Stocks – An Introduction
A stock market, equity index, or share index is an association of buyers and sellers of shares, which represents ownership interests on companies; these can include publicly traded shares as well as company-securities listed on a regulated exchange. In the United States, there are currently seven exchanges for common stock: the NASDAQ, AMEX, OTCBB, NYSE, AMEX and the pink sheets. There are also many mutual funds that are listed on stock markets across the country. These mutual funds usually represent individual portfolios rather than a single company. The role of the broker in buying stocks and selling them to you is playing a more important part in the world of stock investment today.
Many investors use an online trading website, such as NYSE, NASDAQ and the AMEX to purchase shares from mutual funds and other investors. In the past, brokers represented brokerage firms and delivered messages to their clients. Today, however, many brokers are independent or work independently, providing services including buying and selling stocks on the stock market. Brokers help you by finding shares that match your criteria, receiving information from you about the security and sending the order to the appropriate exchange.
Because the major exchanges all operate independently, their services and rules change periodically to protect investors. For example, the Nasdaq requires that companies provide notice to the public prior to listing any securities and may bar companies from trading for five years after it becomes public. The SEC or Securities and Exchange Commission does not restrict the number of times a company can list its securities. There are also over-the-counter stock markets, although their trading volume is limited compared to the NYSE and NASDAQ. Over-the-counter securities must be bought and sold in accordance with their applicable regulations.
Another important aspect of the trading of securities on the stock market relates to margin requirements and trading size. These are typically below minimum requirements by most professional firms. If an investor wants to buy large quantities of stocks then it’s usually recommended to open a cash account. If the investor only wants to sell shares through margin accounts, then it’s generally not a problem, provided that the broker provides “buy” or “sell” orders at market prices as set by him or her. Brokers often represent a wide variety of market participants and therefore have expertise in working with various margin accounts.
Many retail investors have become interested in trading on the stock markets because they want to minimize costs. Fees charged by the exchanges and brokerages can be quite high, especially if market participants do not have full understanding of the fees and charges. On the other hand, many large institutional investors and hedge funds manage their own trading and exposure within the stock markets. They use spreads to reduce trading costs and are familiar with how the markets work. For these investors, knowledge of the market structure and how individual securities are traded helps them to make good decisions.
Since STocks are now being traded on the Over the Counter Marketplaces, many investors are interested in learning more about how and where they can buy and sell Shares. Many of the Over the Counter marketplaces are not restricted by the restrictions on the US exchanges. There is a large number of online stock exchanges where Shares of all types can be bought and sold. These companies include NASDAQ, Pink Sheet, AMEX, OTCBB, and E-Trade.