The Stock Market
Jennifer Wendt
Stock Market
Definition: a particular market where
stocks and bonds are traded, bought, and
sold; auction markets
Also known as a stock exchange
2 main sections of a stock market
Primary market
Secondary market
Stocks
What are stocks?
Equity investments; Pieces of the corporate pie (own
a slice of the company)
Prices move up and down depending on how much
investors are willing to pay at the time
Types of Stocks
Common stock
Most of the stock in the US
No guarantees you will make money
Tend to increase in value but it is a risk
Possible to lose some or all of investments if the value of
stock drops
Preferred stock Ownership shares issued by a corporation and traded by
investors
Reduce investor risk but limit reward
Greater chance of getting some of investments back if
company fails
History of Stock Markets
Originated in New York City (Tontine Coffee House) in
early part of the 18th century
Exchanges dealt with not only commodities but also
human beings; slave trade
Philadelphia was the first organized exchange in 1790
History of stock markets cont…
New York brokers began to charge for representing
others in 1792
Created a constitution to guide business and limit
membership- “New York Stock Exchange Board”
“Open Board of Brokers”- brokers with rejected
membership
Combined to form “New York Stock Exchange”
History of stock markets cont…
“New York Curb Exchange” was a rival group of brokers
who openly conducted business on the street since
1849
Moved indoors in 1921 and is now the American Stock
Exchange
These are two of many exchanges in the US
Financial markets are called Wall Street because that
was the cite of the first exchanges
How it works….
Traditional:
All trading takes place among the membership
Membership is limited an can only be obtained by buying
another member’s seat
Types of memberships:
Commission brokers
Floor brokers
Registered traders
Specialists
Odd-lot dealers
Block Positioners
How it works cont….
Electronic Markets:
No central trading location and no exchange floor
Advanced telecommunications and computer
network run by the National Association of Securities
Dealers which allows brokers to monitor stock
prices, match orders, and make trades
Nasdaq is the largest market in the country
Becoming popular and important all over the world
How it works cont…
Over the Counter Trading:
Stock from small or new companies which
aren’t listed
Bought and sold over the counter
Handled over telephone or computer now