What is a stock market? A stock market, stock exchange, or share exchange is an association of investors and lenders of shares, representing ownership interest claims on specific companies; these can include securities listed on an exchange such as the New York Stock Exchange (NYSE) or the NASDAQ (national association of securities dealers). An investment in a company’s stock represents an entitlement to profits from the purchase price less any fees payable, if any; fees may be included in the initial purchase price or paid automatically as part of a line of credit. The value of a share may increase or decrease over time relative to the value of other shares traded on the same exchange.
There are numerous stock exchanges throughout the world. In the United States, the most popular exchanges are the NASDAQ and NYSE (New York Stock Exchange). However, many other countries, including those in Canada, England, Japan, Australia, and Europe, have their own specialized stock exchanges. In general, the larger the country, the more stock exchanges there are.
One of the most important features of a stock market is the ability to borrow. When a shareholder makes a purchase of a specific number of shares, they are obligated to buy that quantity of shares at that price on the date of trading. Shares are typically listed individually or in what are called baskets; this allows traders to buy and sell them as required. A particular basket may be determined by the issuing company or by the Securities and Exchange Commission (SEC). Most exchanges allow trading shares to be traded either ‘per lot’ or in what are known as ‘many lots.’
The major feature of stock markets lies in the trading, buying, and selling of securities. As a result, these markets provide the means for investors to enter into transactions and make profits. The buying and selling activities of investors occur at pre-set intervals during the day and are often leveraged; this means that the amount of leverage can be increased beyond the value of the actual securities being bought and sold. Since, by its nature, stock markets are open for a certain period of time each day, this feature provides investors with opportunities to buy and sell shares many times during the day. Also, the trading of these securities is often done around the clock.
The stock market works with a number of elements; among these are interest rates and the availability of the buying and selling securities. Investors can be grouped into investment groups depending upon their investment objectives. These groups may include investors who are interested in different types of securities and may come together to pool their buying and selling activities. Funds can be developed for specific purposes such as investing in various types of bonds, real estate, commodities, and the like.
Stock exchanges provide the means for individuals to buy and sell shares at pre-set prices and through the use of trading exchanges and other systems. There are many types of stock markets including futures and options exchanges, for instance, where buyers and sellers place bids and offers on securities in exchange for a time period specified by the exchange. Index exchanges also provide information on the movements of underlying securities within a particular index. Finally, there are stock exchanges where a number of securities are listed, either directly or through an exchange broker.