Welcome to the final piece of the market puzzle - the intermediaries! These are the organizations that make trading possible by connecting buyers and sellers.
Think of intermediaries as the "middlemen" who facilitate transactions and keep markets running smoothly every single day.
Engagement Message
What challenges might arise if buyers and sellers had to find each other directly?
Investment banks are major intermediaries that help companies access primary markets. They guide companies through IPOs, find institutional investors, and set initial stock prices.
Investment banks also provide advisory services for mergers, acquisitions, and other major corporate transactions.
Engagement Message
Why would a company need professional help to go public?
Brokers and dealers are different types of intermediaries. Brokers act as agents - they find buyers for your sell orders and sellers for your buy orders, earning commissions.
Dealers act as principals - they buy securities for their own inventory and sell them to you at slightly higher prices.
Engagement Message
Which type seems more like a "matchmaker" - brokers or dealers?
Stock exchanges like NYSE and NASDAQ are intermediaries that provide the actual trading platforms. They create organized marketplaces where securities can be bought and sold efficiently.
Exchanges set trading rules, ensure fair pricing, and provide the technology infrastructure that makes modern trading possible.
Engagement Message
What might happen to trading efficiency without organized exchanges?
How do intermediaries make money? Brokers earn commissions or spreads on transactions. Dealers profit from the difference between buying and selling prices (the bid-ask spread).
Investment banks earn fees for IPO services and advisory work. Exchanges charge trading and listing fees.
