INTRODUCTION TO STOCK MARKET:

The term stock market refers to several exchanges in which shares of

publicly held companies are bought and sold. Such financial activities
are conducted through formal exchanges and via over-the-
counter (OTC) marketplaces that operate under a defined set of
regulations. 

Both “stock market” and “stock exchange” are often used

interchangeably. Traders in the stock market buy or sell shares on one
or more of the stock exchanges that are part of the overall stock market.

The first stock market was the London Stock Exchange which began in

a coffeehouse, where traders met to exchange shares, in 1773.
The first stock exchange in the United States began in Philadelphia in
1790.
 The Buttonwood Agreement, so named because it was signed under a
buttonwood tree, marked the beginning 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 the New York Stock and Exchange Board in
1817.

HOW THE STOCK MARKET WORKS

Stock markets provide a secure and regulated environment where
market participants can transact in shares and other eligible financial
instruments with confidence, with zero to low operational risk. Operating
under the defined rules as stated by the regulator, the stock markets act
as primary markets and secondary markets.

As a primary market, the stock market allows companies to issue and

sell their shares to the public for the first time through the process of
an initial public offering (IPO). This activity helps companies raise
necessary capital from investors.

Using the stock exchanges, investors can also buy and sell securities
they already own in what is called the secondary market.
A company divides itself into several shares and sells some of those
shares to the public at a price per share.
 To facilitate this process, a company needs a marketplace where these
shares can be sold and this is achieved by the stock market

WHAT ARE THE FUNCTION OF STOCK MARKET

 The stock market ensures price transparency, liquidity, price
discovery, and fair dealings in trading activities.

 The stock market guarantees all interested market participants

have access to data for all buy and sell orders, thereby helping in
the fair and transparent pricing of securities.

 The market also ensures efficient matching of appropriate buy and

sell orders.

 Stock markets need to support price discovery where the price of

any stock is determined collectively by all of its buyers and sellers.
Those qualified and willing to trade should get instant access to
place orders and the market ensures that the orders are executed
at a fair price.

 Traders on the stock market include market

makers, investors, traders, speculators, and hedgers.

 An investor may buy stocks and hold them for the long term, while
a trader may enter and exit a position within seconds.

 A market maker provides necessary liquidity in the market, while a

hedger may trade in derivatives.

HOW STOCK MARKET ARE REGULATED

Most nations have a stock market, and each is regulated by a local
financial regulator or monetary authority, or institute. The SEC is the
regulatory body charged with overseeing the U.S. stock market.

The SEC is a federal agency that works independently of the

government and without political pressure. The mission of the SEC is
stated as “protecting investors, maintaining fair, orderly, and efficient
markets, and facilitating capital formation.”

Companies listed on the stock market exchanges are regulated, and

their dealings are monitored by the SEC. In addition, the exchanges set
certain requirements such as mandating timely filing of quarterly
financial reports and instant reporting of relevant corporate
developments, to ensure that all market participants are equally
informed.

WHAT IS THE SIGNIFICANCE OF STOCK MARKET

The stock market is a component of a free-market economy. It allows
companies to raise money by offering stock shares and corporate bonds
and allows investors to participate in the financial achievements of the
companies, make profits through capital gains, and earn income
through dividends. 

Who Helps an Investor Trade on the Stock

Market?
Stockbrokers act as intermediaries between the stock exchanges and
the investors by buying and selling stocks and portfolio managers are
professionals who invest portfolios, or collections of securities, for
clients. Investment bankers represent companies in various capacities,
such as private companies that want to go public via an IPO or
companies that are involved in pending mergers and acquisitions