Those who make a habit of watching news channels have already been introduced to the stock exchange, albeit in an indirect way. The symbols that scroll across the bottom of the channel every few minutes are stock symbols. The numbers that accompany the symbols are the current price of those particular stocks, which is an indication of a company's worth at that particular moment in time. The selling price of stocks varies due to market conditions, inside deals, scandals and even world events, which affect the company's overall viability.
The first practical application of a stock exchange occurred in the early 1600s, when the Dutch West India Company in Amsterdam made it standard practice to trade their stocks. The British followed suit around the time of the Revolution. Philadelphia had its own exchange by 1790, and in the early 1800s, market investors were meeting at the Curb Stone exchange at the corner of Exchange Place and Broad Street in New York City. In 1934, Congress created the Securities and Exchange Commission, allowing more regulation in the trading industries. While this made trading stock safer for smaller investors, it also led to more restrictions and regulations for companies looking to grow through the public sale of stock.
There are a number of stock exchanges, including the most popular, the New York Stock Exchange (NYSE) and the widely recognized NASDAQ. There is also one for smaller corporations, known as microcap companies. To get a spot on the exchange, a corporation must "go public" and offer their stocks to a wide range of consumers. The company determines the price and number of shares to offer to the public market, called an Initial Public Offering (IPO). In order to have the company listed on the exchange, it must meet stringent financial requirements. In the US, their earnings have to be more than $10 million US Dollars (USD) per year for three years, and they must have issued over one million shares of stocks worth between $70 and $100 million USD. Companies must also register with the SEC and agree to comply with their rules, one of which is to ban those who misuse the exchange or engage in unfair trading practices.
A company listed on a stock exchange has unlimited access to investors. This means unlimited financing opportunities, which can help owners raise capital for their corporation and expand into a more successful business. Depending on the product popularity or market conditions, the price of stocks fluctuates. Investors earn a profit through buying when prices are low and selling when shares have reached their highest prices. Even investors do not directly deal with the exchange, but hire a broker, a specialist who knows the ins and outs of the exchange, to buy and sell for them. Brokers make a commission off of every profitable sale.
