The stock market refers to a public network of financial transactions, where company stock or shares are being traded (bought and sold). However, the stock market is not in fact the physical place where the trading takes place – the market place is known as the stock exchange. The global and local stock market transactions take place in various stock exchanges around the world. Some of the biggest and most famous stock exchanges are the New York Stock Exchange (NYSE), London Stock Exchange, Paris Bourse, Tokyo Stock Exchange and the Shanghai Stock Exchange. The stock market is represented in each continent by large stock exchanges. Basically, stock exchanges are organisations offering a market place for sellers and buyers.
For a company, trading in the stock market provides a way of creating financial opportunities and raising funds. Attracting investors and selling their own shares is one of the most important ways of raising money. Also, being a public or a listed company available for trading in the stock market enhances the company’s reputation and financial stability. The benefits of operating in the stock market do not only apply to companies, but to individual investors as well; getting into buying and selling shares can offer extensive financial benefits to anyone, when done right. Budding investors should remember that entering the stock market can be a risk for a beginner without the necessary knowledge and professional help.
The state of the stock market is also seen as an important indicator of the state of the local and global economy. When the local stock market is operating well, it is sometimes considered that the national economy is also stable. The general public have also become a more important part of the stock market. For example, having a pension fund probably means that you have a stake in the stock market.
The stock market is driven by sentiment and news. For example, company news on new products, staff changes and corporate activity can have an effect on the company’s shares.
The stock market consists of sellers, buyers and stock exchange professionals who act as the middle-man between the seller and buyer, executing transactions. Sellers and buyers operating in the stock market range from independent investors to institutional investors, such as banks and insurance companies. Public companies trading their own shares are also participants in the stock market.
Most stock exchanges these days are electronic, automatically matching buyers and sellers. An investor is keen to buy a share for a certain price, and a potential seller is keen to sell their share for a certain price. When these expectations match, a trade takes place. In case various buyers are after the same share on the same price, the share is sold to the one who expressed their buying interest first. An investor can pay the market price for the share, or bid for the price.
A physical stock exchange, such as NYSE, is also known as a listed exchange. This means they only trade stocks that are listed with them. When an investor wants to bid for a certain share, their exchange professional goes to a floor broker, who then approaches the floor trading post specialist who will then match the buying bids to shares on sale. This is done by using a method known as the open outcry, meaning the trading process happens through verbal communication – and this is why news clips from stock exchanges can seem slightly overwhelming. Sometimes the asking price and the bid do not match; this means there is a spread between the two and the trade does not execute immediately. In cases like these, the specialist should resort to their own resources to close the spread.
In a virtual stock exchange, the stock market transactions take place not by people but by computers. Instead of using a floor trading post specialist, bids and selling prices are matched by computers. In the past years, virtual stock exchanges have increased in the stock market together with large financial companies starting to operate in the stock market by themselves, without the help of stock exchanges.
There are several ways to enter the stock market. It should be stressed that before giving the stock market a go, it is necessary to be as informed about the operations as possible, as it a high-risk business. At Accendo Markets, as well as providing thorough information and introduction, we offer our customers two different ways of operating in the stock market. Customers can choose between Contracts for Difference (CFDs) or spread betting.