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What is an Exchange?Automation, Management, and Regulation of Financial Markets$

Ruben Lee

Print publication date: 2000

Print ISBN-13: 9780198297048

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780198297048.001.0001

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(p.322) Appendix 2 Definitions

(p.322) Appendix 2 Definitions

Source:
What is an Exchange?
Publisher:
Oxford University Press

In order to gauge the generally accepted meanings of the terms ‘exchange’, ‘stock exchange’, ‘futures exchange’,1 and ‘market’, a survey was undertaken of their definitions in four general and traditional dictionaries, and seven more modern specialist finance and economics dictionaries.2

Eight significant points emerged in the generalist dictionaries:

  1. (1) All of them have more than one definition for all the terms—so that there is no single exclusive meaning for any of the words.

  2. (2) All the dictionaries define an ‘exchange’ and a ‘stock exchange’ as a building or place for buying and selling, or for the transacting of business.

  3. (3) All the dictionaries refer to the items which are traded on a ‘stock exchange’ as stocks, shares, or securities, but none of the dictionaries puts any restriction on the things which may be traded on an ‘exchange’.

  4. (4) All the dictionaries define a ‘stock exchange’ as some form of association of people for the buying and selling of stocks.

  5. (5) Three dictionaries make reference to an ‘exchange’ being centralized in some manner.3

  6. (6) Two dictionaries refer to a ‘stock exchange’ as being a market or marketplace.4

  7. (7) All the dictionaries define a ‘market’ as: first, a meeting of people for buying and selling; second, a place or building used for such meetings; and third, as buying and selling.

  8. (8) Two dictionaries refer to a ‘market’ as being a ‘stock exchange’.5

There was both less uniformity and a wider range of meanings for the four terms in the specialist dictionaries. Eighteen significant points emerged:
  1. (1) All but one of the dictionaries define an ‘exchange’ or a ‘stock exchange’ as a physical location for buying and selling/6

  2. (2) All the dictionaries refer to the items which are traded on a ‘stock exchange’ as stocks, shares or securities, but none of the dictionaries puts any restriction on the things which may be traded on an ‘exchange’. Only futures contracts are traded on a ‘futures exchange’.7

  3. (3) Several dictionaries characterize an ‘exchange’ or a ‘stock exchange’ as being organized or formal, as opposed to being informal, decentralized, or over-the-counter.8 Forms of organization included the standardization of contracts, and the creation of membership rules, listing rules, and a constitution.

  4. (4) Several dictionaries characterize an ‘exchange’ or a ‘stock exchange’ as being authorized.9

  5. (5) Several dictionaries note that an ‘exchange’ or a ‘stock exchange’ might operate electronically.10

  6. (6) Several dictionaries note that an ‘exchange’ or a ‘stock exchange’ could be closed, meaning that only members are allowed to trade on it.11 One dictionary notes that ‘futures exchanges’, like ‘stock exchanges’, are membership organizations.12

  7. (7) Several dictionaries note that an ‘exchange’ or a ‘stock exchange’ organizes trade on a regular basis.13

  8. (p.323) (8) Several dictionaries mention that a ‘stock exchange’ centralizes trading in securities.14

  9. (9) One dictionary says an ‘exchange’ ensures fairness of the pricing or auction process.15

  10. (10) One dictionary says an ‘exchange’ provides fast price disclosure.16

  11. (11) Several of the dictionaries say that an ‘exchange’ provides safe settlement, delivery, and clearing.17

  12. (12) Several of the dictionaries say that an ‘exchange’ provides liquidity.18

  13. (13) Several dictionaries refer to a ‘futures exchange’ as being an institution for providing a regulated market for trading in futures contracts.19

  14. (14) Several of the dictionaries refer to an ‘exchange’ and a ‘stock exchange’ as a market.20

  15. (15) Many of the dictionaries define a ‘market’ as a physical location for trading.21

  16. (16) One dictionary specifically states, however, that a ‘market’ should not be thought of as a locality, but rather as buying and selling.22 Many of the other dictionaries also identify a ‘market’ as buying or selling, as a medium for exchanges between buyers and sellers, or as the process of transacting.23

  17. (17) One dictionary refers to a ‘market’ as those who participate in trading.24

  18. (18) Several dictionaries refer to a ‘market’ as being an exchange or a stock exchange.25

Notes:

(1.) There were very few entries specifically under ‘futures exchange’.

(2.) The four general dictionaries are the Macdonald, Chambers Twentieth Century Dictionary [CTCD] (1978), the Oxford English Dictionary [OED] (1975), Stein, (p.355) the Random House College Dictionary [RHCD] (1979), and Grove Webster's Third New International Dictionary [WTNID] (1961). The specialist finance and economics dictionaries are Collin (1996), Corben (1997), D'Andrea (1996), Economist Books (1994), Mahony (1997), Moles and Terry (1997), Rutherford (1995), Webber (1994), and Woelfel (1994). Dates are not put in subsequent references.

(3.) WTNID, CTCD, and RHCD.

(4.) OED and RHCD.

(5.) OED and WTNID.

(6.) Corben, Collin, D'Andrea, Economist, Mahony, Moles and Terry, and Rutherford.

(7.) Collin, Mahony, Moles and Terry, and Woelfel.

(8.) D'Andrea, Moles and Terry, Woelfel.

(9.) Moles and Terry.

(10.) Economist, Mahony, Moles and Terry, and Rutherford.

(11.) D'Andrea, Moles and Terry.

(12.) Woelfel.

(13.) D'Andrea and Rutherford.

(14.) Woelfel, and Moles and Terry.

(15.) Moles and Terry.

(16.) Mahony.

(17.) Mahony, and Moles and Terry.

(18.) Mahony, and Moles and Terry.

(19.) Collin, Mahony, and Moles and Terry.

(20.) Collin and Rutherford.

(21.) Collin, D'Andrea, Moles and Terry, and Rutherford.

(22.) Woelfel.

(23.) Moles and Terry, and Rutherford.

(24.) Moles and Terry.

(25.) Moles and Terry.