Bob Brinker's Marketimer

  Monday November 20, 2017

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HOW STOCKS ARE BOUGHT AND SOLD
Learn even more about this topic with the Encyclopedia of Personal Finance™

Before investors buy stock, the company first sells, or offers it. The company arranges with investment bankers to purchase its securities and sell them to the general public. This arena is called the primary market. The issuing company receives capital (money) from the sale.

In the secondary market, stocks are sold to investors. In a secondary market transaction, money is not received by the issuing company, but exchanged between investors.

Secondary market trading happens on exchanges and over the counter. The New York Stock Exchange is an example of a place where traders come to buy and sell stock. Exchanges are regulated by exchange boards that decide which companies can list their stock and that make rules about how the stocks are traded. Stocks are sold at open auction at the exchanges, so everyone knows which stocks are selling and what their current selling prices are.

In the over-the-counter (OTC) market, stocks are not auctioned. Their sale is negotiated directly between brokers and buyers.

Often the stocks of new companies and companies that can't get listed on an exchange are traded this way. The NASDAQ is a computer network that keeps traders up to date on the trading of OTC stocks.

Finally, let's look at the fuel that keeps the stock market humming: volatility.




LEARN EVEN MORE WITH THE ENCYCLOPEDIA OF PERSONAL FINANCE. CLICK HERE!

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