Let us understand the term stock market in its basic form and how it operates and what it deals into and who deal into the stock market.
stock market is market place where share, stocks and bonds are traded i.e. bought and sold with the help of professional agents known as brokers of the stock market.
It is the place where people buy and sell company shares known as stock and other derivatives such at a price settled upon in prior at its face value. Modernization in the dealing into the financial assets has brought many new financial instruments whose pay-offs or values depend on the prices of stocks.
The listed stocks are traded in the stock exchange bringing together the buyers and traders of listed business entities at one market place. It has become of a great importance to listen entrepreneurs and companies wants to raise money from the public in the form of IPO. Here a trader/investor can avail of quick liquidity and affect the assets of the households.
This market place may also act as a clearing house and guarantee the payment to the one who sells of his/her security. The financial prices moved here in are temporary and the up rise is called bullish and down fall of prices is called bearish. One may find that only changes in the basic factors viz. margin, dividends and profit etc tend to affect the prices of share on short term basis. The irrational behavior or a stock market crash suggest to the acute dipping of the share prices of the listed entities on the stock exchange affect the economies due to panicky investors and no faith in the procedures of the stock market.
The stock market indices globally seize the operating of the stock market. A trader of a particular stock may not be the owner of this stock and might be buying through the derivatives of marginal borrowings. The high level of uncertainty in the share market puts the traders in the state of conundrum to what to buy at what price or to sell at what price and fix it up on by deciding the settlement prices or decide through the spot price of the commodity.
One may have to bear the taxes that are levied upon by the particular government over the financial transactions, dividends, and trading through the stock market or the gains through the capital traded.
Here too, one should be well versed with the rules and terms of the people in the stock market and how it operates from the very basic level to trade in the exact security type and be safe from the discrepancies formed by the market fluctuations.
Hence, if you want to trade the securities Over the Counter (OTC) market, then you have to be in the stock market for the organized selling or buying of the stock.