World Stock Exchange

What is the world stock exchange all about?

Stock exchanges are perhaps the most crucial agents and facilitators of entrepreneurial progress among modern service institutions. Since the industrial revolution, business enterprises have grown such that proprietors or even partnership firms can no longer raise the collosal amounts of money required for large entrepreneurial ventures. Such massive capital can only be raised through the participation of a large number of investors; the number running into hundreds, thousands and even millions, depending on the size of the business venture.

In general, small-time proprietors (or partners of a proprietary or partnership firm), find it difficult to get out of their business, when they wish to do so. This is because it is difficult to find buyers for an entire business, or even part of a business, just when one wishes to sell it. Similarly, it is not easy for a person with savings, especially with small savings, to readily find an appropriate investment opportunity. These problems become more magnified with larger proprietorships and partnerships.

Firstly, one would prefer not to invest in such partnerships since savings once invested, are very difficult to convert into cash and people do have many reasons, such as better investment opportunity, marriage, education, health, etc.. for wanting to convert their savings into cash.

Clearly then, big enterprises can raise capital from the public at large, only if there is some mechanism which enables investors to purchase or sell their share of the business as and when they wish to do so. This implies that ownership in business has to be "broken up" into a large number of small units. so that each unit may be independently and easily, bought or sold without hampering the regular business activity. Such a breaking up of the ownerhip of the business would also help mobilize small svings in the economy into entrepreneurial ventures.

In a modern business this objective is achieved through the mechanism of shares. A share represents the smallest recognized fraction of ownership in a publicly held business and is represented in the form of a certificate, known as the share certificate. The breaking up of the total ownership of the business into small fragments, each represented by a share certificate, enables these to be easily bought and sold.

The institution where this buying and selling of shares essentially takes place is the stock exchange. In the absence of world stock exchanges, i.e. institutions where small parts of businesses could be traded, there would be no modern business in the form of publicly held companies. Today, stock exchanges enable one to be an owner or part owner in an electronics company without being an electronics wizard. They enable part ownership of one company today and another tomorrow; part ownership of several companies at the same time or of a company hundreds or thousands of miles away.

In addition, they facilitate conversion of one's entire ownership stake into cash, at short notice. Thus, by enabling the convertibility of ownership in the product market into financial assets, namely shares, stock exchanges bring together buyers and sellers of fractional ownerships of companies.

For this reason, activities relating to stock exchanges are also appropriately enough, known as Stock Market or the Security Market. Like a vegetable market, a stock exchange too is distinguished by its own specific locality and characteristics.

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