While today it is possible to purchase almost everything online, there is usually a designated market for every commodity.
Such dedicated markets serve as a platform where numerous buyers and sellers meet, interact and transact. Since the number of market participants in huge, one is assured of a fair price. If the number of tree sellers is large in a common market place.
The buyers will be spoiled for choice with low or optimum-pricing making it is fair market with price transparency. Even while shopping online, buyers compare prices offered by different sellers on the same shopping portal or across different portals to get the best deals, forcing the various online sellers to offer the best price.
A stock market is a similar designated market for trading various kinds of securities in a controlled, secure and managed the environment. Since the stock market brings together hundreds of thousands of market participants who wish to buy and sell shares.While earlier stock market used to issue and deal in paper-based physical share certificates, the modern day computer-aided stock markets operate electronically.
Investor protection
Along with wealthy and institutional investors, a very large number of small investors are also served by the stock market for their small amout of investments. These investors may have limited financial knowledge, and may not be fully aware of the pitfalls of investing in stocks and other listed instruments. The stock exchange must implement necessary measures.
For instance, a stock exchange may categorize stocks in various segments depending on their risk profiles and allow limited or no trading by common investors in high-risk stocks.
Stockbroker,also know as registered representative in the U.S., are the licensed professionals who buy and sell securities on behalf of investors. The brokers act as intermediaries between the stock exchange and the investors by buying and selling stock on the investors by buying and selling stocks on the investors behalf.
How Stock Exchange Make Money
Stock exchange operate as for-profit institutes and charge a fee for their services. The primary source of income for these stock exchanges are the revenues from the transaction fees that are charged for each trade carried out on its platform. Additionally, exchanges earn revenue from the listing fee charged to companies.
The exchange also earns from selling market data generated on its platform like real-time data, historical data, summary data and reference data which is vital for equity research and other uses. Many exchanges will also sell technology products, like a trading terminal and dedicated network connection to the exchange, to the interested parties for a suitable fee.
Significance of The Stock Market
The stock market is one of the most vital comments of a free-market economy.
It allows companies to raise money by offering stock shares and corporate bonds. It lets common investors participate in the financial achievements of the companies, make profits through capital gains and earn money through dividends, although losses are also possible. While institutional investors and professional money managers do enjoy some privileges.
the stock market attempts to offer a level playing field to common individuals.
The stock market works as a platform through which savings and investments of individuals are channelized into the productive investment proposals. It the long term, it helps in capital formation & economic growth for the country.
Examples of Stock Markets
The first stock market in the world was the London stock exchange. It was started in a coffeehouse, where traders used to meet to exchange shares, in 1773. The first stock exchange in United States of America was started in Philadelphia in 1790. The buttonwood agreement, so named because it was signed under a buttonwood tree, marked the beginnings of New York's wall street in 1792. The agreement, was signed by 24 traders and was the first American organization of its kind to trade in securities. The traders renamed their venture as New York stock exchange board in 1817.
Key points
• Stock market are vital comments of a free-market economy because they enable democratized access to trading and exchange of capital for investors of all kinds .
• They perform several functions in market, including efficient price discovery and efficient dealing.
• In US, the stock market is regulated by the SEC and local regulatory bodies.
Next blog on 11January2020
Blog topic~ Put & Call
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