Learn about major global exchanges (NYSE, NASDAQ, LSE, TSE)

1.1.6 · Stock-Market › What Markets Are

Stock Exchange kya hota hai?

Exchanges kaise kaam karte hain: First Principles se

Chalte hain core mechanism derive karte hain:

Step 1: Matching problem

• Alice 100 shares of Apple $150 mein sell karna chahti hai
• Bob 100 shares of Apple $150 mein buy karna chahta hai
• Exchange ke bina, Alice aur Bob kabhi ek doosre ko dhundh nahi paate (probability → 0 ek aisi market mein jahan millions of participants hain)

Step 2: Order book Ek exchange ek order book maintain karta hai — buy orders (bids) aur sell orders (asks) ki ek ranked list:

BIDS (buyers)          |  ASKS (sellers)
$149.99 - 100 shares   |  $150.00 - 100 shares (Alice)
$149.98 - 200 shares   |  $150.01 - 50 shares
$149.95 - 500 shares   |  $150.05 - 300 shares

Step 3: Matching logic Jab Bob ek market order submit karta hai "buy 100 shares at any price", toh exchange ka matching engine:

1. Best ask (sabse kam sell price) dhundha = $150.00
2. Trade execute karta hai: Bob ne Alice se 100 shares $150.00 mein kharide
3. Order book update karta hai (Alice ka order remove karta hai)

Yeh step kyun? Matching engine ensure karta hai ki buyers ke liye best price (lowest ask) aur sellers ke liye best price (highest bid) pehle match ho. Ise price-time priority kehte hain.

Step 4: Settlement Trade ke baad:

• Bob ka account $15,000(100\times$150) se debit hota hai
• Alice ka account $15,000 se credit hota hai
• 100 Apple shares Alice ke account se Bob ke account mein transfer hote hain
• Yeh ek clearinghouse ke zariye hota hai (usually T+2 = trade date plus 2 business days)

T+2 kyun? Funds verify karne, ownership transfer karne, aur failures handle karne ke liye time chahiye. Yeh speed aur risk ke beech ek balance hai.

Chaar Major Global Exchanges

1. New York Stock Exchange (NYSE)

NYSE pure electronic exchanges se kaise alag hai:

NYSE designated market makers (DMMs) use karta hai — human specialists jo specific stocks ke liye assign hote hain aur fair aur orderly markets maintain karte hain. Yahan kyun hai:

DMM role ka derivation:

1. Problem: Pure electronic matching volatility ke dauran fail ho sakti hai (sab sell karna chahte hain, koi buyer nahi)
2. Solution: DMs obligated hain kharidne ke liye jab koi buyer na ho (aur bechne ke liye jab koi seller na ho)
3. Mechanism: DMs apna khud ka capital use karke liquidity provide karte hain
4. Benefit: Extreme price swings rokta hai, continuous trading maintain karta hai

Example calculation: Agar Apple stock mein:

• Best bid: $149.00(buyer$149 mein kharidna chahta hai)
• Best ask: $151.00(seller$151 mein bechna chahta hai)
• Spread = $151-$149 = $2.00 (bahut wide!)

Ek DMM $150.00parbidaur$150.10 par ask laga sakta hai, spread ko $0.10 tak narrow karte hue. Isse sab ke liye trading aasaan ho jaati hai.

Yeh kyun matter karta hai: Wide spreads ka matlab hai traders ke liye zyada costs. DMs transaction costs reduce karte hain.

2. NASDAQ

NASDAQ kyun alag hai: Pure electronic matching

NASDAQ ne dealer network model pioneer kiya:

Step-by-step derivation:

1. Multiple market makers (sirf ek DM nahi) best prices offer karne ke liye compete karte hain
2. Har market maker apna khud ka bid aur ask post karta hai
3. NASDAQ ka system saare market makers mein best bid aur best ask display karta hai (NBBO: National Best Bid and Offer)
4. Jab tum trade karte ho, tumhara order best price wale market maker ko route ho jaata hai

Yeh step kyun? Market makers ke beech competition → tighter spreads → traders ke liye kam costs.

Example: Market Maker A: Bid $149.95/Ask$150.00 Market Maker B: Bid $149.98/Ask$150.05 Market Maker C: Bid $149.90/Ask$149.99

NASDAQ display karta hai:

• Best Bid: $149.98 (B se)
• Best Ask: $149.99 (C se)
• Spread: $0.01

Tumhara buy order Market Maker C ko jaata hai (best ask), aur sell order Market Maker B ko (best bid).

3. London Stock Exchange (LSE)

LSE ka global markets mein role:

LSE European capital ka gateway hai aur iske unique features hain:

International equity market ka derivation:

1. Problem: Ek Chinese company European investors se capital raise karna chahti hai
2. Barrier: China mein direct listing ke liye Chinese accounts, currency conversion, regulatory complexity chahiye
3. Solution: LSE par list karo → European investors GBP (British pounds) mein shares kharidein
4. Mechanism: LSE ka International Order Book non-UK companies ko list hone deta hai

Example: Alibaba (Chinese company) LSE par Global Depositary Receipt (GDR) ke roop mein list ho sakti hai:

• Actual shares China mein hi rehte hain
• Ek UK bank shares hold karta hai aur GDRs (shares represent karne wale certificates) issue karta hai
• GDRs LSE par kisi bhi stock ki tarah trade karte hain

Yeh step kyun? GDRs cross-border trading problem solve karte hain bina actual shares ko borders paar kiye.

