SHARE AND STOCK MARKET| CUET ECONOMICS| L-6

What is Share Market?

The share market is a platform where buyers and sellers come together to trade on publicly listed shares during specific hours of the day. People often use the terms ‘share market’ and ‘stock market’ interchangeably. However, the key difference between the two lies in the fact that while the former is used to trade only shares, the latter allows you to trade various financial securities such as bonds, derivatives, forex etc.

The principal stock exchanges in India are the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

Types of Share Markets

Stock markets can be further classified into two parts: primary markets and secondary markets.

Primary Share Markets

When a company registers itself for the first time at the stock exchange to raise funds through shares, it enters the primary market. This is called an Initial Public Offering (IPO), after which the company becomes publicly registered and its shares can be traded within market participants.

Secondary Market

Once a company’s new securities have been sold in the primary market, they are then traded on the secondary stock market. Here, investors get the opportunity to buy and sell the shares among themselves at the prevailing market prices. Typically investors conduct these transactions through a broker or other such intermediary who can facilitate this process.

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.

Stock markets are venues where buyers and sellers meet to exchange equity shares of public corporations.

Stock markets are components of a free-market economy because they enable democratized access to investor trading and exchange of capital.

Stock markets create efficient price discovery and efficient dealing.

The U.S. stock market is regulated by the Securities and Exchange Commission (SEC) and local regulatory bodies.