Companies go public by offering a specific number of shares in their company to the public through the stock exchange. Investors then can use the stock exchange to buy and sell stocks of companies that they are interested in. From the perspective of an investor, buying and selling stocks seems pretty simple. If someone uses a full-service broker, just call him and place an order for 500 shares of Agthia Technicals. Within a few minutes, he will receive a confirmation that his order has been completed, and he becomes new owner of Agthia Technicals’ stock (Preda, 2009).
Traditionally stock market worked in a different way
1. You place the order with your broker to buy 100 shares of the Coca-Cola Company.
2. The broker sends the order to the firm’s order department.
3. The order department sends the order to the firm’s clerk who works on the floor of the exchange where shares of Coca-Cola are traded (the New York Stock Exchange).
4. The clerk gives the order to the firm’s floor trader, who also works on the exchange floor.
5. The floor trader goes to the specialist’s post for Coca-Cola and finds another floor trader who is willing to sell shares of Coca-Cola.
6. The traders agree on a price.
7. The order is executed.
8. The floor trader reports the trade to the clerk and the order department.
9. The order department confirms the order with the broker.
10. The broker confirms the trade with you.
This is how a traditional stock exchange works, but in current scenario much of the action that takes place when an individual buy or sell a stock is being handled with the assistance of computers. Even if he bought a stock that trades on a stock exchange, his order may be executed with little or no intervention by humans. An individual can log on to a brokerage firm’s Website, enter an order, have the trade be executed, and receive a confirmation within minutes (Preda, 2009)..
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