What Is an Exchange?
An exchange is a marketplace where securities, commodities, derivatives and other financial instruments are traded. The core function of an exchange is to ensure fair and orderly trading and the efficient dissemination of price information for any securities trading on that exchange. Exchanges give companies, governments, and other groups a platform from which to sell securities to the investing public.
An exchange is an open, organised marketplace for commodities, stocks, securities, derivatives and other financial instruments. The terms exchange and market are often used interchangeably, as they both describe an environment in which listed products can be traded.
A key function of an exchange is to provide fair, efficient and orderly trading opportunities by centralising the buying and selling of a particular type of asset. Instead of dealing directly with exchanges, most traders will use a broker.
What Is a Bourse?
A bourse is a market organized for the purpose of buying and selling securities, commodities, options and other investments. The term bourse is most often used in Europe and can be synonymous with an exchange. “Bourse” is based on the residence belonging to textile merchant Robert Van der Burse, where Belgian traders and financiers would gather and trade with one another in the 13th century.
Today the word “bourse” is more commonly associated with the Paris stock exchange and other Euronext bourses such as in Amsterdam and Frankfurt.
CBOE Global Markets
London Stock Exchange
Examples of exchanges
Exchanges are located in most countries around the world. They can be a physical location, where traders meet to conduct business, or an electronic platform.
Traditionally, an exchange was a physical location used for trading securities, which operated via an open outcry or a dual auction system. While less common, there are some exchanges that still offer pit trading – including the New York Stock Exchange (NYSE) and the Chicago Board Options Exchange (CBOE).
In line with the rapid digital transformation of today’s economy, the definition of an exchange has significantly evolved too. As traditional exchanges began to handle an increasing amount of trading flow, most trades started to be placed electronically, off the trading floor. Some examples of purely digital exchanges are the NASDAQ stock exchange and bitcoin exchanges.