Laws in many countries require investment firms to register stocks, bonds and other securities with financial regulators before those instruments can be bought or sold on stock markets. An instrument that can be traded on a particular stock market is commonly referred to as a listed security. Some types of securities are unlisted which means that people can buy and sell these instruments without having to involve a stockbroker or a particular exchange.
Regulators are responsible for ensuring that investors understand the nature of the securities that they buy on stock exchanges. Before a stock can become a listed security on an exchange, reports detailing the finances of the issuing entity are reviewed by regulators. In some instances, an audit of the issuing firm may be conducted before the security is sold during the Initial Public Offering (IPO). Regulators can refuse to approve a stock for sale in which case the issuing firm must improve its financial standing before it can attempt to list the stock on an exchange.
Some nations have more than one stock market in which case the firms that issue stock may decide to sell a listed security on one or several of the markets. Normally, exchanges have the right to accept or refuse listings. Many exchanges only accept particular types of securities such as stocks or bonds issued by technology firms or financial companies. Major exchanges accept listings for many different types of securities including bonds that were issued by overseas entities. A company can decide to de-list a security at any time, in which case securities issued by the firm may be listed on another exchange or be made unavailable for sale.
In some countries, stock exchanges and securities are subject to regulation at both the national and regional level. A resident of a particular region may have the right to buy a security listed on an exchange located in a different region because both the exchange and the investor's trading rights are covered by national laws. In contrast, brokers are normally only allowed to conduct transactions involving securities that are listed on exchanges within their local area.
The prices of securities fluctuate throughout the day based upon factors such as supply and demand but factors impacting one exchange may have less of an impact elsewhere. Consequently, an investor may be able to make simultaneous purchases of a single listed security from two different exchanges. The investor may end up paying two different prices for the instrument, since prices on one market are not always reflective of prices on other markets. Some investors attempt to take advantage of price differences by buying and selling a particular listed security for profit within a short space of time.