Stock Markets Exposed
about stock markets???
question about stock market?? what exactly does the stock market like nasdaq and nyse do.? and what's the purpose of having different stock markets....i mean is one better than other or what? i'm confused...please explain??
Public Comments
- A stock market is basically a market to buy and sell stocks; think a flea market where prices are negotiated for a certain good. In order to buy a stock someone must be willing to sell it, and a stock market is a place where this transaction can be facilitated quickly and efficiently. Imagine if there were no stock markets and you wanted to buy a stock and had to go try to find someone who owned it to sell it to you. The reason there are different markets vary. The NYSE, although not the oldest in the US, is the biggest "physical" market (measured by volume of stocks traded) in the US. the NASDAQ was formed to facilitate the trading (buying and selling) of stocks electronically (without a physical market). This is done more efficiently (by most estimates) than the physical markets. Hope this helps! One thing that most people do not know is that the SEC charges a very small fee per share traded to pay for there business activities (I don't remember the exact calculation but it is basically .000034 x the amount of your trade) totaling around $2.3 Billion/year
- First, there are two ways stocks are actually traded in the U.S. One is on organized exchanges, which are actual geographic places with trading floors. The NYSE falls into this category. The NYSE and other exchanges (AMEX) use an auction system for trading, where a single "specialist" is the market maker for each stock listed on that exchange. This one person stands at a trading position that is near one of the 17 NYSE posts, where the orders bids and offers arrive. Most of these orders arrive from the floor brokers and from an electronic ordering system called SuperDot. SuperDot links firms that are members of the NYSE directly to the specialist's post on the floor. These single specialists are very important people in the auction system. While traders on the floor can get together and make deals without a specialist, specialists are crucial to keeping the market liquid. First, the specialist absorbs excess demand and supply to keep the market liquid; that is, if there are sellers but no buyers, the specialist will buy the stock from the seller, obviously at a lower price. They do the same if there are no sellers but there are buyers. The specialists also execute market and limit orders sent to them by brokers, they help bring buyers and sellers together, and they quote current bid-ask prices that reflect the supply and demand of the stock they're in charge of. Nasdaq (National Association of Securities Dealers Automated Quotation System), on the other hand, is an over-the-counter (OTC) market. Trading in this market is geographically dispersed and buyers and sellers are linked by telecommunication systems. Therefore, there is no trading floor like on the NYSE. Nasdaq is a negotiated system where individual buyers and sellers negotiate prices for stocks. I don't think one is better than the other. The classic image of traders standing in a big circle and yelling is what you see at the NYSE, and I think this is a venerable and uniquely American institution. Unfortunately, lately there have been pushes to turn the trading floors, like at the NYSE and AMEX, into OTC systems like at Nasdaq. While there are benefits to having an OTC system (more buyers and sellers, ability to buy and sell anywhere), I still love the traditional image of brokers on the floor.
