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A Guide to the Key Players
Every day in the ‘Business’ or ‘Markets’ section of publications like Reuters, Bloomberg, and the Financial Times, there is news about the stock market. If you’re curious enough, you’ll notice that the stories always refer to actions that a certain group of participants did. For example, here is one of the headlines in Reuters’ ‘Markets’ section on September 18, 2025: “Stocks churn as traders assess Fed outlook following rate cut.”
The ‘traders’ are only a section of the many participants in the stock market. Like any other market, the stock market (some call it the equities market) works because of the efforts of its elements. You won’t always spot them in a headline, but they’re working behind the scenes to keep the market efficient, stable, and transparent. Which is why this article introduces you to the key participants and explains how each one contributes to the system.
The Investors
An investor is a person, a group of people, or an organization that buys shares in a company. This buyer has the option to obtain the shares directly from the company during an event called the initial public offering (IPO). But direct purchases are often reserved for a specific category of investors (institutional investors or high-net-worth individuals). That is why most investors will wait for the shares to be listed in the secondary market. We’ve done a deep dive into how the stock market works in a previous article; please read more here.
Investors Drive the Stock Market
This group of participants is the beating heart of the stock market. They give it life, movement, and meaning. How so? You may ask.
Pause for a moment and think about Amazon.com and why it exists. According to Statista, Amazon is the largest e-commerce market in the world by sales volume. Billions of shoppers use the platform every year to buy things they want because the site is reliable.
But what will happen if no one checks into the site to make a purchase? The site will still be there. However, management would soon run out of cash to maintain such an expensive infrastructure because they earn from shopping activity. Sellers too wouldn’t have a reason to list products, delivery trucks wouldn’t roll out, and Amazon’s business model would collapse.
This logic applies to the stock market. Investors are to the stock market what shoppers are to Amazon. They provide the demand that keeps the marketplace alive. They do four things:
- They provide activity: Keeping with the Amazon example, the shoppers click, search, and make purchases. This creates activity on the platform. In the stock market, the buy and sell orders that investors make add to the constant flow of trading activity. That is why in the Reuters headline you saw earlier, the publication calls them ‘traders.’ Their trading activity moves the market.
- They drive price discovery: Hwang and Susmel, in a 2009 paper, defined price discovery as the process through which the market determines the fair value of a security (a security is a tradeable financial instrument; it could be a stock, bond, or derivatives) based on factors like investor sentiment, demand and supply, and available information. Think of how a bestseller on Amazon rises to the top of the recommended list because more shoppers want it. In the stock market, investor decisions determine which companies’ shares rise or fall. Prices adjust not in isolation but in response to the collective buying and selling choices of investors.
- They create meaning: A marketplace only has meaning if people show up to use it. Amazon’s servers, warehouses, and sellers exist to serve shoppers. Similarly, the complex system of exchanges, brokers, and regulators exists because of investors. Investors’ willingness to put money into companies gives life to the stock market.
- They fuel growth: When shoppers spend more on Amazon, sellers thrive, Amazon expands, and the platform itself becomes more popular. The same way the stock market thrives when more investors buy up stocks.
So, when we say investors are the “beating heart” of the stock market, it isn’t just a metaphor. They give it motion through their trades, they give it direction through their choices, and they give it meaning by showing up day after day.
The Facilitators
Investors make orders expecting them to be fulfilled. Most cannot explain what happens behind the scenes. But surely someone (or something) must be pulling strings to ensure your ‘Buy’ order gets fulfilled. These players are what we call ‘facilitators.’
Brokers are the Middlemen
Of all the facilitators, one group interacts directly with investors: the brokers. Stock market brokers are the middlemen that link investors with the stock exchanges. Let’s circle back to the Amazon example to get a better grasp of what these players do.
