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Trading The Stock Market

The basics of how individual investors can place trades online.

When most investors think of trading securities they usually think first of the New York Stock Exchange located at 11 Wall Street in downtown Manhattan. This exchange is the oldest, largest, most prestigious, and most visible securities exchange in the United States.

Exchange Based Trading and the Online Stock Trader

Many online traders may wonder "what is a stock exchange?" and what exactly happens on the trading floor. The exchange is a place where buyers and sellers of certain securities come together to do business with one another. By being in one location, these market participants are able to conduct business at a fair and equitable price determined by supply and demand.

But if you're investing in the stock market online how are you doing business on the exchange if you never leave your home or office? The answer is: The electronic age has changed some of the logistics of investing, and many orders make it to the U.S. trading floors by way of an online broker such as TradeKing. These days, many orders are automatically routed electronically to their end destination on the floor instead of being carried in hand by a floor clerk, runner, or floor broker. TradeKing uses "smart routing technology" to make sure that each customer order is sent to the correct location while obtaining the absolute best possible execution price.

The Electronic Marketplace

A traditional exchange is not the only means for buyers and sellers to get together. If a transaction does not take place on a trading floor, then those securities are said to be traded over-the-counter (OTC). OTC trades are handled by an electronic communication network which is a series of computer systems and telecommunications equipment. The most well known electronic marketplace is the NASDAQ which stands for National Association of Securities Dealers Quotation System.

Options Exchanges

There are also several derivatives exchanges in the U.S. Many are solely for trading options. They include the Chicago Board Options Exchange (CBOE), the International Securities Exchange (ISE), the Boston Options Exchange (BOX) and the NASDAQ Options Market (OMX). In years past, this list also included the American Stock Exchange (AMEX), the Pacific Stock Exchange (PSE), and the Philadelphia Stock Exchange (PHLX). However, due to the consolidation of exchanges worldwide, these have been absorbed by other marketplaces. The AMEX and the PSE were acquired by the NYSE and are now known as NYSE Amex and NYSE Arca respectively. The PHLX was acquired by the NASDAQ and renamed NASDAQ OMX PHLX.

The CBOE, NYSE Amex, and NYSE Arca are mostly floor- based options markets where buyers and sellers transact business in one of several physical locations. The ISE, BOX, and NASDAQ OMX are electronic marketplaces. The NASDAQ OMX PHLX is a hybrid market system with both a floor based operation and an electronic platform.

The Major Exchanges and Marketplaces - Past and Present


The New York Stock Exchange traces its origins back to 1792, and their corporate constitution with conduct of business rules was created in 1817. As mentioned earlier, it is known as being a traditional floor based exchange. However the NYSE has acquired several electronic based marketplaces in recent years. It remains the premiere place where buyers and sellers come together to transact business in many different kinds of securities. Online traders can invest in listed (exchange based) stocks, OTC stocks, bonds, and derivative products. Derivatives include Exchange Traded Funds (ETFs), options on ETFs, stock options, index options, futures, and futures options,


The American Stock Exchange's history goes back many years to the 1830s. It was first known as the curb market because its brokers traded shares of stock outdoors in the street. In 1975 the AMEX launched its options market. In 1993 shares of SPY, the very first Exchange Traded Fund (ETF), were traded. The AMEX has a long and rich history as being a competitive floor to trade listed stocks, stock options, index options, ETFs, and ETF options in an open-outcry marketplace. In 2008 it was acquired by the NYSE.


The Chicago Board Options Exchange was founded in 1973 as the first U.S. options exchange. It remains one of the largest option exchanges by contract volume. Online options traders can buy or sell stock options, ETF options, and index options on the CBOE.


The International Securities Exchange was founded in 2000 as the first fully electronic U.S. options exchange. Currently, the ISE operates the world's largest equity options exchange. In 2007, the ISE was acquired by Eurex, one of the world's leading derivatives exchanges. The ISE operates as an independent subsidiary under its own management and brand.


The NASDAQ was started in 1971. It is well known for being a marketplace with high-tech, high growth, and volatile stocks. Some of these include GOOG and AAPL. Stocks are not the only products traded here. Stock options, Index options, and ETF options are traded on the The NASDAQ OMX and the NASDAQ OMX PHLX.

Navigating the Stock Market and the Options Exchanges as an Online Trader

Once an online trader decides to place a trade, there are many places where the order could possibly go. To use your time and resources effectively, it is imperative to use an online trading platform like TradeKing's. TradeKing uses smart order routing technology. This technology automatically routes customer orders to the exchange or marketplace that displays the best possible execution price at the moment the trade is submitted by the customer. Smart routing saves clients both time and money by obtaining the best available price.

TradeKing provides access to all of these Stock and Options Exchanges

Online stock market trading is conducted on the above exchanges through an online trading platform such as the one offered by TradeKing. Although TradeKing offers an online trading platform for experienced investors, it also provides resources for learning how to trade online. These features, combined with their smart routing technology, make TradeKing the ideal online broker for beginning investors and experienced traders alike.

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