Understanding The Stock Market
Stock is a kind of equity. A listed stock is one that can be traded on stock exchanges like New York Stock Exchange ("NYSE") and the Nasdaq. A firm has to fulfill the minimum requirement on asset size, number of shareholders and earnings, etc, in order to be listed.
To study a subject, people like to drill it down into smaller categories. Likewise for the stock market, it can be categorized into primary and secondary market. The word primary here means the first. That is when a stock is firstly brought to the market and sell to investors, such market is called the primary market. More often, people are trading in the secondary market. The secondary market is the market for trading of existing listed stocks.
Dealers and brokers are two terms that are highly related to stock market. You can regard both dealers and brokers as agents. Dealers are agents who maintain their own stock inventories. Therefore, they are able to buy and sell stocks at any time. Unlike dealers, brokers maintain no stock inventories. They work on an arrangement to bring buyers and sellers together.
NYSE is also known as the Big Board. There are people named member of the NYSE. These members are seat owners. They pay a great price (can be over $2 million) to gain seats on the NYSE, which allow them to buy and sell securities on the exchange floor without paying commission. Other than this type of member, there are several other types. They include commission brokers, specialist, floor brokers and floor traders. Each of such members has different authorities and responsibilities.
Commission brokers are the largest group of members. They are responsible for executing customer orders to buy and sell stocks. For the best interest of their customers, they always try to get the best price for their customers. Specialists are the second largest group of member of NYSE. They deal with trading of securities that are assigned to them. They are also known as the market makers as they are obligated to maintain a fair and orderly market. When commission brokers are too busy to handle some of the customer orders, they will delegate the orders to floor brokers. These floor brokers get a earning from the commission brokers in return. There are a small number of floor traders. These floor traders are independent traders. They anticipate the price fluctuation and trade securities for their own profits.
The operation of NYSE is very much the same as what you have seen on TV. All the members move around and buy and sell stocks for their customers including individual investors and institutional investors. The operation for Nasdaq is quite different compared to NYSE because of its bigger size. Instead of people moving around the floor, the trading is computerized and all the trading is done through dealers.
When you look through the pages of financial newspaper, you will find the financial information for several different markets. Basic information including the price, dividend and yield is reported on such financial pages. For example, you can find the last 52 weeks' high and low price, the day's high, low and closing price, the annual dividend and the dividend yield.
Article Source: FxTradingStock.com
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by: Simon Wong
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Date: Mon, 10 May 2010
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