An auction market is one in which stock buyers enter competitive bids and stock sellers enter competitive offers at the same time. If this sounds like buying and selling stock on a stock exchange, you're right. It is worth noting that before stocks are traded on a stock exchange, which is referred to as the secondary market, they are created by means of an initial public offering (IPO). The secondary market is essentially an auction market and is what people are referring to when they talk about the stock market.

Virtually all stocks are traded on stock exchanges. Some exchanges are physical locations (for example, the New York Stock Exchange - NYSE) where transactions are carried out on a trading floor. The other type of exchange is virtual (National Association of Securities Dealers Automated Quotations - Nasdaq), comprised of a network of computers where trades are made electronically.

To learn more about exchanges, see Getting to Know Stock Exchanges, The Tale Of Two Exchanges: NYSE And Nasdaq and The Global Electronic Stock Market.

  1. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  2. What kind of assets can be traded on a secondary market?

    Virtually all types of financial assets and investing instruments are traded on secondary markets, including stocks, bonds, ... Read Full Answer >>
  3. Why would a company decide to utilize H-shares over A-shares in its IPO?

    A company would decide to utilize H shares over A shares in its initial public offering (IPO) if that company believes it ... Read Full Answer >>
  4. How do I place a buy limit order if I want to buy a stock during an initial public ...

    During an initial public offering, or IPO, a trader may place a buy limit order by choosing "Buy" and "Limit" in the order ... Read Full Answer >>
  5. How do corporate actions affect floating stock?

    Corporate actions, defined as a company's actions that affect the amount of outstanding company stock shares, can either ... Read Full Answer >>
  6. What are the advantages and disadvantages of listing on the Nasdaq versus other stock ...

    The primary advantages for a company of listing on the Nasdaq exchange are lower listing fees and lower minimum requirements ... Read Full Answer >>
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