What is a stock exchange and how does it work?

The stock exchange: a simple definition

A stock exchange is a market where financial securities are bought and sold, such as shares (a stake in a company's capital) or bonds (a share of a company's or a state's debt).

The price of these securities moves according to supply and demand: the more buyers there are for a given security, the more its price tends to rise, and vice versa. Unlike a private exchange between two individuals, everything happens in an organised, transparent way, at the same price for everyone, at the same moment.

We can go even further with the definition set out in the European MiFID directive (Markets in Financial Instruments Directive), reproduced in Article L. 421-1, I of the French Monetary and Financial Code. Under this definition, a market qualifies as a "regulated market" when it is recognised as such by its home country, operates regularly, and applies rules approved by the competent authorities to govern market access, the admission of securities, and the conduct of trading.

In its 2027 edition, the Vernimmen, a leading reference work on corporate finance, lists four stock markets in Paris: Euronext, Euronext Growth, Euronext Access and Lise.

In everyday language, then, "stock exchange" is used to describe any platform where securities are traded. In legal texts, it's a little more precise than that: depending on how it is organised and supervised, a platform may be classified as a "regulated market" or a "multilateral trading facility" (MTF) — two distinct legal categories, each with its own rules. But let's not overcomplicate things.

The concept of a stock exchange is nothing new. The earliest known one dates back to 1309, in Bruges, where merchants gathered near the house of the Van der Beurse family to trade debts and securities. It was in Amsterdam, however, in 1602, that the first stock exchange in the modern sense appeared, when the Dutch East India Company sold the very first shares ever offered to the public.

Since then, every major economy has developed its own. New York has the NYSE and the Nasdaq (a favourite among tech companies). London has its exchange, Tokyo has its own. In continental Europe, Euronext brings together several markets, including Paris, since 22 September 2000.

What is a stock exchange for?

A stock exchange serves a dual purpose.

Why does a company go public?

For a company, it's a way to raise capital, equity, by selling a share of its capital rather than borrowing from a bank. Companies do this to fund growth: opening new sites, hiring, investing in research and development, or acquiring another company.

Unlike a loan, this money doesn't add to a company's debt or its financial costs, giving it more room to invest without straining its cash flow. In exchange, the company shares part of its capital, and potentially its future profits, with shareholders.

But this isn't the only option: a company can simply borrow from a bank, a standard loan repaid with interest. It can also turn to private equity, specialised funds that take a direct stake in its capital without going through a listed market. Or it can turn to crowdfunding, raising small amounts from a large number of individuals, usually through an online platform.

What sets the stock exchange apart from these three options is that it opens up a company's capital to a large number of investors at once, rather than to a single lender or fund. Once listed, shares then trade freely between investors, at a price set by the market rather than negotiated case by case.

This openness also allows a company to raise larger amounts while gaining visibility, which generally makes future capital increases easier once it is listed.

For an individual, why invest in the stock market?

For an individual, it's a way to put their savings to work in the hope of growing them, with the prospect of a return potentially higher than that of risk-free savings products.

A word of caution, though: unlike a standard regulated savings account (such as the Livret A), returns are not guaranteed and depend on the performance of the companies invested in, which carries a real degree of risk. In practice, this means the value of a security can fall, and the investor can lose part, or all, of the amount invested.

Other options exist here too, such as life insurance or rental property, for example. But the stock market allows you to become a direct part-owner of a company (through a share) or a creditor of a company or a state (through a bond), with the ability to sell your holdings at any time on the market, unlike often less liquid investments such as property.

Investing in the stock market can also, for some, answer a more personal motivation: putting money into a company whose products they like, or whose values they share, by becoming one of its shareholders directly rather than just a customer.

How does a company go public?

To list on a stock exchange, a company must meet certain criteria and go through a process known as an initial public offering, or IPO.

Admission criteria vary depending on the market. On Euronext Paris, the regulated market for large companies, at least 25% of the company's capital must be made available to the public at listing (or 5% if that represents at least €5 million), along with three years of audited accounts.

For younger or smaller companies, Euronext Growth (Euronext's "arm" dedicated to SMEs and mid-sized firms) applies more flexible criteria: a minimum "free float" (the portion of capital actually available for public purchase, excluding stable holdings such as those of executives) of €2.5 million, two years of audited accounts instead of three, but a requirement to appoint a "listing sponsor", an authorised intermediary that supports the company for at least two years after listing.

In most cases, a prospectus detailing the company's business, accounts and risks must be approved by the French Financial Markets Authority (AMF) before any listing.

