Equity Market is a financial term that refers to any open trading market of stocks, bonds, derivatives, or any other number of financial investment instruments. An equity market is more commonly referred to as a “stock market”. Various equity markets operate throughout the world and have become a key process of modern business ownership. A stock is a small ownership stake in a company.
Globally, the value of all stocks and derivatives is currently estimated at over $800 Trillion. The largest stock market in the world is the New York Stock Exchange. The following are just some of the world’s stock exchanges:
1. The Toronto Stock Exchange (Canada).
2. The Amsterdam Stock Exchange.
3. The London Stock Exchange (Britain).
4. The Tokyo Stock Exchange (Japan).
5. The Hong Kong Stock Exchange (People’s Republic of China).
On each stock market, stocks are listed and traded on a daily basis. Individual people, investment companies, or other corporations can freely exchange stocks, usually at the prevailing price at the time of sale. Other forms of trading can also occur, including short selling, margin buying, or any number of methods of buying, selling, and trading stocks.
In order to invest in a stock market, you must be registered with the exchanged or employ a broker to trade on your behalf.
1. Traditionally, brokers have been brick and mortar institutions that required their clients to physically contact a broker to place orders on the stock market.
2. New technology has lead to the proliferation of online brokerage accounts, which allow clients to access their accounts anywhere in the world and seek trades at any time from their computer.
Physical exchanges, such as the New York Stock Exchange, exists in a centralized location and requires floor brokers to enter orders and work with other brokers in order to establish trades for their clients. Now, virtual stock exchanges are possible, such as the NASDAQ, where all trades occur over a connected computer network. This still requires that brokers trade the stocks, however they no longer are in a centralized location.
In order to get listed in an equity market, a business must “ go public”. Going public refers to the selling of stock in the company to the general public, which raises money for the company while diluting ownership to numerous stockholders. In order to get listed, a company must do the following:
1. First, the company must conduct a process of “due diligence”, in which all aspects of the company are investigated to determine an accurate value.
2. Once a value is assigned, a specific number of shares are sold through an “Initial Public Offering”, in which the stocks are sold at an initial price.
3. Once the IPO is initiated, the company goes public on an opening date, in which its stock value will go up and down according to the daily trading value.