subject: Understanding The Stock Market [print this page] Other than supermarket, there is another market that many people visit every day. It is the stock market. To a certain extent, both supermarket and stock market are places for buying and selling or for transactions. But, stock market is of course much more complicated than a supermarket. Without an understanding of the stock market, you are going to put your assets in dangers.
With reference to the financial market study, stock market is composed of two sub-markets namely primary and secondary market. Primary market refers to the market for the stocks that are newly issued. In other words, it is the market for the initial public offering. The secondary market on the other hand is for the listed stock. The buy and sell of the existing listed stock.
Dealers and brokers are two common terms that you may come across when talking about stock. Both of them are playing the role as agents, but there are some differences between the two. Dealers maintain a level of stock inventories for instant buying and selling at any time. Brokers have no stock inventories carried. They can only arrange the buying and selling among the buyers and sellers.
NYSE is also known as the Big Board. There are people named member of the NYSE. These members are seat owners. They pay a great price (can be over $2 million) to gain seats on the NYSE, which allow them to buy and sell securities on the exchange floor without paying commission. Other than this type of member, there are several other types. They include commission brokers, specialist, floor brokers and floor traders. Each of such members has different authorities and responsibilities.
Commission brokers are members of NYSE, who buy and sell stocks in accordance to the order from their customers. For every transaction, they are accountable for getting the best price for their customers. Specialists, also known as market makers are a smaller group of NYSE members. They are responsible for asking and posting prices for securities that are assigned to them. Floor brokers work similarly to commission brokers. Instead of responsible to customers, they are responsible for commission brokers. In return, they receive a commission fee from the commission brokers. Lastly, independent traders named floor traders work on their own accounts. Their securities buying and selling are completely based on their own anticipation of securities price fluctuations.
Have you ever seen the scene of the floor activity on TV? The real floor activity of NYSE is very much the same as what you have seen on TV. People are moving around the floor for their order flow. But, it is a bit different when we talk about the operation of Nasdaq. Due to a bigger size of Nasdaq, it is much more computerized. It is a computer network of securities dealers for trading of listed stocks.
To understand more about the financial or stock market, you need to equip yourself with the ability to read the market report. You can find useful stock information on all financial newspapers. Common terms that you may encounter include 52 Weeks Hi Lo which represents the high and low price for the last 52 weeks; DIV represents annual dividend; Hi Lo and close represents the high, low and closing price for the day and YLD represents the dividend yield.
