The New York Stock Exchange is a Wall Street hallmark.
Bull market. Bear market. Flat market. When financial journalists use these terms, they do not allude to farming transactions or deals involving animal brokers. Economic news reporters refer to the impact of stock-exchange rates on financial markets, focusing on how investor mood affects securities' values. Stock exchanges are also known securities markets or financial exchanges.
Definition
Stock-exchange rates, also called stock-market prices, are the product of economic fluctuations and the investment strategies of market participants. These rates are values that market players attribute to a string of financial products. Investment instruments range from traditional products--such as stocks, bonds and commercial paper--to "exotic products." These include derivatives, swaps, options and collateralized debt obligations, or CDOs. Investors use the terms "bull market," "bear market" and "flat market" when stock-exchange rates go up, inch down or stay unchanged, respectively.
Significance
Securities' values help investors restore balance in financial markets, enabling exchange participants to distinguish unhealthy companies from economically sound firms. This distinction is essential, especially for portfolio managers who purchase securities with a long-term outlook. Without accurate, complete rates, investors may be unable to gauge the nature and inherent risk of purchased securities. Financial analysts use the term "market risk" to describe inherent exposures, a concept that enables investors to mitigate unfavorable fluctuations in exchange prices.
Market Participants
Securities-exchange participants pay close attention to instrument fluctuations to adjust their bets, depending on specific circumstances. Unforeseen events, such as negative corporate performance and regulatory changes, may throw investors' wagers off kilter. Other situations that may derail corporate financiers' strategies include a bad economy as well as political turmoil and social unrest in a foreign country. Stock-market players run the gamut from financial institutions and investment analysts to portfolio managers, traders and publicly listed firms.
Exchange Types
Investors pore over exchange data to determine the market's pulse, keeping a close eye on how the doldrums of a bad economic deal a blow to companies' strategies. Stock exchanges include electronic platforms and physical markets. An example of electronic exchange--or over-the-counter market--is the National Association of Securities Dealers Automated Quotation, or NASDAQ. Physical stock exchanges include the Tokyo Stock Exchange, Chicago Mercantile Exchange, New York Stock Exchange and London Stock Exchange.
Regulators
Government agencies ensure that stock exchanges remain level playing fields, setting directives that prevent financially strong players from skewing prices with their large war chests. In fact, monitoring market activities to make sure some investors don't reap ill-gotten profits is a constant, important concern for regulators. Major stock-exchange regulators include the U.K. Financial Services Authorities, U.S. Securities and Exchange Commission, Commodities Futures Trading Commission and Financial Industry Regulatory Authority.
