Stock Market
The stock market is a number of official exchanges or over-the-counter (OTC) companies with a certain set of rules for buying or selling shares of public companies.
Traders buy or sell stocks on one or more exchanges. Stock exchanges are part of the stock market.
Examples of the most popular U.S. stock exchanges are the New York Stock Exchange (NYSE) and Nasdaq.
Understanding the Stock Market
The stock market is a platform for buyers and sellers meeting to make deals, determine stock prices of corporations, and evaluate the economy as a whole. Because the market is open, both buyers and sellers face fair prices and high liquidity. Market players can safely make deals in securities and other assets with zero or low risk.
In 1773, the first coffeehouse-based stock market appeared in London. Traders agreed to meet there to exchange shares.
In 1790, the first stock exchange appeared in the USA (Philadelphia).
In 1792 the agreement under the buttonwood tree was signed for securities trading. It was signed by 24 traders and it was the precondition of New York Wall Street creation. In 1817 the company was renamed the New York Stock and Exchange Board.
In the US, the stock market is managed and monitored by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
How the Stock Market works
Regulators set certain rules for the stock markets. There can be primary and secondary stock markets. The primary markets allow companies to attract the necessary finances from investors by debuting the issue of their shares to the public. This requires the Initial Public Offering (IPO).
The company splits up into shares and sets a price for each share. Then, the company sells a portion of those shares to the public.
Investors purchase a company's stock with the purpose to earn income (share price appreciation, dividends, or both). The stock exchange is a reliable intermediary for this type of deal. It takes a commission from the company and its partners for its services.
