Trading stocks. This is a common phrase that people usually hear or say, especially in the financial world, although it really is wrong – you don’t trade stocks like a basketball cards (I’ll exchange with you 100 Intels for 100 IBMs).
To "trade" pertains to buy and sell in the language of the financial markets. Now, the next question would be, where do people do these transactions?
There are two terms to start with, first is the share market or more commonly known as stock market; and the other one is the stock exchange.
Although the words "stock market" and "stock exchange" are somewhat interchangeable in casual talks, there are some distinctions in the meanings of the words. The stock market is a wide entity covering a vast extent of market activities and firms. The stock exchanges are only a portion of the stock market system.
A stock market pertains to the whole market of equity, either private or publicly possessed, for exchanging in the shares, stocks, derivatives of the different firms. "The stocks are recorded and exchanged on stock exchanges which are entities a mutual organization or corporation specialized in the business of bringing merchants and purchasers of the organizations to a recording of stocks and securities together." like DOWJONES, NASDAQ, BSE. In other words, a Stock exchange is the place where shares/stocks are recorded and where people can purchase and merchandise their shares. The stock market is the word usually said to pertain to all the stock exchanges. some people even use the word stock market to pertain to a specific exchange.
A stock market, equity market or also called as share market is the aggregation of merchants and purchasers (an indefinite network of economic deals, not a discrete entity or physical facility) of stocks (shares); these are securities recorded on a stock exchange as well as those only exchanged in private.
Stocks are divided in different styles. One regular technique is by the country where the firm is domiciled. For instance, Honda, Toyota and Suzuki are established in Japan, so they are part of the Tokyo Stock Exchange.
The extent or range of the world stock market was calculated at about $36.6 trillion at the start of October 2008. The overall world derivatives market has been calculated at about $791 trillion face or nominal value, 11 times the whole proportion of the whole world economy. The worth of the derivatives market, because it is declared in terms of notional values, cannot be straightly compared to a fixed income security or a stock, which generally pertains to an actual worth. In addition, the wide range majority of derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event happening is offset by a comparable derivative 'bet' on the event that is not happening). Many such relatively illiquid securities are appreciated as marked to model, instead of an actual market price.
The stocks are recorded and exchanged on stock exchanges which are entities of a mutual organization or corporation functional in the business of bringing merchants and purchasers of the institution to a recording of securities and stocks together.
Generally considered major stock exchanges are New York Stock Exchange, Toronto Stock Exchange, Deutsche Börse (Frankfurt Stock Exchange), Paris Bourse, London Stock Exchange and the Amsterdam Stock Exchange. In Asia, there are the Hong Kong Stock Exchange, the Singapore Exchange, the Shanghai Stock Exchange, the Tokyo Stock Exchange, the Bombay Stock Exchange and the Philippine Stock Exchange. Examples in Latin America are the BMV and BM&F Bovespa. While in Africa, Nigerian Stock Exchange and JSE Limited are the well known exchanges. Lastly in Australia, there is a stock exchange located in Sydney, the Australian Securities Exchange, which is the national stock exchange because of the size of its population.
The players in the market involves institutional investors composed of insurance companies, mutual funds, hedge funds and banks. Individual retail investors are also participants of these market as well as publicly exchanged corporations swapping in their own shares. Some of the analysis have proposed that corporations and institutional investors trading in their own shares commonly acquire greater risk-adjusted returns compare to retail investors.
Moreover, stock exchange is a form of exchange which offers services for traders and stock brokers to buy/sell bonds, stocks and other securities. Stock exchanges also offers facilities for redemption and issue of securities and other monetary means, and capital events involving the payment of dividends and income. Securities exchanged on a stock exchange involved stock given by bonds, derivatives, companies, unit trusts and pooled investment goods. Stock exchanges usually works as "continuous auction" markets, with merchants and purchasers consummating deals at a central area, like the floor of the exchange.
To be able to exchange a security on a particular stock exchange, it must be recorded there. Generally, there is a main area at least for document keeping, but exchanges is increasingly less connected to such a physical area, as present day markets are electronic networks, which provides them advantages of boosted speed and trimmed down expenses of deals. Trade on an exchange is only by members.
The primary offering of bonds and stocks to investors is by description done in the main market and subsequent exchanging is done in the secondary market. A stock exchange is usually the most imperative body of a stock market. Several determinants are the ones who move the supply and demand in stock markets.
There is commonly no urgency to issue stock by means of the stock exchange itself, nor must stock be subsequently transact on the exchange. Such deals is said to be over-the-counter or off exchange. This is the most common way that bonds and derivatives are exchanged. To a greater extent, stock exchanges are sectors of a global market for securities.
In recent years, different areas for transactions, like "dark pools", electronic communications networks and alternative trading systems have taken much of the exchanging actions away from conventional stock exchanges.
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