Currency consideration: Agar LSE share price = £10 aur GBP/USD = 1.25 hai, toh dollar equivalent hai: ${\text{Price}}_{\text{USD}}={\text{Price}}_{\text{GBP}}\times \text{Exchange Rate}=\pounds 10\times 1.25=\$12.50$

Yeh kyun matter karta hai: International investors ko currency risk face karna padta hai. Agar GBP kamzor ho, toh tumhara investment value kho deta hai bhale hi stock price flat rahe.

4. Tokyo Stock Exchange (TSE)

TSE ka unique feature: Lunch break

Western exchanges ki tarah jo continuously trade karte hain, TSE mein ek zaraba (morning session) aur gogo zaraba (afternoon session) hoti hai 1-hour break ke saath.

Lunch break kyun?

1. Historical: Human traders ko rest chahiye tha
2. Current benefit: Investors ko afternoon trading se pehle morning news digest karne ka time milta hai
3. Drawback: Gap risk create karta hai (lunch ke dauran koi news aaye toh price sessions ke beech jump kar sakta hai)

Gap risk ka example:

• Morning close: Sony ¥10,000 par trade karta hai
• Lunch ke dauran: Sony disappointing earnings announce karta hai
• Afternoon open: Sony ¥9,500 par gap down karta hai (ek instant mein 5% drop)
• Lunch ke dauran tum trade nahi kar sakte → tum loss mein phans jaate ho

Yeh kyun matter karta hai: International stocks trade karte waqt hamesha exchange ke hours check karo.

Time zones mein returns calculate karna:

Agar tum ek U.S. investor ho jo TSE par trade kar rahe ho, tumhe 13-ghante ka time difference account karna hoga (JST standard time mein ET se 13 ghante aage hai):

1. TSE 9:00 AM JST par open hota hai = 7:00 PM ET (tumhare liye pichli shaam)
2. TSE 3:00 PM JST par close hota hai = 1:00 AM ET
3. Toh poora Tokyo trading day jab New York mein raat hoti hai tab hota hai

Time zone conversion: $\text{ET hour}=(\text{JST hour}-13)\mathrm{mod}24$

• TSE open: $(9-13)\mathrm{mod}24=(-4)\mathrm{mod}24=20=8:00\text{ PM ET}$
• TSE close: $(15-13)\mathrm{mod}24=2=2:00\text{ AM ET}$

Yeh step kyun? 8:00 AM ET par, JST 9:00 PM hoti hai — Tokyo ka market pehle hi din ke liye close ho chuka hota hai (yeh 1:00 AM ET par close hua tha). Baat yeh nahi ki tumne ek open market ke "kuch ghante miss" kiye, balki yeh ki poora Tokyo session tumhare sone ke dauran unfold hota hai. Koi bhi badi news jo Tokyo mein raat ko aaye, teri jagah tumhare uthne tak price already move kar chuka hoga.

Yeh kyun matter karta hai: Global trading ke liye awareness chahiye ki har market kab open hai. U.S. East Coast se TSE live trade karne ke liye, tumhe roughly 7:00 PM se 1:00 AM ET tak jaagna padega. Opportunities aur risks tumhare sone ke dauran hoti hain.

Chaar Exchanges ki Comparison

Spreads alag kyun hote hain: Liquidity derivation

Bid-ask spread trading volume ke inversely proportional hota hai:

$\text{Spread}\propto \frac{1}{\text{Volume}}$

Kyun? Zyada traders → zyada orders → buyers aur sellers ko match karna aasaan → bid aur ask ke beech chhota gap.

Example:

• Apple (NASDAQ): Daily volume = 50 million shares → spread = $0.01
• Chhota TSE stock: Daily volume = 10,000 shares → spread = ¥50 (bahut zyada wide)

Yeh kyun matter karta hai: High liquidity stocks (bade exchanges, popular companies) ke trading costs kam hote hain.

Common Mistakes

Connections

• Order books and price discovery – Exchanges real-time prices kaise determine karte hain
• Market makers and liquidity providers – DMs aur dealers ka detail mein role
• ADRs and GDRs – International stocks U.S. exchanges par kaise trade karti hain
• Currency risk international investing – LSE aur TSE prices exchange rates ke saath kyun fluctuate karti hain
• Trading hours and global market timing – 24-hour market coverage ke liye strategies
• Listing requirements and IPOs – Companies exchanges ke beech kaise choose karti hain
• High-frequency trading – Electronic exchanges microsecond trades kaise enable karte hain

Flashcards

#flashcards/stock-market

Stock exchange kya hota hai? :: Ek regulated marketplace jahan securities kharide aur beche jaate hain, jo price discovery, liquidity, transparency, aur trust provide karta hai.

Concept Map