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ASSET MARKETS

Stock market

Where companies sell pieces of themselves and people become their co-owners.

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Its role in the system

The market where companies sell pieces of themselves — shares — to investors, and investors resell them to one another. Here a business raises capital without taking on debt, and households' savings (directly or through pension and investment funds) become ownership of real companies. Every second, the share price sums up expectations about profits and about the risks in the economy.

Functions

  1. Raising capital — an initial public offering (IPO) and follow-on issues (SPO): the company gets money it does not have to repay, and in exchange shares its ownership and its profit.
  2. Secondary trading — investors buy and sell shares that have already been issued; it is precisely the ability to sell quickly (liquidity) that makes shares attractive to the first buyer.
  3. Price formation — the market price shows what the business is worth (its capitalisation) and becomes the reference point for mergers, management options and collateral.
  4. Indices and passive investing — indices (🇺🇸 the S&P 500, 🇩🇪 the DAX) measure the market as a whole; exchange traded funds (ETFs) that copy an index let you buy “the whole market” in one purchase.
  5. Corporate control — shareholders vote, elect the board and can change management; takeovers happen through buying up shares.

What makes it special

  • Who earns and how: investors on price growth and dividends; the arranging banks on placement fees; market makers on the difference between the buy and the sell price (the spread). A share is also last in the queue: in a bankruptcy shareholders are paid after all creditors and bondholders, which is why the expected return is higher than on debt and the price swings are wider. The market itself is what is traded and at what price; the venues (exchanges) and the settlement (clearing) are separate links.
  • Disclosure is the basis of trust: a public company reports regularly and announces material events immediately; insider dealing and manipulation are crimes. The regulators: 🇺🇸 the SEC, 🇪🇺 ESMA and national authorities, 🇬🇧 the FCA; the global principles come from 🌍 IOSCO.
  • Passive money is changing the market: more and more money is invested through index funds, which buy every share in the index regardless of the news; that is why simply being added to an index already moves a company's price.
  • A share on a blockchain (tokenised equity): a share is a record — the only question is who keeps it. Classically the record sits with a central securities depository and a transfer agent, and it changes by market rules and in business hours. A tokenised share is the same record on a blockchain: the holder moves it personally, within seconds, around the clock. Where it is already lawful: 🇨🇭 Switzerland recognised rights entered in an electronic register in its DLT act, and the FINMA-licensed SDX trades such securities; 🇪🇺 the EU opened the DLT pilot regime (since March 2023); 🇺🇸 in the United States the token is issued by the company itself through a transfer agent that keeps the master securityholder file on-chain — that is how Galaxy Digital put its Nasdaq-listed class A shares on Solana in September 2025. In January 2026 the SEC spelled out the difference: a token issued by the company is the same share, while a third party's “wrapper” is only a claim on that intermediary and dies with it. What is unresolved: how corporate actions and shareholder votes are run, who answers for a lost key, and whether a court will treat the holder of the wallet as the owner.
  • 🇨🇳 China and 🇯🇵 Japan — two different routes: on China's mainland market (A-shares in Shanghai and Shenzhen) private individuals account for roughly sixty per cent of turnover — far above developed markets, where individuals usually account for less than a third of turnover — so prices react far more sharply to mood and rumour. The state is not only the supervisor: when the market falls, state entities (above all Central Huijin) announce purchases of exchange traded funds and hold prices up, as they did in April 2025. Japan applies its pressure through the exchange itself: since March 2023 the Tokyo Stock Exchange has asked companies whose shares trade below the book value of their own equity (a price-to-book ratio under one) to publish a plan to fix it, and it publishes the list of those that responded. Companies began buying back their own shares and unwinding cross-shareholdings, and the market's average valuation rose.

Why it matters

When the stock market freezes or crashes, companies lose access to capital for growth, pension savings shrink, and people who feel poorer spend less — which slows the whole economy.

🇺🇸 The dot-com crash, 2000–2002

on the wave of internet hype, companies with no profit and sometimes no finished product came to the exchange. The NASDAQ index peaked on 10 March 2000 and by October 2002 had lost 78 per cent; hundreds of companies went bankrupt. An example of how the market can misprice risk for years and then correct abruptly.

🇺🇸 “Black Monday”, 19 October 1987

the Dow Jones index fell 22.6 per cent in a single day — the largest one-day fall in history — and the crash spread instantly to exchanges in other countries. Automatic selling under “portfolio insurance” strategies amplified the fall; afterwards circuit breakers were introduced, requiring trading to pause when prices drop sharply.