Finally, it's worth noting that an IPO is a relatively long process (generally six to nine months of work) and a costly one (between 5% and just over 10% of the funds raised, once the fees of auditors, lawyers, banks and communications advisers are included).

These are some of the reasons, among others, why some companies, outside the large groups with the necessary resources, choose not to go public.

What is the primary market in the stock exchange?

It is at the moment of this IPO that what is known as the "primary market" comes into play. Before setting a final price, the company and its advising banks first establish an indicative price range.

Over several days, institutional investors (investment funds, insurers, asset managers…) submit their buying intentions at different price levels within this range: this is known as book building.

By combining all these intentions, the banks determine the listing price that allows them both to raise the intended amount and to ensure there is enough demand for the offer. It is this price, confirmed just before the first day of trading, that retail investors then pay to acquire their first shares.

The money paid by all these investors, institutional and retail alike, goes straight into the company's coffers. Private investors do not take part in the bookbuilding, but they can buy shares in IPOs open to the general public.

What is the secondary market in the stock exchange?

Once these securities are listed, what is known as the "secondary market" begins: investors who bought shares at the IPO can now resell them, at any time, to other investors.

This is where most day-to-day stock market activity takes place, long after the IPO itself. In fact, the vast majority of transactions observed each day on the markets involve securities already in circulation, not newly issued ones.

Prices then move freely according to supply and demand, without the company being involved or receiving a single cent from each trade.

It is also this secondary market that gives a listed security its practical value: unlike a stake in an unlisted company, which is hard to sell quickly, a listed share can find a buyer within seconds, at any point during a trading session.

What obligations does a listed company have?

Once listed, a company takes on new obligations it must meet on an ongoing basis. It must publish an annual financial report within four months of its financial year-end, and a half-year financial report within three months of the end of each half-year.

It must also hold an annual general meeting, where shareholders vote on matters including the approval of accounts and the appointment of directors. Finally, it must adopt stronger governance, with a board of directors or supervisory board and, depending on its size, an audit committee responsible for overseeing the quality of the financial information it publishes.

How do you invest in the stock market?

Investing in the stock market isn't reserved for finance professionals or the wealthy: any adult can do it, as long as they follow a few simple rules.

The first step is to open a dedicated account with a broker or a bank. Two types of accounts coexist, each suited to a different purpose.

A standard securities account (in French, a compte-titres ordinaire, or CTO) can be opened at any age (including for a minor, via their legal representatives) and has no contribution cap. It allows the purchase of securities on any market in the world, including the US or Asia. In exchange, gains are taxed from the year they are received (when a dividend is paid or a security is sold), generally through the single flat-rate levy (prélèvement forfaitaire unique, or PFU) of 31.4% since 1 January 2026, also known as the flat tax.

The PEA (Plan d'Épargne en Actions), France's tax-advantaged share savings plan, is reserved for adults who are tax residents in France. It is capped at €150,000 in contributions (Service-public.fr) and limited to shares of companies headquartered in the European Union or the European Economic Area.

There are two variants: the PEA jeune, for 18-25-year-olds still attached to their parents’ tax household and capped at €20,000, and the PEA-PME, designed to invest in SMEs and mid-sized companies (ETIs). It can be combined with a standard PEA, within an overall ceiling of €225,000 for both plans.

In exchange for these restrictions, the PEA offers a genuine tax advantage: after five years of holding, gains are exempt from income tax, with only social security contributions still due, at a rate of 18.6% since 1 January 2026 (Service-public.fr).

Certain index funds, or ETFs (Exchange Traded Funds), do allow this geographic limitation to be worked around: they actually hold European shares while tracking the performance of a non-European index, such as the S&P 500. This structure, debated in summer 2026 during discussions on the 2027 budget, remains permitted to this day.

Once the account is funded, buying is done by placing an order, specifying the desired security, the quantity and, optionally, a limit price. There is no legal minimum amount to get started: some online brokers even offer fractional shares, making it possible to invest a few euros in a company whose share costs several hundred.

This order is then sent to the market, where it is executed if a seller offers their securities on the terms requested. Brokerage fees generally apply to each transaction.

How does the stock exchange work day to day?

Here's what a typical day on the stock exchange looks like.

What are stock exchange trading hours around the world?

Euronext Paris is open Monday to Friday, from 9am to 5.30pm (Euronext), trading hours broadly shared by most major European markets. Outside these hours, an order can be submitted, but it will only be executed at the next opening.

