What is a Stock market?

A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include securities listed on a public stock exchange, as well as stock that is only traded privately, such as shares of private companies which are sold to investors through equity crowdfunding platforms. Investment is usually made with an investment strategy in mind.

Private companies list shares of their stock on an exchange through a process called an initial public offering (IPO). Investors purchase those shares, which allows the company to raise money from the public to grow its business. Once the company is listed on a stock exchange it is now a public company and investors can buy and sell the company’s shares on an exchange that tracks the stock price.

The supply and demand help determine the price for each security at which investors and traders are willing to buy or sell. A stock exchange facilitates stock brokers to trade company stocks and other securities. A stock may be bought or sold only if it is listed on an exchange. Thus, it is the meeting place of the stock buyers and sellers. India’s premier stock exchanges are the Bombay Stock Exchange and the National Stock Exchange.

KEY TAKEAWAYS

• Stock markets are venues where buyers and sellers meet to exchange equity shares of public corporations.
• Stock markets are components of a free-market economy because they enable democratized access to investor trading and exchange of capital.
• Stock markets create efficient price discovery and efficient dealing.
• The U.S. stock market is regulated by the Securities and Exchange Commission (SEC) and local regulatory bodies.