finance Finance refers to monetary resources and to the study and Academic discipline, discipline of money, currency, assets and Liability (financial accounting), liabilities. As a subject of study, is a field of Business administration, Business Admin ...

, a trade is an exchange of a security such as

stock Stocks (also capital stock, or sometimes interchangeably, shares) consist of all the Share (finance), shares by which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporatio ...

s, bonds,

commodities In economics, a commodity is an economic good, usually a resource, that specifically has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. Th ...

, currencies, derivatives or any valuable

financial instrument Financial instruments are monetary contracts between parties. They can be created, traded, modified and settled. They can be cash (currency), evidence of an ownership, interest in an entity or a contractual right to receive or deliver in the form ...

for "cash". Such a

financial transaction A financial transaction is an Contract, agreement, or communication, between a buyer and seller to exchange goods, Service (economics), services, or assets for payment. Any transaction involves a change in the status of the finances of two or mo ...

is usually done by participants of an exchange such as a

stock exchange A stock exchange, securities exchange, or bourse is an exchange where stockbrokers and traders can buy and sell securities, such as shares of stock, bonds and other financial instruments. Stock exchanges may also provide facilities for ...

, commodity exchange or

futures exchange A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts defined by the exchange. Futures contracts are derivatives contracts to buy or sell specific quantities of a commodity or ...

with a short-dated promise to pay in the

currency A currency is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general definition is that a currency is a ''system of money'' in common use within a specific envi ...

of the country where the ' exchange' is located. The

price A price is the (usually not negative) quantity of payment or compensation expected, required, or given by one party to another in return for goods or services. In some situations, especially when the product is a service rather than a ph ...

is agreed between the buyer and seller on the execution of the trade and is guided by the supply and demand for that financial instrument. Once the trade is executed a number of steps take place until the trade is finally

settled A settler or a colonist is a person who establishes or joins a permanent presence that is separate to existing communities. The entity that a settler establishes is a settlement. A settler is called a pioneer if they are among the first settli ...

. There is a pre-defined settlement period for this to happen in each market. Trading in financial markets is key part of a countries economics, providing liquidity, enabling price discovery, and facilitating efficient capital allocation. When trading in financial markets, financial traders balance risk and potential reward to attempt to make profit from the trades.

Life cycle

The securities trade life cycle involves: # Order initiation and execution. ( Front office function) # Risk management and order routing. ( Middle office function) # Order matching and conversion into trade. ( Front office function) # Affirmation and confirmation. ( back office function) # Clearing ( back office function) # Settlement. ( back office function)

Participants

Participants in the financial markets include: * Speculators or retail traders * Institutional traders such as

insurance companies Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to protect ...

, private funds, hedge funds *

Central bank A central bank, reserve bank, national bank, or monetary authority is an institution that manages the monetary policy of a country or monetary union. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the mo ...

s such as the U.S. Federal Reserve(Fed), Bank of Japan (BOJ), European Central Bank (ECB) * Corporations such as Multinational companies (MNCs) * Governments

References

Share trading {{finance-stub

Life cycle

Participants

See also

References