The price of securities, foreign currencies and commodities traded on a stock exchange are determined by supply and demand. But how does this work? Trades are not directly concluded between buyers and sellers, but rather by authorized brokers. The traded assets are not physically present. Investors therefore do not conduct their transactions on-site or on their own, but instead instruct a securities broker through their bank to buy or sell a specific number of e.g. shares. Alternatively, they can work with a discount broker for online stock trading.
Floor and computer-based exchanges
Who hasn’t seen scenes from movies or news programs showing images of a stock exchange “floor”? The English word “floor,” meaning “trading floor,” refers to the place where trading takes place within the exchange building. Such pictures reflect the traditional image of a “floor-based exchange,” where the traders are physically present on site. In contrast to the classic trading floor or floor exchange, the electronic exchange has emerged, where traders enter their orders via networked trading systems. Today, most stock exchanges around the world are modern electronic exchanges and no longer floor exchanges. Trading on the Vienna Stock Exchange has also been fully electronic for many years.
Trading of expectations
Stock exchanges are, at their core, marketplaces for expectations. Shares of a publicly traded company are generally purchased when the buyer expects the company to perform well. Or when the shares are currently very cheap due to various circumstances, but an upturn and so-called “profit-taking” can still be anticipated. If shareholders anticipate unfavorable developments, they will most likely offer their shares for sale. Stock markets are therefore considered economic barometers, as they anticipate future developments. They generally react very sensitively to economic and political changes.
