Share Market Trading includes buying and selling of company shares either through Stock Exchange or Over-the-Counter (OTC). It is also called the Equity Trading.
Shares are certificates which represents ownership rights of the holder in a company.
Share Market is the market for securities where organized issuance and trading of shares takes place either through exchanges or over-the-counter in electronic or physical form. It plays an important role in channelizing capital from the investors to the business houses which consequently leads to the availability of funds for business expansion.
Basically, Share Market can be divided into two parts :-
1.Primary Market
It is the market where new issues of securities are offered to the investors.
2.Secondary Market
An investor of a secondary market buys a security from another participant of the same and not from any issuing corporation (as in case of Primary Market).
Shares in the Share Market are either traded through :-
(a) Stock Exchange
These are organized market places where stocks, bonds are other equivalents are traded between the buyers and sellers where exchange acts as a counter-party to both the participants in case of any default. The contracts are standardized and not customized ones. For example, NYSE, NASDAQ, NSE, NIKKEI, etc.
(b) Over-the -Counter (OTC)
These are not centralized exchanges. Here, the trade takes place through a network of dealers. Generally, the OTC contracts are bilateral customized contracts and not standardized ones.
The shares traded are Common Stocks. Common Stocks :-
Gives an ownership right to the holders of the stock and hence the share holders are entitled to the earnings of the company according to their stake.
Holders also get dividends on those stocks as and when given by the company.
Liquidity of common stocks are very high and can be bought and sold at any time of the market hours.
Important Participants of Share Market Trading are :-
Buyer
An investor who buys a script in the belief that the market will rise. If his hinge becomes right then he makes profit otherwise he suffers loss.
Seller
Seller of a stock sells in the hope that the stock price will go down.
Stock Broker
Brokers are persons or firms who execute buy/sell order on behalf of the investors and charge a commission for rendering the service.
Share Trading are done in three ways:-
(a) Offline Share Trading
In this form of trading the customer
either goes to the share broker's place and sits before the share trading terminal and asks the dealer to place orders in his account.
or rings the share broker, asks the share quotes and other relevant informations, and accordingly places orders over the phone.
(b) Online Share Trading
The client could avail the share market and could place his order on his own from any place he wants, provided he has a computer with an Internet connection.
Open Outcry Trading
Here, the investors put their orders through the brokers and these share brokers in turn place and execute orders on behalf of them on the floor of the exchange. These brokers gather in a particular place on the trading floor known as Trading Post. There is a person called as the Specialist present in the trading post who does the matching of the buy and sell orders. This type of auction method is called Open Outcry Method.