| Your new-found interest in the stock market may | | | | The American Stock Exchange, or AMEX, is now |
| have you scratching your head in confusion with | | | | actually owned by the same people that own the |
| some of the language. It sounds familiar, but does it | | | | NASDAQ. Its role has faded in recent years and is |
| make sense? Hopefully it will after reading this article. | | | | now used almost exclusively for trading small-cap |
| The Stock Market | | | | stocks, those with a relatively small market |
| The stock market is the overall industry of buying | | | | capitalization, and derivatives, stocks whose price is |
| and selling stocks, wherever that may occur. It can | | | | dependent upon (derived from) another asset. That |
| be broken down further into the primary market and | | | | asset is commonly another security. |
| the secondary market. | | | | Around the world there are many other stock |
| The secondary market is what most people refer to | | | | exchanges. The two biggest worldwide would be the |
| as the stock market. It is where existing and | | | | London Stock Exchange and the Hong Kong Stock |
| outstanding shares of stock are traded between | | | | Exchange. Another noteworthy exchange is the |
| previous and new owners. The company for which | | | | Over-the-Counter Bulletin Board (OTCBB). This is a |
| the shares are based has little or nothing to do with | | | | less-regulated OTC exchange. Most penny stocks are |
| the vast majority of secondary market sales. | | | | found here. With little regulation, OTCBB trades are |
| The primary market is where newly-created | | | | considered risky. |
| securities are first issued. These new issues are | | | | The SEC |
| often referred to as IPO's or Initial Public Offerings. | | | | The Securities and Exchange Commission is the |
| The Exchanges | | | | watch dog over the whole industry. They not only |
| As you probably know, most stocks are traded on | | | | rule over the trading process, but help assure |
| exchanges. Stock exchanges are physical locations | | | | companies' claims about their worth are accurate. |
| where stock buyers and sellers meet to negotiate | | | | They also run a program to help inform investors. |
| their transaction. Sort of like a farmers' market for | | | | You can check it out at |
| securities. There are also virtual exchanges made up | | | | The Hierarchy |
| of computer networks over which electronic trades | | | | You are the trader. You hire a brokerage firm to |
| are made. | | | | make your trades for you. The brokerage firm is a |
| The largest is the New York Stock Exchange, NYSE. | | | | member of a stock exchange. Its employees can |
| Also known as the "Big Board," the NYSE was | | | | actually go onto the trading floor to the exact spot |
| founded in 1792 and the largest companies in America | | | | where the stock you want to buy or sell is being |
| are listed there. | | | | traded, called the trading post, and affect the trade |
| The NASDAQ is more of a virtual stock exchange. It | | | | for you. At this spot is someone called the specialist |
| deals in over-the-counter (OTC) stocks. There is no | | | | who will match up buyers with sellers. Once the trade |
| physical location or floor brokers. All trades are done | | | | is made, details go back up the line to the brokerage |
| electronically. The NASDAQ is home to many | | | | firm, then to you. The SEC keeps a watchful eye |
| technical company stocks, even larger companies, | | | | over it all. |
| which all used to flock to the NYSE in the past. | | | | |