How does the stock exchange work??

Question

for example the london stock exchange i see on the news 5798..up 70 points what does that mean?

Answer 1

The London Stock Exchange (LSE) was originally established to enable the trading in shares and is now one of the largest stock exchanges in the world.  The LSE now has 4 core areas of business: equity markets, trading services, market data information and derivatives.  There are several stock market indices, a stock market index is a method of measuring a stock market.  The figure you quote refers to the FTSE 100; i.e. the index of the 100 largest companies shares listed on the LSE; which is by far the most commonly quoted of the UK indices.  The index began on the 3rd of January 1984 with a base of 1000, the value of the index fluctuates throughout the day’s trading and the value at the end of the day compared to the beginning is what you will see quoted; in the example you give the index would have closed at 5798, which was up 70 points on the opening value.  You can buy investments that track this and other indices, and are a low cost way of gaining exposure to the performance of a large number of shares.

Disclaimer:

The answers above are for guidance only and should not be acted upon without you receiving independent financial advice relevant to your circumstances.  To find and IFA please call 0800 085 3250 or go to http://www.unbiased.co.uk.

Answer 2

Stock exchanges are comprised of groups of stocks. For example the NYSE is the New York Stock exchange. Consider it a group with thousands of stocks participating in this group. Some perform well, others dont. Then you have the Amex which are smaller companies, and NasDaq which are mostly tech stocks. As for the London exchange, it was founded in 1801, it is one of the largest stock exchanges in the world, with many overseas listings as well as British companies. The LSE is part of the London Stock Exchange Group plc. So, think of them as groups of participation.

Answer 3

A stock exchange is a place where stock trading and stock settlement is overseen & accomadated. There are usually two aspects; primary and secondary markets. Primary is for new companies raising finance and secondary is the facility to trade & settle companys' shares already listed. There are usually member participants, such as brokers and market makers. there are rules and regulations and requirements of accountability, and facilities for displaying share prices in real time, and monitoring of activity (legal and illegal) of members and public trades, and reporting and recording of every trade, and monitoring of disclosable stakes, and news, regulatory and financial communications channel and I suspect a lot more. Oh, hold on, you've changed your question in the second paragraph!! Now you are talking about the FTSE100 index. This isn't the stock exchange! This is the Financial Times (the pink newspaper) Stock Exchange 100 (100 top listed companies like Barclays Bank and Shell Oil) Index. It is ann index that tracks the movement up and down of the top 100 companies. It is not an accurate indicator really because at the moment the oil companies and the mining companies which are the biggest constituents are flying up and companies like the banks, property and house builders which are slightly smaller are going down. Therefore it is the former that are pushing the index up. You wait and see what happens when the oil price drops to $100 a barrel and the mining bubble deflates! Is that all clear? any questions with a narrower subject matter try http://www.shareworld.co.uk

Answer 4

In simple terms ... essentially, the FTSE 100 is the largest 100 comapnies, by market capitalisation (shareholder equity) in the UK. Every quarter they have a review, and they boot a few out, and promote a few in .... recently housebuilders have all gone, as the equity has shrunk.

When you see the FTSE 100 go up 70pts, it is the index that has gone up. Some may have fallen, some may have risen, but overall the 100 companies have collectively increased in value. It may be that the biggest 10 companies were up, and the other 90 were down, but because the larger you are the more weighting you have in the index, the overal market will have gone up.

If there were 5 companies in an index. Combined value of £100bn, 1 alone is £25bn, that would have 25% weighting in the index. So if the other 3 companies were up 2% each, and that was down 8%, the overall index would fall, even though 3/4s of the companies within it were up