Naturally, other major markets operate on different schedules depending on their time zone. Wall Street (the NYSE and Nasdaq), for example, opens at 9.30am local time (3.30pm Paris time during summer, 2.30pm in winter) and closes at 10pm Paris time.

The Tokyo Stock Exchange, meanwhile, is open while it's still night-time in France: it opens at 9am local time (around 1am or 2am Paris time, depending on the season, with a local lunch break that interrupts trading in the middle of the Japanese trading day) and closes at 3.30pm local time (Japan Exchange Group), or roughly 7.30am or 8.30am Paris time.

For an investor placing orders on several markets at once, this time difference takes a bit of juggling: an order placed on a US stock before 3.30pm Paris time, for example, won't be executed until Wall Street opens, several hours later.

How is a share's price set?

During a trading session, a security's price is formed through the continuous matching of buy and sell orders: this is known as the order book. Each buyer indicates the maximum price they're willing to pay, each seller the minimum price they'll accept.

As soon as a buy order and a sell order meet at the same price, the trade is executed, and that price becomes the security's new trading price. The more numerous and aggressive the buy orders relative to sell orders, the more the price tends to rise, and vice versa.

The opening and closing of a session work slightly differently: orders build up without being executed, then a single equilibrium price is calculated for all of them at once. This is known as a fixing (an opening or closing auction).

How is a stock market order executed?

But before an order can reach the market, it first has to get there. Since no investor, retail or institutional, ever accesses the stock exchange directly, everyone goes through an intermediary, a broker or a bank, who submits the order on their behalf.

Once the trade is agreed, a clearing house steps in, Euronext Clearing for Paris's equity markets. Its role: to stand between the buyer and the seller, becoming the buyer to every seller and the seller to every buyer.

In practice, neither the buyer nor the seller deal with each other directly any more, but each deals with the clearing house itself. If one of the two parties were to default before the trade settles, the other would still be paid or delivered, with the clearing house absorbing the risk in their place.

To guard against this kind of event, the clearing house requires its members to post financial guarantees, known as margin calls, as well as a contribution to a shared default fund to cover any extreme losses.

Traditional exchanges vs new market infrastructure: what's the difference?

Established exchanges like Euronext rely on a transaction-processing infrastructure built up gradually over several decades: electronic trading, clearing houses, central securities depositories, each added over the course of successive regulations. This architecture is still, today, what organises the bulk of the European market.

Currently, settlement of a transaction on European markets generally takes two business days after the trade, a cycle known as T+2: the time it takes for the trade to be confirmed, cleared (a clearing house pools and nets the positions of many investors to reduce the flows that need settling) and then actually settled by the central securities depository, which transfers the securities and the funds. This timeframe is set to shrink: the European Union plans to move to same-day settlement (T+1) from 11 October 2027, bringing it into line with standards already in place in the United States since 2024.

Against this backdrop, new market infrastructures have begun to emerge, powered by a recent technology: blockchain, or DLT (Distributed Ledger Technology). Since 2023, a specific European framework, the DLT Pilot Regime (EU Regulation 2022/858), has allowed certain operators to test market infrastructures built on this technology, under the supervision of the same regulators as traditional markets. Lise is one such example.

In practice, this technology makes it possible to merge, on a single platform, functions that on a traditional exchange are split between several intermediaries: the trading of securities and their custody. Shares are then represented as digital tokens, or tokenised shares, which can reduce both the time and the cost of accessing the market, particularly for smaller companies.

Is a stock exchange a public body?

A stock exchange is a private company, whose activity is certainly overseen by public authorities, but which does not belong to them. This is a common misconception: people often picture a country's stock exchange as a state body, under government control.

Yet Euronext, which operates the Paris stock exchange, is itself listed on the stock exchange, on its own market. It's hard to imagine a state body listing its own shares and selling them to private investors.

Three clearly distinct players are involved:

• The market operator: this is the entity that runs the platform where buy and sell orders meet. In France and continental Europe, that's Euronext, a commercial company like any other.
  
• The regulator: in France, that's the French Financial Markets Authority (AMF), a public authority that sets the rules and oversees their enforcement. At European level, that's ESMA (the European Securities and Markets Authority), which coordinates this supervision between member states. Neither the AMF nor ESMA owns or operates the market: their role is to guarantee it runs properly, not to be its owner.
  
