Question

What are the two primary purposes of a securities exchange? What does NASDAQ stand for? How does this exchange work? What government agency oversees the securities industry? What is a prospectus?

Answer 1

Below mainly two primary purpose of a securities exchange:

• Is to oversee organizations and individuals in the securities markets, including securities exchanges, brokerage firms, dealers, investment advisors, and investment funds.
• Is to regulate the exchange of stocks, as well as other financial assets. Such regulation ensures a fair environment for not only investors, but also the corporations whose stocks are traded in the market.

NASDAQ stands for "National Association of Securities Dealers Automated Quotations".

How does this exchange work:

It uses remarkable and highly reliable computer systems to handle the exchange of stocks between buyers and sellers, and to set opening and closing prices. In this article, we'll take a high-level view of the different services and techniques that the NASDAQ stock market uses for those transactions. For starters, where do all of these stock shares come from? The shares of stocks being bought and sold belong to the companies listed on the NASDAQ exchange. To take a step back: if a company wants to go public, it chooses the exchange where it will be listed -- that is, where it will sell its shares. Several thousand companies have chosen NASDAQ.

But if you look at the NASDAQ Market Site Tower from 20,000 feet, you realize that the apparently simple act of providing a stock exchange actually has three separate components:

• The interface -- The place where broker dealers and market makers gain access to the system.
• The matching engine -- A computer that connects buyers and sellers when their prices match.
• Quote services -- Data feeding the buy and sell price quotes that NASDAQ provides.

There are many other services provided inside the exchange, of course, including Market Site broadcasting, record keeping, and backup services. But the three services described above are the most important.

SEC (The Securities and Exchange Commission):

The Securities and Exchange Commission, or SEC, is a United States government agency whose main responsibility is enforcing securities laws and regulating the securities industry. The SEC was created by the Securities Exchange Act of 1934 in the wake of the Great Depression in order to protect investors.

What does the SEC do:

The SEC's primary goal is to protect investors and maintain orderly markets that are fair and efficient for all. Created in the wake of the Great Depression in order to enforce newly passed securities laws, the SEC was part of Congress' plan to restore the public's confidence in the market.

In order to achieve these goals, the SEC issues rules to govern the securities industry. And, while the entirety of the rules imposed by the SEC are well beyond the scope of this article, they can generally be divided into two main ideas:

1. If companies offer securities to the public, they must tell the truth about their business and the risks involved.

2. People who sell and trade securities must treat investors fairly and honestly.

The SEC consists of five commissioners, appointed to staggered five-year terms by the president, no more than three of which can belong to the same political party. Supporting the commissioners is a staff of approximately 4,600 people, spread out across the SEC's 12 offices throughout the U.S.

The five divisions of the SEC:

• Division of Corporation Finance: Oversees corporate disclosure of important information to the public, such as annual and quarterly filings, proxy materials, and registration statements.
• Division of Trading and Markets: Maintains fair, orderly, and efficient markets. This division provides oversight of the major participants in the markets.
• Division of Investment Management: Regulates and oversees the investment management industry, including mutual funds, analysts, and investment advisors.
• Division of Enforcement: Decides which securities law violations to investigate, and works closely with U.S. law enforcement agencies.
• Division of Economic and Risk Analysis: Uses data analytics to assist the SEC in its mission to protect investors.

Responsibilities of the SEC:

According to the SEC's website, the commission's responsibilities include:

• Interpreting and enforcing federal securities laws
• Issuing new rules and amending existing rules
• Overseeing the inspection of securities firms, brokers, investment advisors, and ratings agencies
• Overseeing private regulatory organizations in the securities, accounting, and auditing fields
• Coordinating U.S. securities regulation with federal, state, and foreign authorities