The Stock Market Bureaucracy

Abstract

As mentioned, the stock market is not as free as some imagine it to be (Adam Smith, 1776). In order to operate, it requires a significant bureaucracy composed of market systems—a trading floor and/or complicated computer trading systems, stock brokers, analysts, investment bankers, and regulative overseers such as the SEC (Security and Exchange Commission). This is a massive support system that every stock exchange requires to support shareholders’ buying and selling of parts of firms in the form of shares. First, this chapter will describe the roles that shareholders and most of the major players in the financial bureaucracy play including investment bankers, stock brokers and mutual fund managers, analysts and the press, banks, credit rating agencies, and insurance companies. Then, the chapter will summarize with a description and analysis of the financial bureaucracy and shareholders’ relationships to the large American corporation as per Figure 3.1 in Chapter 3 describing the overall building block model of the firm.