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The Financial Importance of the US Stock Market

Us Stock Market

US Stock Market Defined:

The US Stock Market is an exchange where investors come together to buy and sell shares of publicly-traded companies. The shares of stock that are actively bought and sold by the investors represent a financial interest in the underlying company or organization. The companies involved must be publicly held, meaning they must issue stocks to a marketplace in an attempt to raise money for their particular business ventures.

Those companies who sell stocks to investors do so to raise capital. The capital raised is then used to finance their current operations and paying for future endeavors or expansion plans. If a publicly-held company is able to turn such capital into profits, their corresponding shares will generate profits for the investors who hold them. In a similar fashion, if the underlying corporation loses money, the investors will experience a loss in their investment in the form of decreasing stock prices.

The US Stock Market, in the most simplistic sense, is a location where investors (buyers and sellers) come together to make business deals and affirm transactions. That being said, the US Stock Market, as a whole, is not a tangible singular location; the US Stock market encompasses numerous marketplaces where individuals may come together to actively negotiate and purchase or sell stocks and other financial instruments.

The New York Stock Exchange:

The New York Stock Exchange is often regarded as the principal stock exchange in the world. That being said, not every company is listed on the New York Stock Exchange; however, it is home to the most-respected and prestigious companies in the world.

For an individual to purchase a stock on the NYSE, they must deliver finances either through a financial broker or by accessing an electronic marketplace online. By accessing a physical broker, the individual will process their transaction by going through the physical New York Stock Exchange and the brokers on the floor. In contrast, when an individual purchases a stock online, they bypass the traders on the floor of the NYSE and conduct electronic purchases and sales on their own.

Primary and Secondary Markets of the US Stock Market:

A vital characteristic of the US Stock market is found in the marketplace’s structure. The US Stock market is comprised of a primary market and a secondary market. The primary market of the US Stock market is where securities are transacted for a company’s initial public offering (IPO). The initial public offering is the base price that is used when a private company decides to go public.

After the price has been set, the once private company is now established as a publicly held company. As a result of the dearth of IPOs in a fiscal year, the primary market is less active when compared to the secondary market, which is the location where investors trade companies that are already publicly held.

NEXT: Wall Street: The Financial Capital of the World

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