Stock market or stock exchange is a market where different exchanges buy and sell shares of publicly held companies. These financial activities are carried out by official exchanges and OTC markets (markets where very large transactions are carried out) in a legal framework.

Traders in the stock market can buy and sell the desired company's shares in the exchanges that trade those shares. For example, we can mention the New York Stock Exchange (NYSE) and the Nasdaq Market (NASDAQ). Stock markets are components of a free market economy because they allow democratized access to investors' business and capital exchange. There are many efficient transactions in the stock market and it makes the stocks discover their price and main position in the market by considering the supply and demand.

The stock market is an environment for traders to meet, interact and make transactions. The stock market plays its effect on the economy in the form of a barometer, meaning that high volume of transactions and investments in the stock market of a country means prosperity in the economy of that country. With the help of the stock market, buyers and sellers can benefit from a fair price, high liquidity and transparency in their transactions.

The first stock market was the London Stock Exchange, which was founded in a coffeehouse in London in 1773, where traders bought and sold their stocks among themselves.

Transactions in stock markets and stock exchanges were done physically in the past, and traders bought and sold paper-based physical share certificates under the name of stocks. But in today's modern world, stock market trades are online. But this market is still a regulated and controlled environment.

It should be noted that in the stock market, in addition to stocks, other securities such as bonds and exchange-traded funds (ETF), etc. are bought and sold.

How the Stock Market Works

The stock market is a regulated place for traders to trade their stocks and other securities easily and safely. It can be said that a company divides itself into several shares and sells some of those shares to the public at a certain price under the process of "Initial Public Offering" or (IPO). This activity allows joint stock companies and corporations to collect the capital they need with the help of investors. To facilitate this process, a stock company needs a market to list its shares for sale. In this way, the need to have a stock market is felt.

Also, when a company's shares were offered to the market and, for example, one of the shareholders wanted to sell his own shares, a stock market or stock exchange is also needed for this purpose; to exchange his shares or turn them into cash in this market.

By studying the mentioned above cases, it can be said that the stock market has appeared like an exchange and made people's transactions easy and fast, and for the services it provides, it receives a fee as an income for the market.