• The central securities depository (CSD): it keeps the overall record of all securities issued and organises their transfer between financial intermediaries, which in turn hold their clients' accounts. In Europe, the main CSDs are Euroclear, Clearstream and Euronext Securities. Since 21 September 2026, Euronext Securities has been the default CSD for settling equity transactions on Euronext Paris (PostTrade360, 2026).

Three roles, three responsibilities, three distinct entities. A stock exchange is therefore neither a ministry nor a government agency, but a private infrastructure operating under public oversight.

Is Lise a stock exchange?

Yes, Lise is a stock exchange. With a few points to clarify about its legal status.

Lise is an investment firm authorised by the French Prudential Supervision and Resolution Authority (ACPR) and supervised by the AMF. In practice, it operates a multilateral trading facility (MTF), registered as an SME Growth Market, as well as a settlement system built on a distributed ledger, under EU Regulation 2022/858, the same regulation that underpins the DLT Pilot Regime mentioned above.

In short, Lise combines on a single platform two of the three functions usually kept separate: that of market operator and that of central securities depository. This is a first in France.

This architecture changes what happens once an order is executed. On a traditional market, a transaction currently settles in two business days (T+2) - a timeframe due to fall to a single business day (T+1) by 2027 - the time it takes for the chain of intermediaries (the buyer's bank, the seller's bank, the clearing house, the central securities depository) to process the trade. At Lise, this chain is concentrated on a single piece of infrastructure, allowing for immediate settlement.

As for the third role, that of regulator, nothing changes: Lise remains under the supervision of the same public authorities as Euronext, namely the AMF and the Bank of France, with European coordination from ESMA and the European Central Bank when its licence was granted.

Lise is, then, a more recent stock exchange, built on a different technology, open 24/7, which integrates two of the three functions required of any market (operator and custodian of securities) and remains subject to the third, oversight by an independent regulator.

Can you invest on Lise without going through a broker?

Yes, and this is a major difference. Where investing on traditional exchanges requires going through a broker or a bank, Lise allows you to open an account directly on its own platform: after identity verification, a securities account is opened in the investor's name, funded by bank transfer, with no additional intermediary.

Opening an account and subscribing to an IPO are both free. Trading fees on the secondary market follow a tiered, decreasing scale, ranging from 0.10% to 0.25% depending on the volume traded by the investor over the previous six months (Lise's Pricing Transparency Policy, version 1.1, 8 December 2025).

One point worth noting: securities held in a Lise account are not eligible for the PEA. They can, however, qualify for the 18% IR-PME tax reduction, provided the company meets the criteria of an eligible SME, and the investor holds their securities for at least five years, within a limit of €50,000 in contributions (€100,000 for a couple).

Frequently Asked Questions

What securities and assets can you buy on the stock exchange?

Three main families make up most of the market. Shares, a stake of ownership in a company. Bonds, a debt owed by a company or a state, with a set interest rate. And ETFs (Exchange Traded Funds, or trackers), which bundle a basket of shares or bonds into a single security, such as all the constituents of an index like the CAC 40. Alongside these three families are more complex products, reserved for more experienced investors: warrants, turbos, or CFDs (Contracts For Difference). These products allow investors to bet on an asset rising or falling, often with leverage, which magnifies both potential gains and losses.

Are trading and investing in the stock market the same thing?

No. Investing means buying shares or other securities to hold over time, aiming to benefit from their potential growth and dividends. Trading, on the other hand, aims for short-term gains through frequent buying and selling, often using leveraged products such as CFDs, which allow investors to stake more than their actual capital. This difference isn't just a matter of "pace": it also radically changes the level of risk involved.

Can you lose more than you put in when buying shares?

For a standard cash purchase of shares, no: the maximum loss is limited to the amount invested, even in the worst case where the security loses all its value. For CFDs, the logic is a little different: since 2018, European law has required brokers to guarantee that a retail client can never lose more than the money held in their overall account. In practice, a single position can cost more than the margin specifically allocated to it, but never more than the total funds in the account: you can lose everything, but you can no longer end up owing money on top. The deferred settlement service (SRD), which also allows investors to borrow to invest more than their available capital, does not carry this same guarantee: a loss greater than the initial stake remains possible, which explains some of the wariness surrounding these leveraged products.

Do you need a lot of money to start investing in the stock market?

No, that's no longer the barrier people think it is. Most online brokers allow you to open a securities account with no minimum deposit, and some offer fractional shares, making it possible to access securities costing several hundred euros each with a starting stake of just a few dozen euros.

What's the difference between a share and a bond?

