A Business Raises Capital by Issuing Shares

Stock Exchange
A stock exchange, securities exchange or bourse is a facility

where stockbrokers and traders can buy and sell securities, such
as shares of stock and bonds and other financial instruments. Stock exchanges may
also provide facilities for the issue and redemption of such securities and instruments
and capital events including the payment of income and dividends. Securities traded on
a stock exchange include stock issued by listed companies, unit trusts, derivatives,
pooled investment products and bonds. Stock exchanges often function as "continuous
auction" markets with buyers and sellers consummating transactions via open outcry at
a central location such as the floor of the exchange or by using an electronic trading
platform
 Exchanges are marketplaces for the trade of securities, commodities, derivatives,

and other financial instruments.
 Stock exchanges allow investors to buy and sell shares of a company among
each other in a regulated and legitimate space.
 Companies may use an exchange to raise capital in the secondary market
through an IPO
 More than 80% of trading on the New York Stock Exchange is done
electronically.
When a business raises capital by issuing shares, the owners of those new shares
are likely going to want to sell their stake someday. Maybe they have a child going to
college and need to cover the tuition bill. Perhaps they pass away, and their estate is
subject to some hefty estate taxes. They may even leave it to their grandchildren, who
get to enjoy the stepped-up basis loophole, but the heirs want to liquidate to buy a
house. Whatever is driving their decision, they aren't likely to tie up their funds unless
they know somehow, someway, at some point in the future, they'll be able to find a
buyer for their holdings without too much trouble in what is known as "the secondary
market."
Without a stock exchange, these owners would have to go around to friends, family
members, and community members, hoping to find someone to whom they could sell
their shares. (Technically, you can do this. You don't have to sell your shares on a
stock exchange. You can take physical possession of your stocks in certificate form,
endorse them, and sign them over to someone in exchange for payment in your
lawyer's office, or at your dining room table if you are so inclined. When the stock
exchange was closed during World War I, many people did just that, creating a
secondary shadow market.
The downside is that there is no transparency. Nobody knows what the best price is
for a given stock at any given moment in time. You could be selling your shares for
$50 while the guy two towns over is getting $70.) With a stock exchange, you will
never know the person on the other end of the trade. He, she, or it could be halfway
around the world. It could be a retired teacher. It could be a multi-billion dollar
insurance group. It could be a publicly-traded mutual fund or hedge fund.
How does Stock Exchange Operate?
With the help of stockbrokers, the buyers and sellers participating in a stock market carry
out their transactions. The brokers representing selling parties take their orders to the
stock exchange floor and then find brokers representing parties willing to invest in similar
stocks. If both parties agree to trade at the fixed price, the transaction takes place.
Also, stock exchanges have multiple roles in an economy which make it vital. These roles
include:
 Raising capital for businesses

 Mobilising savings for investment
 Facilitating company growth
 Profit sharing
 Corporate governance
 Creating investment opportunities for small investors
 Government capital-raising for development projects
 Barometer of the economy
Trading Floor
As the name suggests, a trading floor is a place where traders buy and sell fixed income
securities, shares, commodities, foreign exchange, options etc.
 On the trading floor, these traders buy or sell these securities on behalf of their
clients or the organization that they work for.
 A trading floor looks a circular area. It’s often called “a pit”, because when the
traders trade they step down onto a certain area and buy/sell securities.
 These trading floors can be found in the places where trading activities occurred.
For example, we can talk about the New York Stock Exchange or the Chicago
Board of Trade where traders trade on the trading floors to buy or sell.
 We can also find trading floors in investment banks, brokerage houses, in firms
that are in trading business.
 The traders buy/sell securities on the trading floors via telephone, internet, and
another particular method.
There are three types of people found on the trading floor:

 Floor brokers – These professionals are on the floor on behalf of their own clients,
who are investors interested in making money through trading stock.
 Market makers – Banks and financial institutions generally occupy this role, which
helps keep the market liquid.
 Floor traders – Unlike a floor broker, a floor trader is there to act on his own behalf,
investing in stocks with his own money.
In some instances, floor brokers are also allowed to act as floor traders, investing using
their own money as well as investments from their clients. In some exchanges, there may
be rules against this. The New York Stock Exchange restricts floor brokers to trading only
on behalf of the agencies they represent.
Trading Bulletin
The stock of a publicly owned company that is traded on the Over-The-Counter Bulletin
Board system (OTCBB). Although bulletin board stocks are not required to meet minimum
financial requirements or a threshold of trading volume, they are required to file financial
reports with the Securities & Exchange Commission (SEC) or other Self Regulatory
Organizations (SRO). A bulletin board stock can be identified by the ".OB" suffix on its
stock symbol. For example: ONEV.OB is the symbol for One Voice Technologies, Inc.,
which is traded on the OTC market.
Stock Loser
Stock Winner

A Business Raises Capital by Issuing Shares

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Stock Exchange

A stock exchange, securities exchange or bourse is a facility

 Exchanges are marketplaces for the trade of securities, commodities, derivatives,

How does Stock Exchange Operate?

 Raising capital for businesses

There are three types of people found on the trading floor:

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