stock market definition

Definition of the stock market

The stock market, is the market that regulates the purchase and sale of securities, such as stocks and bonds, by following up on the factors controlling them and related to the nature of supply and demand within the financial market. The stock market is also known as the market that depends on the application of investing in securities, such as buying and selling shares issued by private companies.

Another definition of the stock market is the physical or virtual electronic place in which there is a group of sellers and buyers with the aim of achieving the trading of securities between them. This market is divided into two markets; They are the primary market through which securities are issued for the first time, and the secondary market, which is used to trade previously issued securities.

The origins of the stock market

The city of Venice is the first place that witnessed the trading of securities in the year 1300 AD, and it used tablets containing information on the various securities offered for trading. effects on individuals. In the year 1600 AD, with the emergence of the East India Company, this contributed to strengthening the idea of ​​​​the financial market by granting the French, British and Dutch governments to the company the documents that help in collecting their profit shares, and with the passage of time the first stock exchange appeared in London in 1773 AD, but it was restricted in terms of Dealing with stocks, unlike the New York Stock Exchange, which used to implement stock trading in its financial market.

Developments in communication technology and the Internet in the twenty-first century have contributed to directly affecting the nature of trading in the financial markets, which led to the transformation of financial transactions into electronic trading, and this resulted in a change in the world of investments, and customers became using computer systems to apply private buying and selling operations. in stock; In order to reach the implementation of deals between the parties in easy ways.

characteristics of the stock market

The stock market is characterized by a set of characteristics; Which:

  • Returns and risks: one of the basic characteristics of the stock market; Assets, such as stocks, are characterized by a high degree of risk, and special changes in the economic environment and the nature of competition between companies over sales and profits, which contribute to determining the prices of these stocks, affect them.
  • Changes: are the fluctuations that occur in the financial markets, and appear as a result of changes in prices associated with a group of events, such as: government economic reports and company profits. Therefore, successful investors in the financial markets are keen to hedge against changes and fluctuations; This is done by diversifying the investments within their investment portfolios.
  • Liquidity: is the stock market's provision of margins that clarify the differences between buyers and sellers of securities by encouraging these markets to bring together establishments and companies from all over the world, and information technology has contributed to promoting and supporting private trading in the financial markets; By publishing financial information for investors and participants in these markets.
  • International: One of the characteristics and characteristics of the stock markets; It brings together all European, American and Asian companies, which contributes to encouraging individual and institutional investors to use the electronic networks available around the clock in the application of trading operations.
  • Regulation: One of the most basic characteristics of financial markets; It depends on the existence of laws that regulate it, and ensure that all investors have access to private information on investment operations at the times convenient for them.

The importance of the stock market

The stock market is one of the important markets in the economic sector, and its importance can be summarized according to the following points:

  • Economic indicator: that is, the stock market is used as an indicator to measure the economic condition of countries, and it also helps to reflect all changes, and to clarify stock prices in terms of rise or fall, which refer to prosperity or recession in the economic situation.
  • Setting prices for securities: helping to provide values for securities that depend on the effect of supply and demand, and this contributes to evaluating the nature of the demand for these securities, which is considered one of the important benefits for investors; It helps to know the value of investments.
  • Ensuring the safety of financial operations: It is one of the important matters that these markets apply, as it depends on observing the safety of companies and their ability to apply regulations and rules while dealing with the stock exchange.
  • Participation in economic growth: stock markets support the ability to invest, through the exchange of securities between different companies, which leads to capital building and contributes to economic development.
  • Encouraging savings and investment: by providing investment offers for most securities, which contributes to attracting many individuals towards saving in order to invest in the securities offered through companies, instead of applying investments in assets that do not achieve any financial returns, such as gold.

stock market goals

The stock market seeks to achieve a set of goals, the most important of which are:

  • Building a safe investment environment capable of achieving credible competition.
  • Developing all methods and means used in trading; By applying the best and latest methods.
  • Business development in the stock market; Through excellence in services provided to individuals and establishments.
  • Providing information about trading to investors and dealers in the stock market.
  • Supporting private awareness in investing, which includes all individuals in society; Especially those dealing with the stock market.
  • Diversity in the financial instruments used by investors in the stock market.

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