stock exchange

or stock market or(in continental Europe) Bourse

Organized market for the sale and purchase of securities (see security) such as stocks and bonds. Trading is done in various ways: it may occur on a continuous auction basis, it may involve brokers buying from and selling to dealers in certain types of stock, or it may be conducted through specialists in a particular stock. Some stock exchanges, such as the New York Stock Exchange (NYSE), sell seats (the right to trade) to a limited number of members who must meet eligibility requirements. Stocks must likewise meet and maintain certain requirements or risk being delisted. Stock exchanges differ from country to country in eligibility requirements and in the degree to which the government participates in their management. The London Stock Exchange, for example, is an independent institution, free from government regulation. In Europe, members of the exchanges are often appointed by government officials and have semigovernmental status. In the U.S., stock exchanges are not directly run by the government but are regulated by law. Technological developments have greatly influenced the nature of trading. In a traditional full-service brokerage, a customer placed an order with a broker or member of a stock exchange, who in turn passed it on to a specialist on the floor of the exchange, who then concluded the transaction. By the 21st century, increased access to the Internet and the proliferation of electronic communications networks (ECNs) altered the investment world. Through e-trading, the customer enters an order directly on-line, and software automatically matches orders to achieve the best price available without the intervention of specialists or market makers. In effect, the ECN is a stock exchange for off-the-floor trading.

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Trading in stocks and bonds that does not take place on stock exchanges. Such trading occurs most often in the U.S., where requirements for listing stocks on the exchanges are strict. Schedules of fees for buying and selling securities are not fixed in the over-the-counter market, and dealers derive their profits from the markup of their selling price over the price they paid. Many bond issues and preferred-stock issues, including U.S. government bonds, are listed on the New York Stock Exchange but have their chief market over-the-counter. Other U.S. government securities, as well as state and municipal bonds, are traded over-the-counter exclusively. Institutional investors such as mutual funds often trade over-the-counter because they are given volume discounts not offered on the exchanges. The regulation of the over-the-counter market is carried out largely by the National Association of Securities Dealers, created by Congress in 1939 to establish rules of conduct and protect members and investors from abuses. Seealso NASDAQ.

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Any of the purchases and sales of government securities and commercial paper by a central bank in an effort to regulate the money supply and credit conditions. Open market operations can also be used to stabilize the prices of government securities. When the central bank buys securities on the open market, it increases the reserves of commercial banks, making it possible for them to expand their loans and investments. It also increases the price of government securities, equivalent to reducing their interest rates, and decreases interest rates generally, thus encouraging investment. If the central bank sells securities, the effects are reversed. Open market operations are usually performed with short-term government securities such as treasury bills.

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Set of institutions, conventions, and practices whose aim is to facilitate the lending and borrowing of money on a short-term basis. The money market is, therefore, different from the capital market, which is concerned with medium- and long-term credit. The transactions that occur on the money market involve not only banknotes but assets that can be turned into cash at short notice, such as short-term government securities and bills of exchange. Though the details and mechanism of the money market vary greatly from country to country, in all cases its basic function is to enable those with surplus short-term funds to lend and those with the need for short-term credit to borrow. This function is accomplished through middlemen who provide their services for a profit. In most countries the government plays a major role in the money market, acting both as a lender and borrower and often using its position to influence the money supply and interest rates according to its monetary policy. The U.S. money market covers financial instruments ranging from bills of exchange and government securities to funds from clearinghouses and certificates of deposit. In addition, the Federal Reserve System provides considerable short-term credit directly to the banking system. The international money market facilitates the borrowing, lending, and exchange of currencies between countries.

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Study of the requirements of specific markets, the acceptability of products, and methods of developing and exploiting new markets. Various strategies are used for market research: past sales may be projected forward; surveys may be made of consumer attitudes and product preferences; and new or altered products may be introduced experimentally into designated test-market areas. Formal market research dates back to the 1920s in Germany and the 1930s in Sweden and France. After World War II, U.S. firms led in the use and refinement of market-research techniques, which spread throughout much of Western Europe and Japan.

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Means by which buyers and sellers are brought into contact with each other and goods and services are exchanged. The term originally referred to a place where products were bought and sold; today a market is any arena, however abstract or far-reaching, in which buyers and sellers make transactions. The commodity exchanges in London and New York, for example, are international markets in which dealers communicate by telephone and computer links as well as through direct contact. Markets trade not only in tangible commodities such as grain and livestock but also in financial instruments such as securities and currencies. Classical economists developed the theory of perfect competition, in which they imagined free markets as places where large numbers of buyers and sellers communicated easily with each other and traded in commodities that were readily transferable; prices in such markets were determined only by supply and demand. Since the 1930s, economists have focused more often on the theory of imperfect competition, in which supply and demand are not the only factors that influence the operations of the market. In imperfect competition the number of sellers or buyers is limited, rival products are differentiated (by design, quality, brand name, etc.), and various obstacles hinder new producers' entry into the market.

