Why Does The Stock Exchange Exist?

The modern securities market is evolving with the complicated trading relationship,and it is aimed to regulate the trading of securities,protect the lawful rights and interests of investors,safeguard the economic order and public interests of the society,and promote the economy.Essentially,the stock exchange is an institution for trading the securities from the perspective of historical development.As the important component of the securities market,its developments should be based on this nature.In recent years,the major stock exchanges have carried out the demutualization reform,which is caused by the changes of the external environment of the traditional stock exchange due to technological transformation.Traditionally,the stock exchange controls the flow of the market information through the arrangement on the seats of the trading hall.However,with a new upsurge of trading on the Internet,the wedging influences of the supervision regulator for the public interests and the increasing competition among the Exchanges all over the world,the stock exchanges and their members are apt to the new demands with the transformation on organization and function of the stock exchange.Therefore,the major securities exchanges in disputes basically have completed the demutualization reform and promote the binary interaction between the market and the firm.Shanghai Stock Exchange and Shenzhen Stock Exchange,compared to other Western stock exchanges,are operated late in 1990 s.And the establishment of the two stock exchanges in Shanghai and Shenzhen mainly relies on the administrative power.But there are an increasing number of issues during the time,which result in the devitalization of two stock markets.Yet,it is necessary for the Stock Exchanges in PRC to face the actual demand of the investors,improve the internal governance and reshape their competitive position in the global market.There are five chapters in this paper.Chapter 1 illustrates that the investors' and issuers' financial demands for the securities issue market,and the differences in preference for investors' future earnings in securities market are the theoretical reasons for the initial existence of the stock exchange.Chapter 2 verifies the formation of the initial reasons for the formation of the stock exchange through the early history of New York Stock Exchange on trading seats,the market information and trading rules.Chapter 3 demonstrates the challenges and reforms of Western stock exchanges under the transformation from the private order towards the self-regulation.The technology being developed and the demutualization being in the process,the specific changes of the functions and structures of the stock exchanges and the path to resolving the potential conflict between the profitable goals and the self-regulation responsibility will be reflected.Chapter 4 provides an explanation for the shortage of the competitive strength with the analysis of the Stock Exchanges in PRC because their legal positions are vague and interfered with the administrative power.The organizational functions of the Stock Exchanges and the general objectives of the Stock Market are mismatched.And the Stock Exchanges are with the similar features of the state-owned enterprises in PRC.Therefore,it is necessary to redefine the boundary between the commercial functions and the administrative ones and to improve the capacity to the market competitions in the commercial field.The last part is to refine problems and summarize this paper.