An Exchange is an organized market where tradeable securities, commodities, foreign exchange, and derivatives such as futures and options are bought and sold. A securities market with an exchange is generally run in 3-tiers: 1. The exchange, 2. Brokers/dealers, and 3. End users/ investors. Many exchanges also make use of a clearinghouse, which reduces the risk of default. The benefits of having instruments trade on an exchange include liquidity, transparency, price discovery, and information dissemination. Exchanges can include stock exchanges, commodities exchanges, spot exchanges and derivatives exchanges.
Synonyms: Market, Stock Exchange, Bourse, Commodity exchange
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