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Semiskilled or unskilled workers who move from one region to another, offering their services on a temporary, usually seasonal, basis. In North America, migrant labour is generally employed in agriculture and moves seasonally from south to north following the harvest. In Europe and the Middle East, migrant labour usually involves urban rather than agricultural employment and calls for longer periods of residence. The migrant labour market is often disorganized and exploitative. Many workers are supervised by middlemen such as labour contractors and crew leaders, who recruit and transport them and dispense their pay. Labourers commonly endure long hours, low wages, poor working conditions, and substandard housing. In some countries, child labour is widespread among migrant labourers, and even in the U.S. those children who do not work often do not go to school, since schools are usually open only to local residents. Workers willing to accept employment on these terms are usually driven by even worse conditions in their home countries. Labour organizing is made difficult by mobility and by low rates of literacy and political participation, though some migrant labourers in the U.S. have been unionized. Seealso Cesar Chavez.

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Association of workers in a particular trade, industry, or plant, formed to obtain improvements in pay, benefits, and working conditions through collective action. The first fraternal and self-help associations of labourers appeared in Britain in the 18th century, and the era of modern labour unions began in Britain, Europe, and the U.S. in the 19th century. The movement met with hostility from employers and governments, and union organizers were regularly prosecuted. British unionism received its legal foundation in the Trade-Union Act of 1871. In the U.S. the same effect was achieved more slowly through a series of court decisions that whittled away at the use of injunctions and conspiracy laws against unions. The founding of the American Federation of Labor (AFL) in 1886 marked the beginning of a successful, large-scale labour movement in the U.S. The unions brought together in the AFL were craft unions, which represented workers skilled in a particular craft or trade. Only a few early labour organizers argued in favour of industrial unions, which would represent all workers, skilled or unskilled, in a single industry. The Congress of Industrial Organizations (CIO) was founded by unions expelled from the AFL for attempting to organize unskilled workers, and by 1941 it had assured the success of industrial unionism by organizing the steel and automotive industries (see AFL-CIO). The use of collective bargaining to settle wages, working conditions, and disputes is standard in all noncommunist industrial countries, though union organization varies from country to country. In Britain, labour unions displayed a strong inclination to political activity that culminated in the formation of the Labour Party in 1906. In France, too, the major unions became highly politicized; the Confédération Générale du Travail (formed in 1895) was allied with the Communist Party for many years, while the Confédération Française Démocratique du Travail is more moderate politically. Japan developed a form of union organization known as enterprise unionism, which represents workers in a single plant or multiplant enterprise rather than within a craft or industry.

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Body of law that applies to matters such as employment, wages, conditions of work, labour unions, and labour-management relations. Laws intended to protect workers, including children, from abusive employment practices were not enacted in significant numbers until the late 19th century in Europe and slightly later in the U.S. In Asia and Africa, labour legislation did not emerge until the 1940s and '50s. Employment laws cover matters such as hiring, training, advancement, and unemployment compensation. Wage laws cover the forms and methods of payment, pay rates, social security, pensions, and other matters. Legislation on working conditions regulates hours, rest periods, vacations, child labour, equality in the workplace, and health and safety. Laws on trade unions and labour-management relations address the status of unions, the rights and obligations of workers' and employers' organizations, collective bargaining agreements, and rules for settling strikes and other disputes. Seealso arbitration; mediation.

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Study of how workers are allocated among jobs, how their rates of pay are determined, and how their efficiency is affected by various factors. The labour force of a country includes all those who work for gain in any capacity as well as those who are unemployed but seeking work. Many factors influence how workers are utilized and how much they are paid, including qualities of the labour force itself (such as health, level of education, distribution of special training and skills, and degree of mobility), structural characteristics of the economy (e.g., proportions of heavy manufacturing, technology, and service industries), and institutional factors (including the extent and power of labour unions and employers' associations and the presence of minimum-wage laws). Miscellaneous factors such as custom and variations in the business cycle are also considered. Certain general trends are widely accepted by labour economists; for instance, wage levels tend to be higher in jobs that involve high risk, in industries that require higher levels of education or training, in economies that have high proportions of such industries, and in industries that are heavily unionized.

