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Trading

Participants in the stock market range from small individual stock investors to large hedge fund traders, who can be based anywhere. Their orders usually end up with a professional at a stock exchange, who executes the order.

Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry. This type of auction is used in stock exchanges and commodity exchanges where traders may enter "verbal" bids and offers simultaneously. The other type of stock exchange is a virtual kind, composed of a network of computers where trades are made electronically via traders.

Actual trades are based on an auction market model where a potential buyer bids a specific price for a stock and a potential seller asks a specific price for the stock. (Buying or selling at market means you will accept any ask price or bid price for the stock, respectively.) When the bid and ask prices match, a sale takes place, on a first-come-first-served basis if there are multiple bidders or askers at a given price.

The purpose of a stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a marketplace (virtual or real). The exchanges provide real-time trading information on the listed securities, facilitating price discovery.

The New York Stock Exchange.

The New York Stock Exchange is a physical exchange, also referred to as a listed exchange – only stocks listed with the exchange may be traded. Orders enter by way of exchange members and flow down to a floor broker, who goes to the floor trading post specialist for that stock to trade the order. The specialist's job is to match buy and sell orders using open outcry. If a spread exists, no trade immediately takes place—in this case the specialist should use his/her own resources (money or stock) to close the difference after his/her judged time. Once a trade has been made the details are reported on the "tape" and sent back to the brokerage firm, which then notifies the investor who placed the order. Although there is a significant amount of human contact in this process, computers play an important role, especially for so-called "program trading".

In 12th century France the courtiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. As these men also traded in debts, they could be called the first brokers.

Some stories suggest that the origins of the term "bourse" came from the Latin bursa meaning a bag because, in 13th century Bruges, the sign of a purse (or perhaps three purses), was hung on the front of the house where merchants met.

The story may well be apocryphal, however it is possible that in the late 13th century commodity traders in Bruges gathered inside the house of the Van der Burse family (for some a Venetian family with original name "Della Borsa" and used three leather bags as coat-of-arms), and in 1309 they institutionalized this until now informal meeting and became the "Bruges Bourse." The idea spread quickly around Flanders and neighboring counties and "Bourses" soon opened in Ghent and Amsterdam.

In the middle of the 13th century, Venetian bankers began to trade in government securities. In 1351, the Venetian Government outlawed spreading rumors intended to lower the price of government funds. There were people in Pisa, Verona, Genoa and Florence who also began trading in government securities during the 14th century. This was only possible because these were independent city states ruled by a council of influential citizens, not by a duke.

The Dutch later started joint stock companies, which let shareholders invest in business ventures and get a share of their profits—or losses. In 1602, the Dutch East India Company issued the first shares on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds. In 1688, the trading of stocks began on a stock exchange in London.

On May 17, 1792, in order to more easily trade cotton, twenty-four supply brokers signed the Buttonwood Agreement outside 68 Wall Street in New York underneath a buttonwood tree. On March 8, 1817, properties got renamed to New York Stock & Exchange Board. In the 19th century, exchanges (generally famous as futures exchanges) got substantiated to trade futures contracts and then choices contracts.

There are now a large number of stock exchanges in the world.

  

USA stock market daily report by Millenium Traders (August 13, 2009, Thursday) 

After two months of gains retail sales reports show a drop of 0.1% in July compared to a gain of 0.8% in June, economists expected a rise by 0.6%. Sales excluding automobiles and auto parts reported an unexpected drop of 0.6% after a gain of 0.5% in June, economists were predicting a gain of 0.3%. Retail king "Wal-Mart" posted a surprising loss of 1.2% in second-quarter same store sales, however shares of Wal-Mart continued to gain, rising 88 cents per share for the quarter. Departments store sales fell 1.6%, including Target, who posted a decline of 0.6%, which is a little surprising after Macy's released they made profits in the second quarter "Consumers continued to maintain a tight hold on their wallets, worried about rising unemployment, falling home prices and tight credit," Steven Wood, president of Insight Economics, told Bloomberg News. "Overall economic activity will not fully revive until consumer spending rebounds." More bad news was reported when the Labor Department released that jobless claims rose by 4,000 to 558,000 week ending August 8th, experts expected claims to fall to 543,000. Although jobless claims reports were not so uplifting, the number of people continuing to collect benefits fell 141,000 to 6.2 million week ending August 1st to it's lowest level since April. 

