The stock market is defined as the set of all those companies, institutions or individuals that carry out transactions of financial products.
Some of these are the stock exchange, the brokerage house, banking institutions and investors; in the stock market you can find all the offers and demands on the securities that are in circulation.
This is a centralised and regulated market, which allows companies to finance their projects and activities by selling their assets or securities.
On the other hand, in the stock market, exchanges of products or assets of a similar nature take place, just as they do in the stock market with shares or bonds..
The demand and supply of products and assets act as the driving force behind the prices at which they are bought and sold.
It is important to note that markets come in many shapes and sizes, their main purpose is to facilitate the buying and selling of existing shares to investors, as well as raising funds through the issuance of multiple new companies.
Do you know how the stock market is defined? If you don’t know exactly, in this post we offer you the possibility of finding out what it means and the function it fulfils.
Elements that make up the stock market
The stock market has a series of elements that allow it to operate as a market, such as a physical space, which is the stock exchange building.
There are also demanders, which are the investors or buyers, and bidders, which can be the issuers directly or the brokerage firms themselves; the regulatory institutions of the same transactions that are carried out in the stock exchange.
Below we will explain in detail about these elements, which are responsible for making the market operate as a market..
The stock exchange
This is an organised, institutionalised and regulated capital market, in which transactions for the purchase and sale of shares or bonds are carried out.
Also known as stock brokers or stockbrokers, they can be a natural or legal person legally authorised to carry out the activities of buying and selling securities on the stock exchange on behalf of third parties.
Investors in the stock market
This is a natural or legal person that provides a series of financial resources of its own, with the aim of obtaining a higher profit in the future.
Issuers in the stock market
These are companies which, first of all, in compliance with the many relevant regulations, offer to the market a series of securities representing their share capital, “shares”, and also securities in the form of credit, “bonds”.
These are the different types of institutions in charge of overseeing the correct functioning of the market, for example, in Spain we can observe the Comisión Nacional del Mercado de Valores (CNMV) and the Banco de España.
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Stock market characteristics to bear in mind
The following are some of the characteristics of the stock market, so that you can get to know it in depth and get to know everything it has to offer.
- The stock market is defined as a regulated, yet centralised space.
- This allows companies to raise finance to carry out their projects or activities.
- With the help of the stock market, investors can obtain a higher return on their savings.
- Within the stock market there is a primary market and a secondary market; in the primary market governments and companies can issue financial products, and in the secondary market the trading of these financial products takes place.
- The increase or decrease of the prices of the different listed shares is reflected in the stock market indices, which show the movement of the prices of the different assets, securities or products.
It should be taken into account that the set of rules and participants, whether issuers, intermediaries, investors or other types of economic agents.
These rules are aimed at enabling the process of issuing, placing and also distributing those securities registered in the national securities register.
It is worth mentioning that one of the largest stock markets is the New York Stock Exchange, which has a stock market index of 17.9 trillion dollars.
The New York Stock Exchange is the leading US stock exchange, which is the first in financial strength and vigour; it is a traditional and world-renowned stock exchange, and all its Asian investors are constantly looking to make a name for themselves.
Now you are informed about the market, its characteristics and all the elements that make it up.