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In economics, the general body of wage earners. In classical economics, labour is one of the three factors of production, along with capital and land. Labour can also be used to describe work performed, including any valuable service rendered by a human agent in the production of wealth, other than accumulating and providing capital. Labour is performed for the sake of its product or, in modern economic life, for the sake of a share of the aggregate product of the community's industry. The price per unit of time, or wage rate, commanded by a particular kind of labour in the market depends on a number of variables, such as the technical efficiency of the worker, the demand for that person's particular skills, and the supply of similarly skilled workers. Other variables include training, experience, intelligence, social status, prospects for advancement, and relative difficulty of the work. All these factors make it impossible for economists to assign a standard value to labour. Instead, economists often quantify labour hours according to the quantity and value of the goods or services produced.

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Specialization in the production process. Complex jobs can usually be less expensively completed by a large number of people each performing a small number of specialized tasks than by one person attempting to complete the entire job. The idea that specialization reduces costs, and thereby the price the consumer pays, is embedded in the principle of comparative advantage. Division of labour is the basic principle underlying the assembly line in mass production systems. See Émile Durkheim.

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Employment of boys and girls in occupations deemed unfit for children. Such labour is strictly controlled in many countries as a result of the effective enforcement of laws passed in the 20th century (e.g., the United Nations Declaration of the Rights of the Child in 1959). In developing nations the use of child labour is still common. Restrictive legislation has proved ineffective in impoverished societies with few schools, although some improvements have resulted from global activism, such as boycotts of multinational firms alleged to be exploiting child labour abroad.

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Commercial contracts calling for the purchase or sale of specified quantities of a good at specified future dates. The good in question may be grain, livestock, precious metals, or financial instruments such as treasury bills. Up until the time the contract calls for the delivery of the good, the contract is subject to speculation. Futures contracts originated in the trade in agricultural commodities; for example, American grain farmers were able to sell their harvest in advance on the Chicago Board of Trade, a commodity exchange.

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or free-market economy or free-enterprise system

Economic system in which most of the means of production are privately owned, and production is guided and income distributed largely through the operation of markets. Capitalism has been dominant in the Western world since the end of mercantilism. It was fostered by the Reformation, which sanctioned hard work and frugality, and by the rise of industry during the Industrial Revolution, especially the English textile industry (16th–18th centuries). Unlike earlier systems, capitalism used the excess of production over consumption to enlarge productive capacity rather than investing it in economically unproductive enterprises such as palaces or cathedrals. The strong national states of the mercantilist era provided the social conditions, such as uniform monetary systems and legal codes, necessary for the rise of capitalism. The ideology of classical capitalism was expressed in Adam Smith's Wealth of Nations (1776), and Smith's free-market theories were widely adopted in the 19th century. In the 20th century the Great Depression effectively ended laissez-faire economics in most countries, but the demise of the state-run command economies of eastern Europe and the former Soviet Union (see communism) and the adoption of some free-market principles in China left capitalism unrivaled (if not untroubled) by the beginning of the 21st century.

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In securities and commodities trading, a rising market. A bull is an investor who expects prices to rise and, on this assumption, buys a security or commodity in hopes of reselling it later for a profit. A bullish market is one in which prices are expected to rise. Seealso bear market.

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or limited obligation bond

Bond issued by a municipality, state, or public agency authorized to build, acquire, or improve a revenue-producing property such as a waterworks, electric generating plant, or railroad. Unlike general-obligation bonds, which are repaid through a variety of tax sources, revenue bonds are payable from specified revenues only, usually the revenues from the facility for which the bond was originally issued. Revenue bonds typically pay interest rates higher than those of general-obligation bonds. The separation of the revenue bond obligation from a municipality's other bond obligations allows the municipality to circumvent legislated debt limits.

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Electrostatic attraction between oppositely charged ions in a chemical compound. Such a bond forms when one or more electrons are transferred from one neutral atom (typically a metal, which becomes a cation) to another (typically a nonmetallic element or group, which becomes an anion). The two types of ion are held together by electrostatic forces in a solid that does not comprise neutral molecules as such; rather, each ion has neighbours of the opposite charge in an ordered overall crystalline structure. When, for example, crystals of common salt (sodium chloride, NaCl) are dissolved in water, they dissociate (see dissociation) into two kinds of ions in equal numbers, sodium cations (Na+) and chloride anions (Cl). Seealso bonding; covalent bond.

