Key Figures in Trading Stock

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Key Figures in Trading Stock

Get to know the key figures in trading stock. First, there’s you, the investor. Then there are the other principals who facilitate the transactions.

Things To Know

  • You typically must use a broker when you trade.
  • You can also purchase shares directly from the company, without a broker.

Stock is evidence of ownership in a corporation. Corporations whose shares are owned by persons outside the "corporate family" are publicly traded. The Securities and Exchange Commission (SEC) established the National Association of Securities Dealers (now called the Financial Industry Regulatory Authority) to make rules to assure the orderly commerce in publicly traded stocks.

Using a broker

Persons in the business of trading stocks are brokers and must register with the SEC. When you want to buy (or sell) shares of a publicly traded stock, you will use the services of a broker. A broker (stockbroker) must pass an examination on securities law to be licensed to trade securities. You have a choice of which broker to invest with. Different brokers provide different services.

Going without a broker

Some companies allow shareholders to purchase shares directly from them without having to use a broker. These arrangements are called direct purchase plans, or direct investment plans. Many other companies offer dividend reinvestment plans, in which your dividends are reinvested into more stock, without using a broker.

Licensed individuals are registered representatives of brokers.

Brokerage houses are large firms that deal in securities and may belong to an exchange such as the New York Stock Exchange or the American Stock Exchange.

Stock investing involves risk, including loss of principal.