When you shop on Amazon, you don’t communicate directly with the thousands of sellers scattered across the globe. Instead, Amazon lets you place your order with a few clicks. You don’t have to worry about what happens after clicking the ‘Place Order’ button because Amazon takes care of everything until the package arrives at your doorstep.
Brokers play this role in the stock market. They are the middlemen who connect investors to the stock exchange. They do the heavy lifting to ensure trading activity proceeds smoothly. That is, they provide accessibility, ensure trades are processed efficiently, and maintain a smooth flow of market activity.
And Then There Are Market Makers
Now, suppose you are shopping on Amazon late at night. You click “buy” on a product, but you get an ‘out of stock’ or ‘no seller available’ response. Were this to happen regularly, the platform would be quite unreliable, and Amazon would probably collapse. What keeps the platform reliable is its fulfillment system: a series of warehouses stocked with popular items, ensuring that when you want to buy something, it’s available immediately.
Market makers play this role in the stock market. They are firms or individuals who are ready to buy or sell a stock whenever required. These players work on a simple mechanism: they continuously quote two prices for every stock they cover:
- The “bid” price – what they’re willing to pay to buy the stock from you
- The “ask” price – what they’re willing to sell the stock to you for
The difference between these prices (called the “spread”) is how they make money. So, a market maker might quote the Apple, Inc. stock at:
- Bid: $150.00 (they’ll buy from you at this price)
- Ask: $150.05 (they’ll sell to you at this price)
This 5-cent spread might seem small, but when you’re trading millions of shares across thousands of stocks, it adds up to humongous profits.
Stock Exchanges are the Marketplace
On Amazon, the entire website is the marketplace. In the stock market, exchanges play this role. Exchanges like the New York Stock Exchange and NASDAQ provide a formal and regulated platform where all the buy and sell orders meet. It’s the “place” where the price discovery happens.
Other Facilitators are Invisible
You, the investor, do not interact with all facilitators directly. Some work so far in the background that you may never think they exist, but their presence is what makes trading happen. They include clearinghouses, custodians, data providers, analysts, and rating agencies.
Clearinghouses are like Amazon’s payment processing and security systems. They see to it that the seller receives money for selling a stock. Custodians, on the other hand, hold onto the shares and ensure that they get to the buyer with all details in order.
Data providers collect, organize, and distribute real-time stock prices, company news, and market data that feeds into your broker’s app. This way, you as an investor have sufficient information to make the right investment decisions.
Analysts and rating agencies are the equivalent of Amazon’s product reviewers and rating systems. They research companies, analyze financial performance, and provide recommendations (like “Buy,” “Hold,” or “Sell”). You could say that their works helps investors to refine their trading decisions.
Figure 1: How an investor’s stock order travels through brokers, exchanges, and clearinghouses.
The Overseers
A fair and trusted marketplace must have rules and referees. Amazon, for instance, has a “Trust and Safety” team to oversee activities on its platform. The marketplace is also subject to consumer protection laws. And don’t forget the customer reviews that share experiences with sellers on the platform.
In the stock market, the oversight function can be categorized into four groups:
Primary Regulators
These sit at the top of the overseeing pyramid. In most countries, including the US, the primary stock market regulator is a government agency. The Securities and Exchange Commission (SEC) does it in the US. It sets rules and investigates fraud or illegal trading.
Self-Regulatory Organizations (SROs)
The government can delegate some regulatory powers to SROs. In the US, for example, the SEC lets the Financial Industry Regulatory Authority (FINRA) handle the day-to-day monitoring of their members. FINRA ensures that members follow ethical standards when dealing with clients.
Facilitators with a Dual Role
Some facilitators double up as overseers. Exchanges, for example, enforce strict trading and listing rules. Clearinghouses ensure settlement integrity, and rating agencies assess credit risks. Their ratings are a form of public scrutiny.
Legislators
These are the rule-makers. In the US, Congress writes the overarching laws that the SEC and others enforce. Simply put, legislators are the ultimate authority; they shape market behavior and set the legal framework.
