The Stock Exchange - An Introduction

It may be wondered how the newspaper obtains the prices it prints. They are gotten directly from the market place where stocks are traded, called a stock exchange, and the prices themselves are based upon the transactions (purchases and sales) during the day, except that in case no actual sale is made, the prices are those at which offers to buy or sell have been made. We may define a stock exchange as a market place for securities.

It should be emphasized that any stock exchange is now subject to regulation under the Securities and Exchange Act of 1934, by which it agrees to co-operate with the Securities and Exchange Commission (SEC) in the enforcement of the Act and to comply with any rules and regulations which the Commission may consider desirable.

Such a stock exchange is not exactly comparable to a real-estate office, where the broker brings a buyer for a listing given him by a seller; nor is it like an auction, where there is only one seller and the buyers compete among themselves. The stock exchange is really a two-way auction market, but-as it is amazing to find that only about four people in every ten know-the New York Stock Exchange does not own the stocks listed for sale to the public!

Here is how it works: bidders compete with one another to purchase at the lowest possible price the shares they want to own. Simultaneously, those seeking to sell compete with one another to get the highest price for the shares they are offering.

The buyer bidding the highest price and the seller offering at the lowest price agree on a figure which is acceptable to each and the transaction is made. The prices simply reflect the basic law of supply and demand. It is a market place where shares in American industry can be bought and sold almost as readily as you can deposit money in the bank.