Page 183 - Initial Public Offering - An Introduction to IPO on Wall Street

A stock market is a place where not only individual traders but also major players meet as
investors and online dealers. You never know who's buying shares or selling them in a stock
market.

Efficient Price Discovery

Stock markets need to facilitate an effective price discovery process that refers to the act of
evaluating the correct price of a security which is typically carried out by analyzing the
supply and demand of the market and other variables related to transactions.

Liquidity Maintenance

Although the number of buyers and sellers for specific financial security is not within the
control of the stock market, it needs to make sure that anyone eligible and able to trade gets
immediate access to position orders that should be completed at a fair price.

12.1.3 Stock Market Participants
There are several different types of participants involved in the stock market, alongside long-
term investors and short-term traders. Everyone has a specific function, but many of the roles
are interconnected and rely on each other to efficiently run the market. The following are the
different participants in the stock market.

Stockbrokers

These are registered professionals who buy and sell shares on behalf of investors and are also
recognized as registered representatives in the U.S. By trading stocks on behalf of investors,
brokers serve as intermediaries between the stock markets and shareholders. For access to the
markets, an account with a retail broker is required.

Portfolio Managers

These are professionals who fund portfolios, or securities collections, for customers. Such
managers receive analyst feedback and make portfolio purchasing or selling decisions.
Portfolio managers are used by mutual fund investors, hedge funds, and retirement plan
providers to make decisions and set the investment strategy for the capital they possess.

Investment Bankers

They serve businesses in different capacities, like private companies wanting to go public
through an IPO or businesses participating in proposed mergers and acquisitions. They
manage the listing process as per the stock market's regulatory requirements.

Custodian and Depot Service Providers

They are an entity retaining the securities of clients for safekeeping to reduce the risk of their
theft or failure and often work in coordination with the market to move shares dependent on
trading on the stock market to/from the respective accounts of transacting parties.

Market Maker

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