Exchange

Stock trading dictionary: meaning, example and how traders use it.

Last updated: October 17, 2026

Definition: Exchange, or stock exchange, is a regulated marketplace where buyers and sellers trade securities such as stocks, ETFs and options under uniform rules, with transparent prices. The largest US exchanges are the NYSE and Nasdaq.

How a stock exchange works

An exchange brings together buy and sell orders and matches them according to price and time priority. Modern US exchanges are largely electronic. When you place a trade, your broker routes the order to an exchange or another trading venue, where it may match with an existing order. The best displayed prices across exchanges form the national best bid and offer, which you see in a stock quote.

Regular trading on the NYSE and Nasdaq runs from 9:30 a.m. to 4:00 p.m. Eastern on business days, with opening and closing auctions that set official prices. Exchanges close on scheduled stock market holidays.

Exchanges also provide market data, such as real-time quotes and trade reports, enforce trading rules, and can halt trading in a stock during pending news or extreme price moves. Their surveillance teams monitor for manipulation, working alongside FINRA and the SEC.

Listing on an exchange

A company joins an exchange through an IPO, a direct listing or a transfer from another market. Exchanges set listing standards covering items such as minimum share price, number of shareholders, market value and corporate governance, and they can delist companies that fall below continued listing requirements. Companies listed on major exchanges must also file regular reports with the SEC.

Example: how an order trades on an exchange

Suppose the best bid on a stock is $20.00 for 500 shares and the best ask is $20.03 for 300 shares. You submit a market order to buy 200 shares. The exchange matches you with the resting sell order, and you buy 200 shares at $20.03. The seller's remaining 100 shares stay on the book at $20.03. If you had instead placed a limit order to buy at $20.01, your order would rest on the book as the new best bid until a seller agreed to that price.

Exchanges vs OTC markets

Securities that do not trade on a national exchange may trade over the counter. OTC stocks, including many pink sheet stocks, trade through dealer networks and quotation systems with lighter listing and reporting standards, which can mean less information and thinner liquidity. Exchanges also compete with alternative trading systems and broker internalization for order flow.

Exchanges around the world

Major markets include exchanges in London, Tokyo, Hong Kong and across Europe, where an exchange is often called a bourse. Each has its own trading hours, currency and rules. Many large companies list shares on more than one exchange, and US investors often access foreign companies through American depositary receipts listed in New York.

Frequently asked questions

What are the two main stock exchanges in the US?

The New York Stock Exchange (NYSE) and Nasdaq are the two largest US stock exchanges by the value of companies listed.

What is the difference between an exchange and a broker?

An exchange is the marketplace where orders are matched. A broker is the firm that accepts your orders and routes them to exchanges or other venues.

· All terms A–Z ·

For information only, not investment advice. See the disclaimer.