A share gives you an ownership stake in a company, with no guaranteed repayment or fixed income: its return depends entirely on the company's performance. A bond is a debt instrument: the issuer (a company or a state) commits to paying regular interest, the coupon, and to repaying the capital on a set date. That repayment isn't 100% guaranteed, though: if the issuer defaults, meaning it can no longer meet its debt obligations, the bondholder can, like a shareholder, lose some or all of their capital.

Can a company leave the stock exchange?

Yes, a company can be delisted, most often after a majority shareholder buys up almost all of its capital through a mandatory buyout offer. Once that shareholder holds at least 90% of the capital, they can even force the remaining shareholders to sell their shares: this is known as a squeeze-out.

How long does it take for a stock market order to be executed?

The execution of an order, meaning the meeting between a buyer and a counterparty at the same price, can happen within seconds, as soon as a matching counterparty exists on the market. Settlement of the trade, meaning the actual transfer of securities and funds between the two parties, takes longer: on traditional European markets, this generally happens two business days after the trade (a cycle known as T+2), a timeframe due to shrink to a single business day (T+1) from 11 October 2027. On Lise, by contrast, settlement is instant.

Sources

• AMF: Barometer of savings and investment 2025 (34% interest in shares, 35% intention to invest, December 2025), amf-france.org/fr/actualites-publications/publications/rapports-etudes-et-analyses/barometre-amf-de-lepargne-et-de-linvestissement-2025
• Lise x poll&roll: The French and the stock market, a still-limited financial culture (66% have never invested, 40% don't understand what a share is, July 2026), lise.com/blog/etude-exclusive-lise-les-francais-et-la-bourse-une-culture-financiere-encore-trop-limitee
• Légifrance: French Monetary and Financial Code, Article L. 421-1 (legal definition of a regulated market), legifrance.gouv.fr/codes/id/LEGIARTI000038611309
• Citéco (Bank of France): Creation of the first stock exchange (Bruges, 1309; creation of Euronext, 2000), citeco.fr/10000-years-history-economics/antiquity-to-middle-ages/creation-of-the-first-stock-exchange
• Euronext: official Euronext Paris page (more than 800 listed companies), euronext.com/fr/markets/paris
• Euronext: Euronext announces volumes for August 2026 (more than 1,800 issuers, €7trn in market cap), euronext.com/en/about/media/euronext-press-releases/euronext-announces-volumes-for-august-2026
• AOF (optionfinance.fr): Rise in trading volumes on Euronext's cash markets (average daily volumes, 2026), optionfinance.fr/info-financiere-en-continu/d/2026-09-08-hausse-des-volumes-sur-les-marches-cash-deuronext-en-aout.html
• Bank of France: The Euronext Growth market, Fact Sheet 231 (listing criteria, free float, listing sponsor), banque-france.fr/system/files/2024-04/823415 Fiche-231.pdf
• EUR-Lex: Regulation (EU) 2022/858 of 30 May 2022 on a pilot regime for DLT market infrastructures (Lise's legal framework), eur-lex.europa.eu/eli/reg/2022/858/oj
• AMF: T+1 settlement (move from T+2 to T+1 on 11 October 2027), amf-france.org/fr/actualites-publications/dossiers-thematiques/le-reglement-livraison-t1
• AMF: Decision approving the rules of the LISE multilateral trading facility (Lise's regulatory status, 14 October 2025), amf-france.org/fr/reglementation/regles-professionnelles-approuvees/decision-dapprobation-des-regles-du-systeme-multilateral-de-negociation-lise-constituees-par-les
• Service-public.fr: Share savings plan, PEA (caps, taxation, PEA jeune, PEA-PME), service-public.gouv.fr/particuliers/vosdroits/F2385
• Tout Sur Mes Finances: interview with Mark Kepeneghian, CEO of Lise, on how the platform works for a retail investor, 9 April 2026, toutsurmesfinances.com/actualites/?p=378
• PostTrade360: Euronext Securities becomes the default CSD for Euronext Paris, Amsterdam and Brussels on 21 September 2026 (2026), posttrade360.com/news/infrastructure/euronext-sets-21-september-2026-go-live-for-alternative-csd-framework
• Le Monde du Droit: Lise, the first firm in France to obtain authorisation to operate a DLT trading and settlement system (in French), lemondedudroit.fr/deals/100995-gide-conseil-de-lise-dans-le-cadre-de-lobtention-de-lagrement-dentreprise-dinvestissement-pour-operer-un-snr-dlt.html