🇩🇪 Linde leaves Frankfurt and the DAX, 2023

In January 2023 roughly 93 per cent of the shareholders of Linde, the industrial gases group and the largest constituent of Germany's DAX, voted to delist from the Frankfurt exchange; on 1 March the shares traded in New York only. Management argued that the dual listing was holding the valuation back: most of the trading already happened in the United States, and the ten per cent cap on any single company's weight in the DAX created regular selling pressure. The case shows that a company lists where the deep pool of capital is — and that a domestic market can lose its biggest name.

Links to other zones · 16

  • Audit & AssuranceNo IPO and no listing survives without audited accounts: the signature from Audit & Assurance is what a Stock market investor relies on when buying a share.
  • Banking & Credit InstitutionsBanking & Credit Institutions arrange Stock market offerings: they build the order book and underwrite the sale.
  • Clearing & settlementAfter each Stock market trade, Clearing & settlement makes sure the buyer receives the shares and the seller receives the money.
  • Corporations & Corporate FinanceCorporations & Corporate Finance are the issuers of the Stock market: a listing is an alternative to bank debt, and shares become the currency for acquisitions and for tying management to the owners.
  • Crypto / Digitaltokenisation has reached shares as well: in the Crypto / Digital zone the same shares exist as tokens — the transfer is instant, but the rules for corporate actions, voting and key custody are not settled.
  • Debt marketThe queue in bankruptcy sets the price of money: holders of Debt market bonds are paid first and holders of Stock market shares last, which is why equity is expected to return more and swings harder.
  • DerivativesIndex and single-stock Derivatives are the Stock market's tool for hedging a fall and for speculating; at times they amplify crashes, as in 1987.
  • Exchanges & platformsShares are listed on Exchanges & platforms (🇺🇸 NYSE, Nasdaq, 🇩🇪 Xetra, 🇵🇱 WSE) and on alternative venues: the Stock market is what trades and at what price, Exchanges & platforms is where.
  • Financial Market InfrastructureThe Stock market runs under Financial Market Infrastructure: it clears prospectuses, watches disclosure and sanctions manipulation and insider dealing.
  • Financial Media & DataA share price is a reaction to information: reports, news and analysis from Financial Media & Data must reach every Stock market participant at the same moment, and trust in the market rests on exactly that.
  • Investment & Pension FundsPension funds, mutual funds and ETFs from Investment & Pension Funds are the biggest holders in the Stock market, and their inflows and outflows move whole sectors.
  • Monetary PolicyMonetary policy is the single biggest outside force on share prices: the policy rate sets the price of money used to discount companies' future profits, so when money is cheap investors pay more for the same earnings. 🇯🇵 The Bank of Japan took this to the limit — it bought equity ETFs from December 2010, became one of the largest holders of Japanese shares, stopped buying in March 2024 and decided in September 2025 to sell the portfolio down. The link runs both ways: 🇪🇺 the ECB counts equity prices as a transmission channel — when they rise, share-owning households feel wealthier and spend more — so the Stock market is part of the financial conditions a central bank watches.
  • Ratings & IndicesIndices measure the Stock market and steer it at the same time: adding a share to an index from Ratings & Indices forces passive funds to buy it, removing it forces them to sell.
  • Real estate marketREITs and developers trade like ordinary shares, so the illiquid Real estate market becomes a Stock market holding that can be bought and sold in seconds.
  • Retail accessRetail access — brokers and investing apps — is the gateway through which private investors reach the Stock market.
  • Sovereign Wealth FundsSovereign Wealth Funds are among the largest shareholders in the world: they vote at meetings, push corporate governance standards on the Stock market and almost never sell in a panic.

Regulation and supervision

Supervised by: Financial Market Infrastructure

The regulator promises no profit — only that everyone sees the same truth. A prospectus is approved before listing and the company reports regularly afterwards, while trading is watched for insider dealing and manipulation: 🇪🇺 MAR, 🇺🇸 the SEC, 🇯🇵 JFSA, 🇨🇳 CSRC.

