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Probably you would know the bookish definitions of the stock market and the stock exchange. So, we’re not gonna discuss that here. You’re here to know the difference but let us shed off the dust from these interchangeable terms in a very short time.
What is Stock Market
The stock market is also known as the Share market.
Like in the vegetable market, selling and buying of the vegetables take place, similarly in the share market selling and buying of the shares occur.
Many times you’ve heard phrases like, “Today’s market has been crashed by this many points” and “this stock has outperformed the market”.
Yes, here the market means the stock market but the exact interpretation of these phrases would be, “Today the index has been crashed by this many points” and “this stock has outperformed the stock index”.
So, from the above interpretations, you can understand that many times when we say “stock market”, we mean “stock index”.
Along with its meaning as a stock index, the stock market is mainly known as the umbrella term where the stock exchanges, depositories and clearinghouses are part of it.
What is a Stock Exchange
Exchanges are the infrastructures where the buyers and the sellers meet physically or virtually to trade shares.
In the present time, Investors do not need to go to the exchange as now we can trade electronically. But earlier the buyers and sellers used to go to the exchange and trade their shares through their broker in the form of an “open outcry system”
Difference between Stock Market & Stock Exchange
Stock Market | Stock Exchange |
Stock market represents the listed companies whose shares can be traded by investors | Stock exchange is the infrastructure or building where companies get listed and earlier shareholders would meet there (on trading floor) to trade shares |
Purpose of stock market is to provide a platform to companies to raise capital for their business and investment options for investors | Stock exchanges are built to carry the formal mechanism for listing of companies |
Stock market examples:
| Stock exchange examples:
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Conclusion
The stock market is a broader term whose one segment is the stock exchange.
Without a stock exchange, companies would have no formal mechanism on which to list shares, and without a stock market, exchanges would have no reason to exist.
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