How Does the Stock Market Work?

A famous building stands on the corner of Wall and Broad Streets in New York City. It is the New York Stock Exchange, a very busy place from 10:00 A.M. to 4:00 P.M., Monday through Friday. This is where the stocks of the best-known corporations are bought and sold every day.

The trading room is enormous, bigger than half a football field. It has 22 horseshoe-shaped trading posts and numerous telephone booths. Each trading post is a kind of counter which has room for about 12 clerks and a few stock exchange workers. There are about ten sections, each of which handles some ten stocks.

Large cards tell which stocks are handled at each place, as well as the latest price. Each telephone booth is open at both ends and has space where a number of clerks can work. Each clerk’s space has a shelf and a group of phones, as well as teletype equipment.

If you want to buy 100 shares of a stock called United Rainbow, you phone your broker, a dealer in stocks. He then calls your order in to a clerk in his telephone booth on the Stock Exchange floor.

When the clerk gets your order, he hands it to a floor broker, because only floor brokers are allowed to trade there. The floor broker must walk (running is forbidden) to the correct trading post and find a broker ready to sell United Rainbow. One important rule that must be followed is that the bid to buy and the offer to sell must be made out loud, not in writing or by whispering, to prevent secret deals.

Now, both the broker who bought the stock and the one who sold it have their clerks report back to their home offices to record the deal. Soon after, you pay for your stock and receive your stock certificate. Part of the money you pay goes to your broker as his commission for making the sale.

About Karen Hill

Karen Hill is a freelance writer, editor, and columnist. Born in New York, her work has appeared in the Examiner, Yahoo News, Buzzfeed, among others.

4 thoughts on “How Does the Stock Market Work?”

  1. Sounds pretty stressful, brokers need motivational compensations, I understand now why not everybody can work as a stock broker. Actually I was interested to know more about this because I want to become a broker, I should have a and I really don’t want to miss that opportunity.

  2. This is really good info on how the stock market works.

    To buy a stock you need to have an investment account. Open an investment account with a stock broker that works at a local firm. However, you can also open an online investment account and make trades without the help of a stock broker. After you have set up your account you will need to fund it before you can make a purchase. Once your account is funded you will be able to enter your order for a stock purchase.When you are ready to sell your shares you have to tell your stock broker that you want to sell shares of the particular company.

  3. In today’s world with millions of transactions by large and smaller investors the world over, there’s no way individual transactions can be performed ‘manually’ on the floor of the stock exchange. Today it’s all done by computers, in some cases (to maximize profits) by computers programmed to buy and sell without human intervention at all.

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