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stock market typically refers to a financial market that handles the buying and selling of company stocks, derivatives and other securities. The stock markets trade the company securities that are listed in the stock exchange.
Both the investors and security issuers make the participants of stock market. Starting from small investors to the governments, corporations, large hedge fund traders and banks, all participate in the stock market activities. The corporations, governments and companies issue securities in the stock market to collect fund. The stock market plays as a platform for the companies to raise money for their business and investors to invest in securities.
Now when both the buyers and sellers in
stock markets are institutions, rather than individuals, the stock market principle is more institutionalized. The emerging of this institutional investor concept has dragged some improvements in the stock market operations around the world.
The stock market existence can be both real and virtual. The stock exchanges with physical locations carry out the stock trading on trading floor. The method of carrying out such trading is called
open outcry where the traders enter for verbal bids. In case of the
virtual stock exchanges, the entire trading is done on line through computers where the traders are connected with each other in a network of computers.
Apart from acting as a market place for stock trading, the stock markets also act as the
clearinghouse for the stock transactions. This means that the stock exchanges collect and deliver the securities and also guarantee for the payment to the security seller. This ensures both the buyers and sellers of securities that the counterparts will not default on the transaction.
The
stock markets in various countries over the world have well performed due to the financial sector reforms and integration. Flow of funds internationally has raised the expertise of stock exchanges in the respective countries.
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