A stock market, equities market, or share exchange is an association of buyers and sellers of shares, which collectively represent ownership interests in companies; these can also include securities listed on the over-the-counter bulletin board system. Companies’ shares are listed in the stock market by trading prices, called quoted shares, determined at the time of the request for quoting. There are two types of exchanges – the over-the-counter (OTC) and the traditional stock exchange (TSE). The primary difference between the two is that the OTC allows investors to trade shares without having to register as brokers or with a bank, and TSEs require users to be registered brokers. In addition, there are hybrid exchanges that combine aspects of both the OTC and the TSEs. These include the Pink Sheets, Nasdaq, and the NYSE.
The primary stock markets were developed in the United States following the passage of the National Intraday Trading Act in August Pink Sheet listings were first used in New York. Over the years these exchanges have been progressively more developed and expanded to cover all states in the US except for Alaska and Delaware. Over the past few years the internet has become an integral part of the stock market. This allows traders to enter trades from anywhere around the world, and does not restrict them to trading hours within the same country as the stock markets. There are a number of web sites that allow traders to quote their shares and these quotes are then shown to other traders when accessing the web site.
OTC stock exchanges offer a wide range of trading opportunities. These include treasury bills, corporate bonds, commercial paper, mortgage backed securities (MBS), option securities (OS), and warrant accounts. As well, there are discount offerings made by some companies on the STocks Exchange that are not traded on the OTC. The scope and volume of the OTC market has lead to some companies taking their services and selling them on the major exchanges.
Because of the complex nature of the stock market the process of making trading decisions can take some time. This is especially true when companies that trade on the OTC market are involved. Since companies that trade on the OTC market are not regulated by the Securities and Exchange Commission (SEC) the process of pricing the securities can be somewhat difficult. There are no minimum redemption amounts or delivery standards. Many of the securities being traded on the OTC are not traded on national exchanges at all.
Because of this reason the SEC is responsible for overseeing the activities of the largest brokerages and clearinghouses. Because of the complexity of the manner in which the securities are listed and sold (through the clearinghouse and the broker dealers) it is very important that the SEC approve the listing and trading of the securities. If this is not done the impact can be drastic. National Stock Markets are designed to provide reasonable access to the securities that investors need to make investments in the marketplace. The lack of standardization and transparency of the securities exchange process greatly increases the opportunities for fraud and fraudulent activity by fraudulent investors.
Because of the increase in fraudulent transactions and the decrease in the ability of shareholders to exercise control over the company they can become a significant problem. When this occurs companies are reluctant to change their ways and often will engage in stock market trading strategies that are outside of their normal business range. This can be very detrimental to the share price of the company. The key issue here is to identify the type of trading strategy that is being used and to properly disclose the associated risks. As more research is directed at understanding the psychology of the stock market the more we can understand the complex processes and behaviors that investors use to determine the fair price of the shares.