finance exchange is a marketplace where:

  • Securities,
  • Commodities,
  • Derivatives and
  • Other financial instruments are traded.

The core Function of a finance exchange is to provide an environment that facilitates fair and orderly trading, along with the efficient dissemination of price information for any securities that are being traded on that exchange. Finance Exchanges gives companies, governments, and other groups a platform on which to sell their securities instruments to the public for making monetary investments.

BREAKING DOWN ‘ A Financial Exchange’

An exchange may be a physical location or an electronic platform, where traders interact with each other, so as to conduct business activities. They may also be called to as a share exchange or bourse, depending on their geographical location.

Exchanges are located in most of the countries worldwide. The prominent ones of them being:

  • New York Stock Exchange (NYSE),
  • Nasdaq,
  • London Stock Exchange (LSE) and the
  • Tokyo Stock Exchange (TSE).

Benefits of the Stock / Finance Exchange

They are used to raise capital by companies, that are more often in an aggressive lookout for opportunities to grow and expand their operational base. The very first sale of stock by a private company to the public is referred to as an initial public offering (IPO) in publically understood terms. Companies that are listed on the stock exchanges typically possess an enhanced profile. Having more visibility makes them potentially more attractive towards-

  • New customers
  • Talented employees and
  • Suppliers

All of whom are eager to conduct business with prominent industry leaders.

Exchange Listing Requirements

  • Each and every exchange has certain listing requirements for any company or group that wishes to offer their securities for trading. Some exchanges have more rigid compliance standards than others, but the basic requirements for stock exchanges include regular financial reports, audited earning reports, and minimum capital requirements.
  • For example, the NYSE has a key listing requirement that stipulates a company must possess a minimum of USD 4 million in shareholder’s equity.

So, these are the functions, benefits, and requirements of Foreign Exchange.

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