Stock Market Today - Everything Is Connected
In the stock market today, all the major American Stock Market exchanges are all connected, as well as to the international exchanges, by computerized systems that allow traders to buy and sell generally any stock they are interested in.
So, while this brief history of the stock market focuses only on the American stock market, it is important to remember that todays stock market, is actually quite international in scope.
In the stock market today, the financial markets in one part of the world are affected by the markets in other parts of the world, more so than ever in history of the stock market, right now.
In todays current stock market, no exchange exists in a vacuum. Today's stock market is a broad-based yet tightly integrated international financial system. It is a world stock market.
This marketplace not only provides companies with financing and investors with potential profits, but also acts as a gauge for the health of all the economies of the world.
The Stock Exchange acts as a market where stock buyers connect with stock sellers. Stocks can be traded on one or more of several possible exchanges such as the New York Stock Exchange (NYSE).
The primary function of a stock exchange is to help provide liquidity; in other words, to give sellers a place to "liquidate" their share holdings.
To be traded, every stock must list on an exchange where buyers and sellers meet. The two big U.S. exchanges are the NYSE and the fast-growing Nasdaq.
Companies listed on either of these exchanges must meet various minimum requirements and baseline rules concerning the "independence" of their boards. But these are by no means the only legitimate exchanges.
In the stock market today, Electronic Communication Networks are relatively new, but they are sure to grab a bigger slice of the transaction pie in the future. Finally, the OTC market is a fine place for experienced investors with an itch to speculate and the know-how to conduct a little extra due diligence.
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The Over The Counter Exchange (OTC)
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What is the over the counter stock exchange?
As the NYSE and the AMEX grew, they became more institutionalized, with all the rules and accouterments that accompany such institutionalization.
This meant listing a stock on either of theses exchanges became more difficult for newer, less established companies that were just getting started. These companies still needed funding that could be provided by offering stock to the public.
This need was handled by the Over The Counter Stock Exchange (OTC), which has really existed alongside the more established exchanges all along. The OTC market handles stocks for very small companies, and their prices are listed on "pink sheets" which display information for these often-obscure stocks.
These stocks are known as Penny Stocks.
This over-the-counter market is regulated by a self-regulatory organization known as the National Association of Securities Dealers, or NASD.
When OTC stock market exchange stocks become successful enough to fulfill certain criteria set out by the NASD, it can then be admitted to the National Association of Securities Dealers Automated Quotation, or the NASDAQ.
This was developed in 1971 to provide real-time pricing information to the brokers/dealers who trade these stocks.
Next: Conclusion: Stock Market Basics
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