The stock market is the procedure through which company stocks and derivatives are traded on the stock exchange. The stocks and securities have to be listed if they are to be traded on the stock market. However, there are different financial exchanges available on the stock market which includes bonds, commodities, derivatives and stocks. Bonds are traded “over the market” which is an informal way of trading and is usually known as bond market. Commodities markets enable the trade of commodities, and derivatives can be traded on various markets.
Currently the worldwide bond market has a volume of transactions that are worth $45 trillion. The deravitives market is estimated at $300 trillion worldwide which is still rising at a rapid pace. The world wide stock market is estimated to be at $51 trillion. This volume of financial transaction gives one a fair idea as to the evolution of the stock market for the trading of financial transactions. In order to trade through the stock market one has to list the stocks that are to be traded on the stock market. Every country has to have at least one stock exchange so as to enable the trading of stocks. For example in the United States there are three main stock exchanges which include the NASDAQ, NYSE and Amex. However there are regional stock exchanges OTCBB and Pink Sheets that enable the sale of the stocks in the market.
The mechanism of trading on the stock exchange is based on the buyer and seller relationship just like in the ordinary market. Trading can be done through auction, physical exchange and virtual exchange.
In auction, trading the stocks is based upon biding. The buyer that bids the highest price gets to buy the stocks. The seller asks for the potential price of the stock and if the buyer calls in the highest price among other sellers than that price is set as the actual price of the stock. The sale of the stocks is then made on a first come first basis of the stock.
Physical exchanges on the stock market take place when stocks are listed on the Stock exchange. This is the most popular kind of trading in the stock market as a stock broker enables the buyer to get the best bids of the stocks at suitable market price. Online brokerage is one aspect of contacting a broker so as to enable the trading of stocks. The broker enables a deal between the seller and the buyer of the stocks. He functions as an intermediary in the stock market, who has information about the best price of the sale of stocks. However it is necessary to read the stock quotes before contacting a broker of a seller. Virtual trading is done on computer networks where the buyer contacts the seller online to bid for the purchase of a stock.
The stock market is a revolutionary concept in business economics which has enabled nations to exhibit better growth rate. This is because stock markets have enabled management and organization of the stocks in an effective way.
by:Vijay Kumar Sharma
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