Identification

• Financial exchanges match corporations looking to raise capital alongside savers that wish to explore possible investment opportunities. Stock exchanges use information technology to coordinate trading activity within an auction format. Trades are executed at price points where the highest bids meet the lowest offers for particular investments.
  
  

Benefits

• Financial exchanges improve liquidity for the overall economy. Liquidity describes one's ability to sell assets and raise cash in a timely fashion. Without stock exchanges, investors would be forced to spend time and money to market their own securities. The lack of liquidity would ultimately lead to mass personal bankruptcies and business failures, as distressed sellers would find themselves unable to raise cash in emergency situations.
  
  

Warning

• Stock exchange volatility may foster social imbalances. Income gaps between the rich and the poor widen as bull market gains accelerate for stocks. Alternatively, stock market crashes are associated with recession and lost jobs. High unemployment rates typically trigger increases in crime and further galvanize animosities between separate socio-economic classes.