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4.1 Market structure – Stocks

Financial Market Structure

The first market that we are going to talk about is the Stock market and what is it that makes the Stock market unique and gives it its structure.

  1. Centralised and Regulated – All of the transactions in the UK Stock market go through the London Stock Exchange (LSE). The LSE enables the companies from around the world to raise money from outside investors. Its main aim is to provide attractive, efficient and well-regulated market for companies, investors and intermediaries (Stock Brokers)

  2. Centralised Point-of-Contact – It is an entity that manages and regulates all of the prices. This is good because there can be no refute about whether the Stock reached a certain price when you are in a trade. It will either did or did not reach the price. This is unlike other unregulated market where there can be dispute. Stock market, being centralised, minimises the room for manipulation.

  3. Wide Spreads – Buyers and sellers may not get the price they ask for due to wide spreads. When a stock has low trading volume, it is considered to be illiquid and is not easily converted to cash. As a result of that, the broker will require more compensation for handling that particular transaction, which accounts for the larger spreads.

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