The stock market is a fundamental pillar of the global economy, serving as a platform where investors can buy and sell shares of publicly traded companies. It provides companies with access to capital in exchange for giving investors a slice of ownership, and it offers a regulated and transparent space for investment activities that power economies worldwide.
In this article, we explore the types of stock markets, the products traded, major global stock exchanges, and the role the market plays in the financial ecosystem.
What is the Stock Market?
The stock market refers to the collection of markets and exchanges where activities such as buying, selling, and issuing shares of publicly held companies take place. It operates through both physical and digital marketplaces, allowing participants ranging from small individual investors to large institutional investors to conduct their trades.
The primary functions of the stock market include:
- Raising capital for businesses
- Providing liquidity for shareholders
- Distributing risk
- Enabling price discovery
- Facilitating economic growth
Types of Stock Markets
There are generally two types of stock markets:
1. Primary Market
The primary market is where new securities are issued and sold for the first time. This happens through an Initial Public Offering (IPO), where a private company becomes public by offering shares to investors.
2. Secondary Market
This is where previously issued shares are traded among investors. Once a company's shares are listed on an exchange, they can be bought and sold in the secondary market.
Besides the primary classification, stock markets can also be divided into:
- Organized Stock Exchanges (e.g., NYSE, LSE)
- Over-The-Counter (OTC) Markets (e.g., Pink Sheets, OTC Bulletin Board)
Types of Trading Products
While “stocks” are the most commonly associated instruments with stock markets, various other financial products are also traded:
