|
|
|
Canada Stock Exchange |
|
|
Investor's business Guide |
|
|
The US Stock Market |
When buyers and sellers
meet to exchange shares of a company, then they do it at
the stock exchange. Stock exchanges are virtual or
physical market places which offer standardized procedures
for stock trading. This is of benefit for both parties,
buyers and sellers, because only an efficient and liquid
stock market is a secure place to trade shares.
Stock markets play an important role in today's economy.
For a company it's the best place to raise much money
quickly. Companies sell shares to have more money for
investments. They can achieve their business goals faster.
Private investors can buy shares to become a partial owner
of the company with voting rights at the shareholder
meeting and the right of shared profits. For an investor
it's the only way to become part of a business and enjoy
the chances for high profits without founding an own
company. Stocks also limit the risks and liability. In the
worst case, you loose the purchase price when the shares
go worthless. |
|
|
There are
various different stock exchanges. The most important ones
in the United States are the New York Stock Exchange
(NYSE) and the NASDAQ. The NYSE is a physical market place
while the NASDAQ is a virtual exchange. The NYSE, also
known as the “Wall Street”, executes the orders to buy or
sell shares through so called specialists in an “open
outcry” system. Each specialist is responsible for a
specific company. When an order to buy or sell stocks
comes in then the specialist tries to match orders to
receive an execution. Since all orders for the same stock
come to the same specialist, he usually has enough shares
to match the orders.
The NASDAQ works different because there is no specialist.
There are several market makers per stock who are
obligated to provide a current bid and ask price at all
times. There are also electronic communication networks (ECN)
which work 100% electronically. All orders are matched
that way. Since there is no physical location of the
NASDAQ like the NYSE trading floor, it's a virtual stock
exchange.
Today's stock markets work very efficiently and fast.
Advances in technology, especially the Internet, allowed
the stock exchanges to grow rapidly the last years. Today
everybody with a computer and Internet can trade stocks
online with low transaction costs. Years ago stock trading
was expensive and made sense only when you bought a large
amount of shares. Now you can trade stocks in seconds and
so inexpensively that so called day traders execute
hundreds of trades per day from their home computer.
You still need a broker to get connected to the stock
market. A broker is the intermediate between the investor
and the stock exchange. He takes care that your orders are
executed properly and timely. Discount brokers offer only
order execution while full service brokers offer more
services at a higher fee like research, advice and
financial planning.
No matter which broker you choose, the stock market is an
exciting place offering you the choice between thousands
of companies. There are new opportunities every day.
By: :David A.
Sorenger is a stock exchange expert and provides detailed
information on the
stock market,
stocks, options and online brokers at his web site
www.StockTradingABC.com
|
|
|
|
|