- During the American Revolution, the colonial government funded its war efforts by selling bonds; banks also started selling shares or parts of their companies to raise money. In 1792, a group of people started out at 40 Wall Street in New York City to trade in shares of companies. As business grew, they moved into the current New York Stock Exchange building. The 1900s and the Industrial Revolution saw companies flourish, and Wall Street grew as a center for commerce. Today, the NYSE has been joined by the Nasdaq and several smaller exchanges around the world.
- Market indices reflect the direction of various markets. A rising stock market is known as a bull market and a falling market is a bear market. Indices track the performance of select baskets of stocks that represent one or more industry sectors. The most well known market index is the Dow Jones Industrial Average, which is an index of 30 blue chip -- large and established -- U.S. companies from the industrial, financial, technology and retail sectors. Most of the companies in the Dow Jones index trade on the NYSE.
- Trading involves buying and selling shares. Companies that list their shares are known as public companies. Details of their shares and other financial information are filed with the Securities and Exchange Commission and available online at EDGAR, the SEC's online database (see Resources). Financial documents are also available on the companies' investor relations websites. Shares are listed on stock markets as symbols: for example, the companies General Electric and Microsoft trade as "GE" on the NYSE and "MSFT" on Nasdaq, respectively.
On the NYSE, when investors enter buy and sell orders, they are routed to the floor of the exchange. Specialists monitor each stock to ensure that transactions are executed promptly and fairly. Buy and sell orders are matched and notices are sent to the brokerage house where the orders are initiated. In electronic trading on Nasdaq and other electronic exchanges, there are no floor brokers or specialists. Buy and sell orders are tracked by computer algorithms and matched, often within seconds of an order being placed. - The Securities Act of 1933 had two basic objectives: require that investors receive financial and other material information on publicly listed companies, and prohibit fraud. The SEC is the federal agency in charge of regulating stock market activity. Companies that wish to sell their shares must register with the SEC and provide details of their business activities, financial statements and management background. Company insiders -- senior management and board members -- must also follow disclosure requirements.
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