The Stock market is a place where stock investors buy and sell stocks. The market is monitored and controlled by a regulatory body that acts as the upholder of fair market practices, Securities and Exchange Board of India referred to as SEBI (Das, 2015) acts as the stock market regulator in India and governs all the operational policies.
Stock markets are facilities that provide the necessary infrastructure to “Sellers” and “Buyers” to facilitate the trading of stocks (Investopedia, 2021). In the past, stock markets used to be physical places where stock traders used to interact with each other physically and complete their transactions. In the recent past due to the improvements in information technology, communication methods, and digitization, stock markets also have been converted into virtual forms where traders can do all the necessary formalities remotely using Information Technology (NSE, 2021a).
The modern form of stock markets works on the principle of fair auction model where the free float of shares is offered on the premise of “Bid” and “Ask” stock prices and the networked high-performance computers match the best “Bid” and “Ask” prices. The trading is done using web portal access and specialized personal trading desks (M. Y. Zhang, Russell, & Tsay, 2008). The settlement of these shares is also completely digitally enabled with the “Dematerialization” of stocks. There is no physical form of stocks, everything is digital and the stock held by the investors is safely kept in the digitized stock depositories (Olekar & Sri, 2013). The digitalized stock exchanges also provide advanced trading information to all stock investors through their trading desk as well as openly available web information that can be accessed freely. Some of the real-time information provided online by stock exchanges is:
- The “Ask” stock price.
- The “Bid” stock price.
- The bids quoted and the bid size in lots.
- The Bid-Ask spread.
- The real-time prices of all listed stocks.
- The publicly available financial information about all the listed stocks.
- The volume of transactions on each stock.
- The historical opening and closing prices of all stocks listed on the exchange.
The oldest stock exchange in India is the Bombay Stock Exchange (BSE) and started as an exchange with the trading floor with verbal calls for trading and in the recent past has been offering online trading also. The National Stock Exchange (NSE) got established in the mid-90s as a completely digital form of trading without any trading floors and trading is purely using the online trading desks.
The stocks listed on the stock markets are available under two major categories:
- Primary Market – When a company lists its stocks on the stock market for the first time, it is called as Initial Public Offering (IPO). In this mode, the company offers stock and investors have to subscribe to these stocks. This mode of buying stock is called as Primary market scenario. This scenario only occurs when new companies are listed or already listed companies are going for a new issue of stocks to raise money for the investors (Bloomberg, 2020a).
- Secondary Market – Once the IPO is established, the stocks are freely available for trading on the stock markets. This is called as free float of stocks that are available for buying or selling. This method which is the most commonly occurring scenario is called the Secondary market (Bloomberg, 2020b).
For Citing this article:
- Patalay, S. (2021). Design and Development of A Financial Decision Support System For Stock Market Investors Using Artificial Intelligence and Machine Learning.