Stock Markets


Most stocks are traded on exchanges. This is the place where buyers and sellers come together to decide a price on a given stock. Some exchanges are physical locations, and exist on a trading floor. The pictures of trading floors floating around on the internet usually depict wild traders, yelling, screaming, frantically running about, and signalling to each other. The other type of exchange is a virtual one, where the trades are performed by computers electronically.

Stock Market’s main function is to facilitate the trading of stocks between buyers and sellers. This facilitating is important, and lowers the risk of investing. Buyers and sellers don’t have to find other people to buy/sell their stocks. They just go to the stock exchange, who will find a candidate for them.

There are two market types: the primary market, and the secondary market. The primary market is were stocks are created via an IPO. The secondary market is where existing stocks are traded between investors. When people talk about the stock market, they are referring to the secondary market. The secondary market does not directly involve the company who originally issued the stock. E.g. IBM does not participate every time an IBM stock is traded between a buyer and seller.

The New York Stock Exchange

Stock Quotes

The biggest exchange in the world is the NYSE. It was founded over 200 years ago, and continues to grow today. The NYSE stock exchange does have a physical trading floor where face-to-face trading can be performed. The brokerage firms represent the investor on the trading floor,, and operates on his/her behalf. Today, computers play a huge role in this transaction process.

The NASDAQ

The NASDAQ is an over-the-counter stock market. There is no central location, or physical floor broker. All trading is performed via computers at lightning speeds. Here, market makers provide bid and ask prices for buyers and sellers. They match up the buyers and sellers, and take a profit in the spread for their work in the trade.

AMEX

The third biggest stock exchange in the U.S is the American Stock Exchange.

Almost every country in the world now have their own stock exchange. The American stock markets are currently the largest, but are followed by the London Stock Exchange, the Hong Kong Stock exchange, and many more.