What Is A Stock Market?
The stock market is a private or public market for the trading (the buying and selling) of company stocks. Stocks are listed, bought and sold on stock exchanges within the stock market. Stock exchanges are corporations or organizations that specialize in the bringing together of buyers and sellers of stocks and function like a marketplace for stocks. Transactions in the stock market can be carried out on a trading floor or virtually through a network of computers.
Buying and Selling Stock
When you buy a share (or a stock) on the stock market you are essentially buying a percentage of a company. You are then entitled to a percentage of any profits that company makes. In order to purchase stock you must first decide which company you would like to purchase shares in: IBM, McDonalds, etc…, and then you contact a stock broker. Brokers are people who will buy the stock for you. A brokerage house is the place where many brokers work and can be thought of like a supermarket of stocks. You tell your broker which stock you are interested in, and how many shares of this stock you would like to purchase. You will pay the broker a fee for providing this buying service for you. Your broker will then contact a floor broker who works on the floor of the stock exchange. The floor broker is the person who will physically purchase your stock. The floor broker will approach special companies at the stock exchange responsible for buying and selling certain stocks. The floor broker will find the company that deals with the specific stock you requested and then purchase that stock. If you ever decide to sell your stock the process will work in the same way.
Securities Exchange Commission
The stock market and the practices of stock brokers and brokerage houses are regulated by the Securities Exchange Commission or SEC. The SEC was established in 1934 in the United States to keep the practices involved in the stock market honest. This commission regulates the procedures for buying, selling, and advertising stock, decides what is legal regarding the stock market and will prosecute those who break the laws. In terms of your own personal comfort, the SEC can be considered the police of the stock market and is responsible for making sure that your broker actually buys your stocks and does not just run away with your money leaving you empty handed.
Article written by Nicole Sivan