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. Why are traders on the floor of the exchange?

    Before the advent of electronic trading platforms, the floor of the stock exchange was the location for market transactions ... Read Answer >>
  2. What exactly is being done when shares are bought and sold?

    Most stocks are traded on physical or virtual exchanges. The New York Stock Exchange (NYSE), for example, is a physical exchange ... Read Answer >>
  3. What kind of assets can be traded on a secondary market?

    Learn about the difference between the primary market and the secondary market, and what types of assets are traded on secondary ... Read Answer >>
  4. What are all of the securities markets in the U.S.A?

    There are three major U.S. financial securities markets which are: New York Stock Exchange (NYSE): NYSE is a stock exchange ... Read Answer >>
  5. How do I invest in the Nasdaq or the NYSE? Is it even possible? Would I want to? ...

    The Nasdaq and the NYSE are stock exchanges that trade securities. Nasdaq stands for National Association of Securities Dealers ... Read Answer >>
  6. Why is the Nasdaq more volatile than the NYSE?

    Learn about the stocks that are traded on the Nasdaq stock exchange, and discover the Nasdaq's relative volatility level ... Read Answer >>
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