Standards: IOSCO Objectives and Principles of Securities Regulation · EU Prospectus Regulation 2017/1129 (as amended by the Listing Act 2024/2809) · EU Transparency Directive 2004/109 · EU Market Abuse Regulation 596/2014 · EU Short Selling Regulation 236/2012 · US Securities Act 1933 / Exchange Act 1934

Careers in this zone · 6

Equity research analyst

Studies 10 to 20 companies in one industry in depth: builds financial models, talks to management, estimates the fair price of the share and issues a buy / hold / sell recommendation. On the sell side (at a broker or a bank) writes reports for clients; on the buy side (at a fund) prepares ideas for the portfolio manager.

What you need to know

  • Analysis of financial statements under IFRS / US GAAP
  • Company valuation: DCF, multiples (P/E, EV/EBITDA)
  • The economics and competitive dynamics of your industry
  • Research and conflict of interest rules (🇪🇺 MiFID II)

Skills

  • Financial modelling in Excel
  • Writing an investment thesis briefly and convincingly
  • Asking management awkward questions
  • Admitting a mistake and changing the recommendation

Certifications: The CFA is the industry standard; in the United States, FINRA licences for the sell side (Series 86/87)

Equity sales trader

Receives large orders from funds — buy or sell millions of shares — and executes them without moving the price against the client: slices the order, chooses the venue and the algorithm, looks for the other side. In parallel, gives clients the “colour” of the market — who is buying what and why.

What you need to know

  • Market microstructure: the order book, liquidity, the impact of a large order on the price
  • Execution algorithms (VWAP, TWAP) and dark pools
  • Best execution requirements
  • Corporate events: dividends, placements, index changes

Skills

  • Fast decisions under pressure
  • Real-time communication with clients
  • Discipline about risk and limits
  • Working with trading terminals

Certifications: In the United States, FINRA licences (Series 7, 57); in 🇬🇧, CISI qualifications; the CFA is a useful plus

Equity capital markets syndicate specialist

Prepares a company for an IPO or an SPO from the market side: gauges investor demand, runs the roadshow, builds the order book, proposes the offer price and allocates the shares among investors. Whether the share rises or “breaks” after trading starts depends on these decisions.

What you need to know

  • The IPO/SPO process: prospectus, underwriting, price stabilisation
  • Company valuation and comparison with peers in the market
  • The behaviour of different investor types: long-only funds, hedge funds
  • Rules for public offerings (🇪🇺 the Prospectus Regulation)

Skills

  • Reading demand and the mood of the market
  • Negotiating the price with the issuer
  • Working to hard deadlines
  • Precision in documentation

Certifications: The CFA is useful; in the United States, FINRA Series 79

ETF capital markets specialist

Works at a company that issues exchange traded funds: makes sure the price of the ETF on the exchange does not drift from the value of its assets, deals with the market makers and authorised participants who create and redeem units, and helps large investors buy or sell the fund without unnecessary cost.

What you need to know

  • The mechanism for creating and redeeming ETF units
  • The liquidity of the ETF and of its underlying assets, spreads
  • Tracking error and fund costs
  • Fund regulation (🇪🇺 UCITS, 🇺🇸 the Investment Company Act)

Skills

  • Analysing trading data (Python / SQL)
  • Coordinating market makers and brokers
  • Explaining to investors how an ETF actually trades

Certifications: Usually not required — the CFA is useful

Equity strategist

Looks at the market from above: which countries, sectors and styles (growth or value, large or small companies) will do better under different scenarios for the economy and for rates. Judges whether the market as a whole is expensive, and advises clients and portfolio managers on how to allocate between sectors.

What you need to know

  • Valuing the market as a whole: multiples, the equity risk premium
  • The link between company profits and the economic cycle
  • The effect of rates and inflation on equity valuations
  • Fund flows and investor positioning

Skills

  • Working with large market datasets
  • Concise, persuasive writing for clients
  • Public speaking

Certifications: The CFA is the industry standard

Event-driven / merger arbitrage analyst

Earns money for a fund on announced deals: buys shares in the company being acquired and judges whether the deal will actually close — whether competition authorities, shareholders or financing might block it. Analyses spin-offs, buybacks and restructurings in the same way.

What you need to know

  • The mechanics of mergers and acquisitions, tender offers
  • Competition and corporate law
  • Financial analysis and company valuation
  • The risk of a deal breaking and what that risk is worth

Skills

  • Reading merger agreements and regulatory filings
  • Thinking in probabilities
  • Reacting quickly to news

Certifications: The CFA is useful; a legal or corporate finance background is valued

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