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How does the stock market work in the UK?

The stock market has always looked very interesting and almost a frantic place from the outside. As a trader, keeping a watch on this market becomes an important pre-requisite to earning profitability. Though, those keen on venturing into this field need to first understand the stock market of the U.K. Studying stock trading courses can also be a good way to gain all the necessary information and skills related to this field. 

Contrary to earlier times when buying shares and investing was only limited to highly affluent people and enterprises, now everyone is taking an interest in the stock market. All thanks to the growth of business world-wide, people from different walks of life started to focus on global ventures. A pool of wealth generated for this purpose relies heavily on investment. Well, anyway all this leads to the current UK stock markets and here is how it works. 

Share markets 

Before we proceed to the famous London Stock Exchangeitself, which was founded during the industrial boom of 1801, it is important to understand how to share markets work. 

If you are looking to buy any other product from the market, then you can get them from the maker or grower, such as food or clothing. Though, in the case of shares, things are not as easy since a company will not issue any new shares. Every company has a fixed number of shares at an allotted time that one can buy. 

You can get shares from multiple parties that include existing shareholder, private shareholder, investment funds, different professional and institutional investors or more. 

While asking brokers to ask around in the market to buy shares is an existing system it is often ineffective and has many loopholes. Hence there are market makers in place. 

Market makers               

A market maker is someone from whom you can buy shares at a lot more ease as they have a contract with the stock exchange. This gives them the right to be a share wholesaler and requires them to sell shares on demand. For this, they need to quote an “ask” or “offer” price. On similar lines, the market maker must quote a “bid” price and should be willing to buy shares at the quoted price. 

Market 

Coming back to the London Stock Exchange, the LSE has two equity markets that come with varied regulatory requirements. The main market has the Financial Times Stock Exchange (FTSE) 100 list that consists of UK’s largest companies and many other indexes. 

The other market that is operated by the LSE is the Alternative Investment Market (AIM). What makes AIM different is that it has less rigorous listing rules hence many companies prefer it for its flexibility and affordability. The AIM is famously home to various smaller companies, though in recent days some of the organisations in AIM have a high market value which goes up to hundreds of millions of pounds.

The London Stock Exchange provides everything from information on share price to trading service that allows investors to trade shares.

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