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Definition of the stock market

Definition of the stock market

The stock market, also known as the stock exchange, is a financial market that governs the purchase and selling of assets such as stocks and bonds by following the factors that control them and are related to the nature of supply and demand. The stock market is also known as the market that is based on investment applications. Buying and selling shares issued by private corporations, for example, are examples of insecurities.

Another definition of the stock market is a real or virtual electronic location where a group of sellers and buyers get together to trade securities. This market is separated into two parts: the primary market, which is where new securities are issued, and the secondary market, which is where previously issued securities are traded.

The origins of the stock market

In the year 1300 AD, the city of Venice was the first to witness the trading of securities, and it employed tablets holding information on the numerous assets available for trading. Individual consequences The East India Company, which was founded in 1600 AD, helped to strengthen the idea of the financial market by granting the French, British, and Dutch governments documents that assisted the company in collecting profit shares, and eventually, the first stock exchange appeared in London in 1773 AD, but it was limited in terms of dealing with stocks, unlike the New York Stock Exchange, which used to implement stock trading in its financial mart.

In the twenty-first century, advances in communication technology and the Internet have had a direct impact on the nature of trading in financial markets, resulting in the transformation of financial transactions into electronic trading, which has resulted in a shift in the world of investments, with customers increasingly using computer systems to conduct private buying and selling operations. in stock; in order to facilitate the implementation of agreements between parties.

characteristics of the stock market

The stock market is defined by a set of qualities, which include the following:

  • One of the fundamental aspects of the stock market is the relationship between returns and risks. Stocks, for example, are high-risk assets, and they are affected by unique changes in the economic climate and the type of competition between companies over sales and earnings, all of which contribute to deciding stock values.
  • Changes: These are variations in the financial markets that occur as a result of price changes linked to a series of events, such as government economic reports and company profits. As a result, successful investors in the financial markets are determined to protect themselves against changes and swings by diversifying 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 data for investors and market participants.
  • International: one of the stock markets' characteristics; it brings together all European, American, and Asian enterprises, which helps to encourage individual and institutional investors to use the electronic networks available 24 hours a day, 7 days a week to conduct trading operations.
  • Regulation: One of the most fundamental aspects of financial markets is that they are reliant on the existence of laws that regulate them and ensure that all investors have access to private information on investment activities at times that are convenient for them.

The importance of the stock market

The stock market is one of the most important marketplaces in the financial industry, and its significance can be stated as follows:

  • The stock market is used as an economic indicator to measure the economic status of countries, as well as to reflect all changes and to define stock values in terms of growing or falling, which relate to economic prosperity or recession.
  • Setting prices for securities: assisting in the provision of values for securities that are based on the effects of supply and demand, and this aids in assessing the nature of demand for these securities, which is considered one of the most important benefits for investors; it aids in the understanding of investment value.
  • Ensure the safety of financial operations: This is one of the most critical issues that these markets address, as it relies on companies' capacity to follow regulations and rules while dealing with the stock exchange.
  • Participation in economic growth: stock markets facilitate investment by facilitating the exchange of securities between enterprises, resulting in capital formation and contributing to economic development.
  • Encourages saves and investment: by giving investment offers for most securities, which helps to entice many people to save in order to invest in securities given by corporations, rather than investing in assets that do not generate any financial returns, such as gold.

stock market goals

The stock market aims to accomplish a number of objectives, the most important of which are as follows:

  • Creating a secure investment environment that allows for credible competition.
  • Developing all trading methods and means; using the best and most up-to-date approaches.
  • Through quality in the services given to individuals and businesses, business development in the stock market can be achieved.
  • Providing stock market investors and dealers with trading information.
  • Support private investment knowledge among all members of society, particularly those who work with the stock market.
  • Investors in the stock market utilize a variety of financial instruments.


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