EconGuru Economics Guide RSS Syndication

Get published on EconGuru.com. Start here!

© Copyright 2006 - 2011 EconGuru.com. All rights reserved. Assets marked and linked to the original sources are hereby used for educational purposes only and are copyrighted by their respective owners.

Subscribe to EconGuru.

Quoted Shares and Stock Exchange

Subscribe to EconGuru:

Quoted shares are shares that have been quoted on a recognised stock exchange. And the stock exchange is a service provider for traders and brokers when they are dealing with stocks, futures, options, bonds, and other securities.

As we know, the shares symbolize the ownership of a business, and the ownership itself to the shareholder is permanent. This means the shareholder can never draw his or her money out from the company by returning his or her shares to that company. However, the shares can be sold and bought, thus the owner of the shares is transferred. If a shareholder wants to quit the ownership of a company, the only way for him is to find a interested buyer and sell him the shares at a agreed price.

However, it is not that easy for a shareholder to find his client who has needs for the very shares at the very moment. It is caused by at least two factors. First, the shareholder, say the shares seller in this occasion, and the buyer are separated geographically. They might not know each other, or even speck different languages. So neither can they come together and negotiate on the business. Second, even if the seller and buyer know each other, they still don’t know the other’s needs. The seller might not know one of his friends needs the shares of the very company the he just invested in, and his friend does not know he owns the shares. The stock exchange comes to solve such problem.

A stock exchange is a place for trading the securities, including the shares. Extensively, the stock exchange provides services for security trading. Such services include Internet infrastructure for trading on line, setting rules for shares to be listed or quoted, monitoring the behaviour of the companies, and so on. In order to be traded on a stock exchange, the shares must be quoted.

The quotation of shares is to update prices regularly at a general accepted price in the market. And it is the basic part of a stock exchange. The scope of assets that can be quoted on a stock exchange is large, varying from the intellectual properties owned or partially owned by the company to the hardware devices of the company like computers. Note that a quoted share is not a listed share. Not all quoted share can be listed because of the criterion for shares to be listed are far more stricter than that to be quoted. Those criterion include the size of the business, the total registered capital, the profitability of the company, and the permission to enter the market and so on, which vary across different economic entities.

Since the shares have been quoted on a recognised stock exchange, the shares can be traded more easily than before. For example, if a shareholder wants to sell part of his shares on a stock exchange, he needs to deposit his shares in the exchange or a bank, usually followed by freezing the shares. Then he quotes upon the shares. This is just like saying “I have a apple and I want to sell it at the price of $1. Who wants to buy it?”. The system of the exchange starts working to match the needs for the shares just quoted. Sometimes, there are several buyers reply their price for the shares, and sometimes there is none. In the later situation, the seller of the shares may need to lower the price in order to attract buyers. Now that there are both sellers and buyers, the system starts to make a match between the two sides until the deal is done.

In conclusion,  a stock exchange is a service provider for trading shares. The shares can be quoted on a stock exchange in order to be traded. And if the shares have been quoted, they need to update the price regularly and wait buyers. This will result into the liquidity of shares, which means the easiness of selling the shares at a stable price and relatively low operational cost.

Share This Article:
Meet the Author

Tags

Tags: , , , ,

EconGuru Economics Guide

Educating the public since 2006.