Starting out
Exchange
A regulated marketplace where buyers and sellers of securities are matched under published rules.
How it works
An exchange provides the order book, the matching rules, the opening and closing auctions, and the official price at which a trade is recorded. Its rules also decide what happens in unusual conditions — halts, circuit breakers, and the treatment of erroneous trades.
Not all trading happens on an exchange. A large share of volume in many markets is matched elsewhere: internalised by brokers, or crossed in venues that publish less before the trade happens.
Where it misleads people
The exchange a company is listed on and the exchange your order actually executed on are not always the same. The difference shows up as a price a fraction away from the one you saw quoted.
Related terms
- Order bookThe live list of every outstanding buy and sell order, arranged by price.
- Market makerA firm that continuously quotes both a buy and a sell price, so there is always someone to trade with.
- Dark poolA private venue where large orders are matched without being displayed publicly beforehand.
- ListingA company’s admission to trade its shares on a particular exchange, under that exchange’s rules.
- AuctionA short period where orders are collected and matched at a single price, rather than continuously.
Mentioned in
More in Starting out
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.