What is Stock Market?
The secondary market facilitates trading i.e. buying and selling of securities. It is also called as Stock Market. The activities of Secondary Markets are undertaken by Stock Exchanges.
Stock market / Stock exchange is one important constituent of capital market. It is an organized market for buying and selling of shares and other securities.
It is a place or mechanism through which the stock, shares and other long-term investments are bought and sold. These types of securities are issued to joint-stock companies and public bodies by State and Central Governments.
Features of Stock Market
Features of stock exchange market are given in the image below. ↓
Image credits © Manoj Patil.
Characteristics, main, salient, features of stock exchange are follows: ↓
- Organized market,
- Organized body,
- Element of capital market,
- Registered brokers,
- Listing of securities,
- Governing body,
- Controlled by US Securities and Exchange Commission(SEC),
- Central Government recognition,
- Sensitive to events,
- Nerve centre of economy,
- Raising funds by business enterprises.
Features of stock exchange are dicussed in brief.
1. Organized market
Stock Exchange is a systematic market for buying, selling and dealing in securities. It provides ready marketability to securities.
2. organized body
A stock exchange is an organized association or corporate body. It may be a Public Limited Company, Company Limited by Guarantee and Voluntary Non-Profit Organization. It is owned by Private Sector but supervised by Government.
3. Element of capital market
Stock Exchanges are important elements of Capital Market. It helps companies to get medium and long term funds by selling shares and debentures.
4. Registered brokers
Trading on Stock Exchange is done only by Stock brokers. If trading in the stock market is done by any other party, then it is not considered as valid purchase.
Stock Exchanges are mostly located in Capital cities of main states in the united states. At present, there are 22 major stock exchanges are there in US, e.g. NASDOQ, NYBT, NMS, etc.
6. Listing of securities
Stock Exchanges facilitate listing of shares. Companies can get their shares listed on one or more stock exchanges in the country. Listing is done by a listing agreement. Only listed companies can do trade in the stock exchange.
7. Governing body
Stock Exchanges are administered and managed by Governing Body. It consists of:
- Vice President,
- Chief Executive,
- Public Representatives,
- Government Nominees.
8. Controlled by Securities and Exchange Commission (SEC)
All activities of US Stock Exchange are controlled by Securities and Exchange Commission (SEC). Rules and regulations are made by SEC. If they are not followed by stock exchange SEC can cancel their registration.
9. Central Government recognition
Stock exchanges must be recognized by Central Government. Recognition may be temporary or permanent.
10. Sensitive to events
Stock exchanges are extremely sensitive to economic and political events taking place within and outside the country.
11. Nerve centre of economy
Stock Exchange is regarded as a nerve centre of the economy. Any event has its reflection on share prices.
12. Raising funds by business enterprises
Business enterprises can raise initial capital as well as additional capital for its growth and expansion through stock exchanges.