In This Article, We Understand Where Share Market Money Goes & How Its Works In the Share Market. It is called an Initial Public Offering (IPO) when a company sells its stock for the first time. A company’s stock can be purchased during its IPO with money going to the company.
Following a Follow-On Public Offer (FPO), the same company raises money from the public to sell more stock. FPOs allow you to buy stock from a company which again gives the money to that company. These two are considered “Primary Market”.
Upon purchasing the stock, it is able to be sold in the “Secondary Market”.
In this respect, people trade on the secondary market when they trade on the NSE, BSE, NYSE, etc.
There is no such thing as a secondary market other than a marketplace for buying and selling. The stock gets transferred to the buyer in these markets when you sell it. You get paid.
In the future, you can repurchase stock from companies that have either recently sold stock to other sellers or who have bought stock from the company (during the IPO/FPO) or from sellers (such as the one you initially sold the stock to). You will deal with the seller directly, so like any other transaction, you will pay the seller and he will give you the stock.
All the stock exchanges in the world build an online marketplace where buyers and sellers can do business. The exchanges make money from each transaction through commissions.
Who Share Market Money Work?
Step 1: An organization authorizes the issuance of stock and then does so
Step 2: This is where the company’s bank account receives money from stock purchasers who buy the stock during an IPO (initial public offering).
Step 3: Even after the IPO is completed, the company gets nothing if stock is bought and sold on the open market. With a stock sale, the buyer exchanges money for the stock owned by the seller.
How it Works
Stocks should be sold to the seller. Individuals or brokerage houses that own and hold shares of various companies can be further defined as mutual funds. Banking and corporate interests may also own stocks and sell them. In both cases, the sales must go through brokers and clearinghouses.
Initial public offerings, also known as IPOs, are sales of stock by newly listed companies to the biggest brokerage houses, such as Goldman Sachs. These brokerage houses then sell the stock to their special clients, including numerous wealthy individuals.
Most new shares are purchased by small dealers and brokers who then resell them to individual investors for a markup. The shares will be placed in myriad mutual funds, pension funds, and alike in order to generate the growth and increase in share value anticipated. A brokerage firm can use a portion of its reserves for lending out shares in short sales if a new company is expected to grow well.
Specialists or market makers are also referred to as market makers. As much as possible, they trade at the index levels so that there is adequate liquidity at all times, to allow for price slippage. It buys, holds, and sells shares with a very small markup. The company also buys and writes down some shares to ensure there is a ready buyer. Their role is to do that.
Within minutes or hours, shares can be sold. Later, they can be held for better opportunities. Market traders are very important to daily market trading, and their work is usually very lucrative.
I understand how it works like that.