Stock market

What is the Stock Market?

According to https://www.investopedia.com/terms/s/stockmarket.asp, the stock market refers to the centralized collection of different markets and stock exchanges where the buying, selling, and issuance of publicly traded stock in companies take place. Someone who trades in the stock market buys and sells through one or more stock exchanges. 

The stock market brings together millions of participants who wish to buy/sell assets (shares), it also provides a means of safely transacting a multitude of different types of securities in a regulated environment ensuring fair pricing practices and transparent transactions. Stock markets create a secure, regulated environment for investors to transact in (Buy/Sell) financial instruments (Stocks, Bonds, Currencies), with low to no operational issues/risks.

The term, ‘Market’ tends to refer to many different markets traded alongside ‘Stocks’. Other markets traded are:

  • Bonds
  • Exchange-Traded Funds (ETF’s)
  • Derivatives (Options, Futures)
  • Commodities 
  • Currencies

The Stock Market has some key functions including:

  • Fair Dealing in Securities: The stock exchanges must ensure that all interested market participants have equal access to information for buy and sell decisions.
  • Efficient Price Discovery: markets must ensure that there is an effective mechanism for efficient price discovery. This is the act of determining the proper price of security usually based on demand and supply factors.
  • Liquidity: Ensuring that interested and qualified Buyers/Sellers are able to gain access to place orders as desired at a fair and equitable price.
  • Investor Protections: Stock Markets/Exchanges must implement necessary protections for the large number of small investors transacting among large institutional investors.

In summary, stock markets create a secure, regulated environment for investors to transact in (Buy/Sell) financial instruments (Stocks, Bonds, Currencies), with low to no operational issues/risks.

 

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