How The Market Works

People are often confused about how prices are actually set, so let’s examine one or two issues in a bit more detail, based on genuine complaints that occasionally arise.

Imagine a situation in which a company comes out with some good news — be it great results, updated forecasts, news of a big contract, or whatever — and a lot of people want to get in quick, before the price rises. As soon as the market doors are open, legions of investors pile in and start asking their brokers for quotes. But the price has already gone up, and people complain that the market makers have cheated by marking the price up before any trading has taken place.

• Market Makers
• SETS and SEAQ
• How Do Share Markets Work?
• Broker Forecasts
• The London Stock Exchange
• Rights Issues and Open Offers
• Share Buybacks
• Share Splits, Bonus Issues and Share Consolidations
• Takeovers and Mergers

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