Basic Knowledge of the Stock Market

Lower Manhattan is the financial center of the United States.

The stock market is an organized forum where stocks and bonds are traded. Stock markets are located in some of the major financial centers in the world, including New York, Chicago, London, Tokyo and Frankfurt.

Ownership

Stocks are claims on the equity gains a company generates. If the value of a stock appreciates, the stockholder is entitled to a part of that increase in value that is proportionate to the amount of stock the stockholder owns.

Stock Exchange

A stock exchange is a centralized marketplace where stock trading occurs. Specially trained individuals called brokers directly handle transactions on behalf of investors. Stock exchanges are physical locations with a trading floor like the New York Stock Exchange (NYSE) or virtual trading floors where electronic trading occurs as in the NASDAQ.

Listing Requirements

Each exchange has listing criteria that each company must meet to trade stock in a particular exchange. For example, the NYSE requires that companies have at least 1.1 million shares with a minimum stock price of $4. In addition, pre-tax income for the previous three years must add up to $10 million.

References

• "Financial Markets and Institutions;" Jeff Madura; 2009

Resources

• New York Stock Exchange: Investor Education
• New York Stock Exchange: How a Stock is Bought and Sold