This chapter introduced you to stock markets. We discussed who owns stocks, how the stock exchanges operate, and how stock market indexes are constructed and interpreted.
Along the way we saw that:

1. Individual investors, directly or through mutual funds, own over half of all traded stocks. The rest are owned mostly by financial institutions such as pension funds and insurance companies.
2. The stock market is composed of a primary market, where stock shares are first sold, and a secondary market, where investors trade shares among themselves. In the primary market, companies raise money for investment projects. Investment bankers specialize in arranging financing for companies in the primary market. Investment bankers often act as underwriters, buying newly issued stock from the company and then reselling the stock to the public. The primary market is best known as the market for initial public offerings (IPOs).
3. In the secondary market, investors trade securities with other investors. Secondary market transactions are directed through three channels: directly with other investors, indirectly through a broker, or directly with a dealer. We saw that a broker matches buyers and sellers; a dealer buys and sells out of inventory.
4. Most common stock trading is directed through an organized stock exchange or through a trading network. The largest organized stock exchange in the United States is the New York Stock Exchange (NYSE). Popularly known as the Big Board, NYSE is owned by its members. There are three major types of NYSE members: floor brokers, specialists, and floor traders. We discussed the role of each in the functioning of the exchange.