They provide a regulated environment where companies and investors can interact on mutually beneficial exchange. The Australian Share Market is approximately 2% of the daily value of shares traded globally. There are over 2,000 listed companies. The Australian market is in the top 10 of global capital markets.
Most industrialised countries have a national share market if not multiple exchanges. Commonly know exchanges are the London Stock Exchange, Tokyo Stock Exchange and New York Stock Exchange. All of these see significantly higher trading volumes than the Australian market. All these facilities perform the same role which is to provide companies with access to capital and offer investors the opportunity to purchase shares in these companies.
The Primary Market
This allows companies to raise capital which can be utilised to grow the business. Typically this is as an initial public offering (IPO) of shares. When the company lists on the stock market they release a certain number of shares at a certain price. Investors who believe in the company’s ability to generate profits can then purchase these shares. Companies have the ability to release more shares at a later date.
The Secondary Market
This is the place where buyers and sellers of shares allow their shares to be exchanged. Based on the economic laws of supply and demand the share prices fluctuate depending on whether there are more investors interested in buying or selling shares in the company. The stock market offers investors the opportunity to make money both over the short and long term depending on which investment strategy they have.