Stock exchange

What it means

A stock exchange is an organised market where shares, bonds and other securities are traded under fixed rules and supervision. Prices form where supply meets demand and are published continuously.

Slovakia has the Bratislava Stock Exchange, which is small and trades mainly government and corporate bonds. Slovak investors more often trade on foreign exchanges through investment firms.

Settlement, the transfer of securities and money, is handled by the central securities depository. The National Bank of Slovakia supervises the exchange and its members.

How it works in practice

For a company, listing through an IPO brings access to capital from a wide range of investors and liquidity for existing owners. It also brings duties: publishing results, insider information rules and higher audit and governance costs.

Smaller companies tend to use the exchange to issue bonds, which is simpler than listing shares. Even then a prospectus or information document must be prepared and investors kept regularly informed.

A company that invests spare cash in listed securities reports them as financial assets, and revaluations or sales affect profit and tax.

What to watch out for

Market prices fluctuate and reflect expectations, not just results. Market capitalisation can therefore differ greatly from book value and from what the whole company would sell for.

Listed companies are subject to strict insider dealing rules. Managers and their close associates must report trades in the company's shares and may not trade in sensitive periods before results are published.