Page 188 - Initial Public Offering - An Introduction to IPO on Wall Street

confidence in their transactions being carried out at fair prices and within a reasonable
timeframe.

There are several stock exchanges in the U.S. and around the world today, most of which are
electronically connected. In turn, this ensures that markets are more effective and more
liquid.

Share prices can be set in a variety of ways on the stock exchange, but the most common
method is through an auction mechanism in which the buyers and sellers position bids and
offers to purchase or sell. A bid is a price at which someone wishes to purchase, and the price
at which someone wishes to sell is an offer (or ask). A trade occurs when the bid and asks
match.

Millions of buyers and traders, who may have various opinions about the value of a particular
stock and therefore the price at which they are willing to purchase or sell it, make up the
general market. As these traders and investors turn their desires to acts by purchasing and/or

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