What are the types of stock markets

Stock market

Stock marketis the generic term for public markets on which shares are regulated or issued, bought and sold over the counter. The stock market is a public market where companies can issue stocks and investors can trade stocks. Stock exchanges like the Frankfurter Böse or the Stuttgart Stock Exchange are part of the stock market. An efficient and functioning stock market is considered critical to economic development as it allows companies to raise capital from investors.

You can also use shares to retain staff. You can find out whether this makes sense in the Billomat magazine.

What are the roles of the stock market?

TheStock marketperforms two very important functions. The first is providing capital to businesses to finance and grow their businesses. Fees for the trading venue and usually for the bank that manages the shares sold on behalf of the company are deducted from the proceeds from the sale of the shares. By selling shares instead of borrowing the capital needed for expansion in the form of loans or bonds, the company avoids borrowing and the interest burden associated with it.

The second function of the stock market is to enable investors to participate in the profits of listed companies. Investors can benefit from buying stocks in two ways. Some stocks pay regular dividends so that shareholders can earn a steady income. The other option is to sell shares at a profit when the share price rises compared to the purchase price.

History of the stock market

Although stock trading in Antwerp dates back to the mid-15th century, trading in stocks in the East India Company in London is generally considered to be the beginning of modern stock trading on a stock market. The creation of the East India Company in London led to a new investment model: companies that offered stocks that represented a fraction of the ownership of the company. Investing in such companies, often protected from competition by government-issued charter companies, became very popular due to the fact that investors could make massive profits from their investments. The company's shares were issued on paper to enable investors to exchange shares with other investors. However, until the London Stock Exchange (LSE) was founded in 1773, there were no regulated exchanges in the UK. The New York Stock Exchange (NYSE) was founded in 1792. The Frankfurt Stock Exchange is much older. It was founded in 1585.

Participants in the stock market - investment banks, stockbrokers and investors

There are a number of regular participants in the stock market. Investment banks handle the initial public offering of stocks. Stocks offered in IPOs are usually bought by large institutional investors such as pension funds or mutual fund companies. Stock brokers buy and sell stocks for their clients. The customers can be institutional as well as small investors. Stock brokers require authorization to trade. Equity analysts are employed by stockbrokers, mutual fund companies, hedge funds or investment banks. These are people who study publicly traded companies and try to predict whether a company's stock prices are likely to rise or fall. Fund managers or portfolio managers, which include hedge fund managers and ETF managers, are important market participants because they buy and sell large amounts of shares and thus usually have a significant influence on the price development of a share.

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