  

Indian stock market daily morning report by Keynote Capitals (August 14, 2009, Friday) 

Discussions on new tax code, strong global cues and a strong recovery in industrial production helped the Sensex gain almost 500 points yesterday. The markets continued to strengthen after the announcements that Germany and France reported positive GDP. High beta real estate, banks and metals stocks led the rally, while recent outperformers IT and pharma stocks saw lackluster buying. Asian markets opened strong today as well. However, they are seen correcting on profit taking. We expect a positive opening for the Indian markets today following cues from the Asian markets. Weak monsoon may however impact the sentiment; traders and investors may try to book profits at higher levels, today being the last day of the week. Commerce and Industry Minister said that India's economy can achieve the same level of growth in FY10 seen a year earlier in spite of worsening dry conditions that threaten to dent its nascent recovery. He expects that the economy would achieve 6.7% growth. 

  

World stock markets daily report (August 14, 2009)

So when did the US market ever start caring about Europe where allegedly the recession is over. Odd that it sure doesn’t feel like a Renaissance on Main Street. US Retail sales (yes the US consumer is still approx 70% of the economy) were a total disaster, jobless claims jumped and foreclosures are a record high, but yet the market ended up because of “better than expected” earnings from Wal-Mart and legendary investor John Paulsen taking a stake in Bank of America and Regions Financial. Downright perverse. The decoupling of the market from the real economy seems to be at all time highs. The S&P500 closed up 0.7% to post a new cyclical high, led by the building materials and financial sectors. Commodities, especially the base metals, also traded positively, with the price action there continuing to diverge from that suggested by the likes of the Baltic Dry Freight Index (now down for 10 sessions in a row). 

HOT STOCK

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8/14/2009 †Company Name
Price
Change / %Change
ARCC
Ares Capital Corp
The investment company said it’s offering to sell 8 million shares and plans to use part of the money to pay debt.
9.22
-0.49 / -5.05%
BA
Boeing Co
The plane maker stopped production at a 787 Dreamliner facility in Italy that was making parts of the plane's fuselage, The Wall Street Journal reported. Its subcontractor, Alenia Aeronautic in Naples, stopped work two months ago after structural flaws were discovered at where the wing and the fuselage meet.
44.87
-1.75 / -3.75%
BKS
Barnes & Noble Inc
The largest U.S. bookstore chain was cut to “underperform” from “neutral” by Credit Suisse Group AG, which said the company’s decision to buy back Barnes & Noble College Booksellers Inc. increased risk and eliminated free cash.
20.87
-2.11 / -9.18%
GNW
Genworth Financial Inc
The life and mortgage insurer that failed to get a U.S. bailout was downgraded to “sell” from “hold” by Citigroup Inc., which cited “a very uncertain earnings outlook and capital position.”
8.28
-0.47 / -5.37%
GRRF
China GrenTech Corp Ltd
The wireless products and services company reported second- quarter profit of 8 cents a share, four times the average analyst estimate.
5.97
+1.91 / +47.04%
JCP
JC Penney Co Inc
The discount department store chain swung to a second-quarter loss of $1M, or break-even on a per-share basis, compared with a profit of $117M, or 52 cents a share, in the year-earlier period. Sales fell 7.9% to $3.94B and same-store sales dropped 9.5%.
31.29
-2.05 / -6.15%
JWN
Nordstrom Inc
The upscale department store operator’s second-quarter net income fell to $105M, or 48 cents a share, from $143M or 65 cents a share, in the year-ago period. Net sales for the quarter fell 6% to $2.14B as same-store sales fell 9.8% from a year ago.
27.87
-1.89 / -6.35%
TKTM
Ticketmaster Entertainment Inc
The ticket broker’s second-quarter profit fell to $6.9M, or 12 cents a share, from $23M, or 41 cents a share, in the year-ago period. Revenue fell to $355.1M from $382.4M.
8.92
-0.85 / -8.70%