Stock Market – Detailed Review And Feedback
What good is a stock market
What is the purpose of the stock trading market? The most complex mechanism of its work allows redistributing securities between different «institutions»: large investors and company owners and private Internet traders. However, the stock market (what is it?), as we know it more often, is a secondary (there is also a primary market – in this case, it provides a relationship between the institutions of the «state» and «commercial structures») that allows the interested individual own the securities. The more such private investors in the market are, the better national economy functions, and there are necessary amounts of funds in the economy to solve its problems.
If they go to the stock exchange, both an individual and a large investor are interested in income due to the turnover of securities. Transactions take place without direct participation of either parties or contractors; their execution is guaranteed by the exchange itself that makes the relationship reliable. For the investor it is a convenient and safe place for various manipulations with valuable assets.
Stock market functions
Trading on the stock market is a quite large amount of work that is invisible to its participants, but performance of specific functions allows the market to work without failures in the automatic mode, and all transactions take place instantly.
To do it, the following items should be performed:
- Organization of the bidding process (even if it is an electronic exchange);
- Creation of conditions for transactions by investors, financial intermediaries, so-called intermediary function;
- Asset valuation, so-called indicative function;
- Organization of a full-fledged process of securities trading, so-called regulatory function;
- Ensuring liquidity of assets (to carry out basic transactions with assets fast and due to a specified tariff policy).
Regulatory functions that make it possible to obtain important information from the market, for example, to carry out full-fledged economic activities that are necessary for the state. In addition, exchange monitors the market to prevent price manipulation, document fraud, violations of individuals and brokers.
How the stock market works
As you know, the stock exchange employs a large number of people that allows it to function efficiently and smoothly. To describe its device we should start with the papers needed to run the entire mechanism. Securities are issued by issuers who have the right to issue (otherwise -conduct emissions) assets (traveler’s checks, credit cards, money) and has certain obligations to the owners of assets, money, cards (information from Wikipedia). The issuers can be a state and a large number of local governments.
According to the legislation the right to issue shares can be also used by different commercial organizations that should be joint stock companies (exchanges, limited liability companies, credit companies, etc.), other legal entities do not have the right to issue shares, according to the information zerich.com (site: https://www.zerich.com/).
As soon as a share is issued, the process involves those participants who provide turnover (this is the exchange where assets are purchased and sold by traders, investors, companies); there are also professionals of depositories and clearing organizations that conduct various kinds of calculations.
We should note here separately the stock brokers, dealers and management companies that provide access to the entire volume of financial assets for those who came to the market to earn. The infrastructure of trading terminals and online trading is created for one of the main groups of participants: investors and traders (it can be state, population, commercial companies), who use the market to buy securities for ownership or resale. A serious role is given to the Central Banks of the countries, the main regulators of the process set the rules for the participants, control the activities.
At the heart of the stock market there is an exchange, where the transactions are carried out with registered (quoted) instruments (assets, securities). The stock exchange provides a platform and necessary infrastructure for stock trading and acts as a high-tech organization that is responsible for the latest high-speed software, uninterrupted operation of servers, secure equipment that allows using the Internet to connect millions of interested buyers and sellers, to provide them with an opportunity to conclude online transactions and round-the-clock access to statistics.
All this helps the exchange to maintain its serious strategic function – to support the liquidity of the market that is characterized by a large number of transactions, trading turnover, driving the price. If the market has low liquidity, it leads to tension and emerge negative moods among the participants of securities trading. To avoid this, the work of the exchange is controlled, subject to strict regulations and rules. The owners of the exchange are prohibited to receive income from asset trading on it, earnings of the exchange are based on commissions, and it has a good income, if a high liquidity occurs.
Stock market bidders
- Those creating and issuing shares (state, companies),
- Those controlling shares movement (market makers; clearing; depository center),
- Those licensed for assets sale in an exchange (stock brokers, management companies, dealers and others),
- Those providing assets turnover (buyers, sellers),
- This process common regulator.