A Stock exchange is a corporation or mutual organization which provides trading facilities for stock brokers and traders, to trade stocks and other securities. It may be a physical trading room where the traders gather, or a formalised communications network. Creation of a stock exchange is a strategy of economic development. Stock markets may affect economic activity through the creation of liquidity. Liquid equity markets make investment more attractive because they allow savers to acquire equity and to sell it quickly and cheaply. At the same time, companies enjoy permanent access to capital raised through equity issues. It has been found that countries that open stock markets grow faster, on average, than the control groups.[1]
Market liquidity may also hurt economic growth, because they make it easy for dissatisfied investors to sell quickly.[2] In addition, issuing shares involves loss of company control, typically to already powerful investors. Foreign ownership of securities and assets is often unappealing.[3] Extremely low income levels keep share ownership beyond the reach of most people in developing countries.
Countries without a stock exchange are Tanzania and Democratic Republic of the Congo.[4]
The Mongolian Stock Exchange as of 2006[update] was the world's smallest stock exchange by market capitalisation.[5][6]
In 1688, the trading of stocks began on the London stock exchange.
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