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What is a Stock Market?

The problem at the onset was that there was no organized way to find out which companies were selling stock, and which people wanted to buy some. Like any type of “new” idea it took a while before organizers got the idea of creating a “stock exchange”–a central place that would bring together sellers (companies with stock for sale) and buyers (people who wanted to buy stock certificates). Now there are many of them and they deal in the buying and selling of many different types of “securities.” The most famous and well known of all the exchanges is the New York Stock Exchange (NYSE).

The NYSE is the granddaddy of them all, and is by far the biggest stock exchange in existence. It was started in 1792 when 24 men signed an agreement stating, “We will trade securities between ourselves, with established commission rates”. Granted, people had been trading securities for years before that, but there was no “central exchange” in which to do business. From that humble beginning, it grew into the global leader of financial transactions. Here is where the world turns as far as the financial markets go. At the NYSE you will find stocks being traded every day by hundreds of “floor traders” (the guys you see running around waving their arms, with tiny computers in their hands) These are the guys that actually take the brokers’ orders and run over to the post that “warehouses” the particular stock that they are looking for and buys them.

The NASDAQ is over 90% a computer driven exchange. It stands for the National Association of Securities Dealers and Quotations. Most of the technology companies are traded on this exchange. Orders to buy, and sellers who want to sell to buyers, are matched up electronically, and in some cases it can be done “instantly”. There are no floor traders waving their arms and hands here! Interestingly, as we have moved from a manufacturing-based society to a more technology-driven economy, the NASDAQ has emerged as the daily volume leader ahead of the NYSE, something that would have been called nonsense just 10 years ago.

Stocks are listed with these exchanges as “ticker” symbols that date back to ticker tape machines. For instance, International Business Machines is a long name, but the “ticker” is IBM. Most company’s tickers are some type of shortening of their actual name, but some of them get a little tricky. If you look in the financial section of the newspaper, you will see another type of abbreviation used for companies. Intel trades under INTC. Cisco Systems is CSCO. At first it might sound confusing, but there are a number of ways to find the ticker symbol on any company.

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