What Is the Stock Market?
The term stock market refers to several exchanges in which shares of publicly held companies are bought and sold. Such financial activities are conducted through formal exchanges and via over-the-counter (OTC) marketplaces that operate under a defined set of regulations.
Both “stock market” and “stock exchange” are often used interchangeably. Traders in the stock market buy or sell shares on one or more of the stock exchanges that are part of the overall stock market.
The leading U.S. stock exchanges include the New York Stock Exchange (NYSE) and the Nasdaq.
How to identify what moves an index’s price
An index’s price can be affected by a range of factors, including:
- Economic news – investor sentiment, central bank announcements, payroll reports or other economic events can affect underlying volatility, which can cause an index’s price to move
- Company financial results – individual company profits and losses will cause share prices to increase or decrease, which can affect an index’s price
- Company announcements – changes to company leadership or possible mergers will likely affect share prices, which can have either a positive or negative effect on an index’s price
- Changes to an index’s composition – weighted indices can see their prices shift when companies are added or removed, as traders adjust their positions to account for the new composition
- Commodity prices – various commodities will affect different indices’ prices. For example, 15% of the shares listed on the FTSE 100 are commodity stocks, which means any fluctuations in the commodity market could affect the index’s price
How Stock Markets Are Regulated
Most nations have a stock market, and each is regulated by a local financial regulator or monetary authority, or institute. The SEC is the regulatory body charged with overseeing the U.S. stock market.
The SEC is a federal agency that works independently of the government and without political pressure. The mission of the SEC is stated as “protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation.”
Companies listed on the stock market exchanges are regulated, and their dealings are monitored by the SEC. In addition, the exchanges set certain requirements such as mandating timely filing of quarterly financial reports and instant reporting of relevant corporate developments, to ensure that all market participants are equally informed.
Failure to adhere to the regulations can lead to suspension of trading and other disciplinary measures.