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Force holding atoms in a molecule together as a specific, separate entity (as opposed to, e.g., colloidal aggregates; see bonding). In covalent bonds, two atoms share one or more pairs of valence electrons to give each atom the stability found in a noble gas. In single bonds (e.g., HsinglehorzbondH in molecular hydrogen), one electron pair is shared; in double bonds (e.g., OdoublehorzbondO in molecular oxygen or H2CdoublehorzbondCH2 in ethylene), two; in triple bonds (e.g., HCtriplehorzbondCH in acetylene), three. In coordinate covalent bonds, additional electron pairs are shared with another atom, usually forming a functional group, such as sulfate (SO4) or phosphate (PO4). The number of bonds and the atoms participating in each (including any additional paired electrons) give molecules their configuration; the slight negative and positive charges at the opposite ends of a covalent bond are the reason most molecules have some polarity (see electrophile; nucleophile). Carbon in organic compounds can have as many as four single bonds, each pointing to one vertex of a tetrahedron; as a result, certain molecules exist in mirror-image forms (see optical activity). Double bonds are rigid, leading to the possibility of geometric isomers (see isomerism). Some types of bonds, such as the amide linkages that join the amino acids in peptides and proteins (peptide bonds), are apparently single but have some double-bond characteristics because of the electronic structure of the participating atoms. The configurations of enzymes and their substrates, determined by their covalent bonds (particularly the peptide bonds) and hydrogen bonds, are crucial to the reactions they participate in, which are fundamental to all life. Seealso aromatic compound; compare ionic bond.

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In finance, loan contract issued by local, state, and national governments and by private corporations, specifying an obligation to return borrowed funds. The issuer promises to pay interest on the debt when due (usually semiannually) at a stipulated percentage of the face value and to redeem the face value of the bond at maturity in legal tender. Bonds usually indicate a debt of substantial size and are issued in more formal fashion than promissory notes, ordinarily under seal. Government bonds may be backed by taxes, or they may be revenue bonds, backed only by revenue from the specific project (toll roads, airports, etc.) to which they are committed. Bonds are rated based on the issuer's creditworthiness. The ratings, assigned by independent rating agencies, generally run from AAA to D; bonds with ratings from AAA to BBB are regarded as suitable for investment. Seealso junk bond.

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(born Jan. 14, 1940, Nashville, Tenn., U.S.) U.S. politician and civil-rights leader. The son of prominent educators, Bond graduated from Morehouse College. In 1960 he helped create the Student Nonviolent Coordinating Committee (SNCC). In 1965 he was elected to the Georgia legislature, but his support of a SNCC statement accusing the U.S. of violating international law in the Vietnam War caused the legislature to deny him his seat. He was twice reelected and was twice more refused entry. The U.S. Supreme Court ruled his exclusion unconstitutional in December 1966, and he assumed his seat in January 1967. He later served in the state senate (1975–87). In 1998 he became chairman of the NAACP.

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Trading in violation of publicly imposed regulations such as rationing laws, laws against the sale of certain goods, and official rates of exchange among currencies. Black-market activity is common in wartime, when scarce goods and services are often strictly rationed (see rationing). Black-market foreign-exchange transactions flourish in countries where convertible foreign currency is scarce and foreign exchange is tightly controlled.

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In securities and commodities trading, a declining market. A bear is an investor who expects prices to decline and, on this assumption, sells a borrowed security or commodity in the hope of buying it back later at a lower price, a speculative transaction called short-selling. Seealso bull market.

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Economic event in the U.S. that precipitated the Great Depression. The U.S. stock market expanded rapidly in the late 1920s and reached a peak in August 1929, when prices began to decline while speculation increased. On October 18 the stock market began to fall precipitously. On the first day of real panic, October 24, known as “Black Thursday,” a record 12,894,650 shares were traded. Banks and investment companies bought large blocks of stock to stem the panic, but on October 29, “Black Tuesday,” 16 million shares were traded and prices collapsed. The crash began a 10-year economic slump that affected all the Western industrialized countries.

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In economics, a market is transparent if much is known by many about:

There are two types of price transparency: 1) I know what price will be charged to me, and 2) I know what price will be charged to you. The two types of price transparency have different implications for differential pricing.

This is a special case of the topic at transparency (humanities).

A high degree of market transparency can result in disintermediation due to the buyer's increased knowledge of supply pricing.

Transparency is important since it is one of the theoretical conditions required for a free market to be efficient.

Price transparency can, however, lead to higher prices, if it makes sellers reluctant to give steep discounts to certain buyers, or if it facilitates collusion.

See also


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