Stock and over-the-counter markets of securities

Stock market of securities or stock exchange is an organized market of securities, where trading is realized according to the strictly established rules and charts during the trading session. Only the securities of reliable issuers are listed on the market. The criteria for being listed are the size of the net income of the company, the value of assets and the size of the released stocks.

The main tasks of the stock exchange are the creation of the necessary conditions for providing trading services; in return the market participants pay commissions, annual fees, and fees for the listing.

The functions of the stock exchange are:

• Arrangement of public trades on certified equipment and with the help of highly qualified employees of the exchange;
• Development and realization of exchange futures contracts;
• Regulation of securities quotes;
• Arbitrage (resolution of conflicts of interests and disputes arising during trading);
• Insurance of market participants against sharp bounces of prices and hedging;
• Guaranteed execution of transactions.

Currently there are more than 200 stock exchanges in the world and the largest ones are New York Stock Exchange, Tokyo Stock Exchange, London Stock Exchange, Shanghai Stock Exchange, Hong Kong Stock Exchange and Frankfurt Stock Exchange.

The first stock exchange, which still exists, was opened in 1602 in Amsterdam, where traders were able to trade not only various commodities, but also securities, and it’s worth mentioning that in both cases the technique of trading was the same. The admission to the stock exchange was free and anyone could take part in trades. For a long time, only the stocks of the United East Indian Company, government bonds of the Netherlands and the administration bonds of the largest cities of the country.

In the middle of the 18th century, on the stock exchange of Amsterdam, 44 types of securities were already being quoted.

In the over-the-counter market securities, not allowed to trade in the stock market, are circulated. More often these are the stocks of small companies, which have not been listed because of the limited circulation or lack of reliability.

Over-the-counter market can be organized and unorganized:

An organized OTC market is a market, where the trade is carried out in accordance with strictly established rules. Before the admission to circulation in the market, securities pass the procedure of listing, which is slightly easier, than in the stock market, but there are some requirements for the companies concerning the magnitude of assets, the quantity of circulated stocks and dealers, who are ready to quote these stocks. Trading on the organized market is realized between professional intermediaries (dealers). National Association of Securities Dealers Automated Quotations (NASDAQ), founded in the USA in 1971, is the largest organized OTC market in the world. By the market capitalization, NASDAQ is the second market in the world after the New York Stock Exchange.

Unorganized over-the-counter market is characterized by the fact that trading occurs spontaneously and without any universal rules, the buyer takes over the whole risk. Moreover, the conditions of transactions are negotiated between the buyer and the seller, and the information regarding the transactions is not recorded anywhere.