Who Are the Main Players in the Stock Market? A Simple Explanation of Key Roles
When entering the world of the stock market, it's essential to understand the different roles involved in buying and selling. Here's an overview of the most important figures you might come across:
Trader
A trader is someone who buys and sells financial assets in the short term, aiming to make a profit from price fluctuations. They use online trading platforms to place orders and constantly monitor charts, news, and indicators. This is a fast-paced, hands-on role—many find it one of the most exciting careers in finance.
Investor
Unlike traders, investors focus on the long term. They buy stocks, bonds, or other assets and hold them for months or even years. The goal is to grow their wealth steadily, often through dividends or long-term value appreciation. Investors can range from everyday savers to large-scale players managing millions.
Financial Broker (or Stockbroker / Advisor)
A broker is a licensed middleman who connects clients with financial markets. They may work for banks, investment firms, or independently. Brokers earn primarily through commissions—small fees charged each time a client buys or sells something. Fees vary depending on the broker, the platform, and the size of the trade.
Some brokers offer low commission rates but require higher account minimums. This helps them attract serious and active clients. Keep in mind that commissions are usually collected by the broker’s firm, and the broker only receives a portion.
Who Are the Floor Broker and the Specialist, and What Do They Do?
With the transition from physical trading floors to electronic markets, some traditional roles in the stock exchange have been gradually disappearing. Among them are:
Floor Broker / Trading Agent
In the past, the floor broker was a professional physically present at the stock exchange. Their job was to negotiate securities on behalf of clients, searching for the best available counterpart to buy or sell a specific financial instrument.
This activity took place on-site, in what was called the "trading pit"—a designated area where trades were executed. The floor broker received orders from financial brokers and carried them out by trying to secure the best possible price. They played a crucial role in ensuring that transactions were completed quickly and fairly.
However, with the rise of digital platforms, the distinction between online brokers and physical floor brokers has disappeared, as everything is now handled through electronic systems.
Specialist
The specialist was a professional responsible for managing the flow of buy and sell orders. Their main task was to match supply and demand, making sure that buy (bid) and sell (ask) orders were aligned in the most efficient way.
In practice, they recorded the orders in the order book and worked to match the best available offers, facilitating smooth and timely transactions. Every trading area once had its own specialist, and the entire system of buying and selling often revolved around them.
Today, however, this role is also being phased out, replaced by algorithms and electronic platforms that automatically match orders in real time, doing so faster and more precisely than humans ever could.
Market Makers and Institutional Investors – Who They Are and What They Do
Market Makers
The term Market Maker refers to financial players who have the economic power to directly influence the price movement of a security on the market. These are typically powerful operators such as investment banks, hedge funds, or large-scale investors with enormous capital reserves.
The name “market maker” is literal—they "make" the market because their trading volume is so large that it can significantly affect the price of a stock or any financial asset. By acting strategically, they can generate profit from even small price differences across markets—a practice known as arbitrage.
For example, if they decide to buy a stock in massive quantities, the price may rise due to increased demand. On the other hand, if they start selling heavily, the price could fall. That’s why they’re often informally referred to as the "strong hands" in the market.
Institutional Investors
Institutional investors are large financial entities that operate in the markets with the goal of managing substantial sums of money—either for themselves or on behalf of clients. This category includes:
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Banks
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Investment firms (also known as SIMs in some countries)
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Pension funds
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Insurance companies
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Holding companies and large corporate groups
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National and international public institutions
Unlike individual retail investors, institutional investors often acquire significant stakes in companies, holding large portions of their capital. In recent years, insurance and reinsurance companies have also taken on an increasingly active role in the markets, offering structured financial products as a form of investment to their clients.
Who Are Insiders, Delayers, and Accumulators ?
Insiders
In financial markets, insiders are individuals who seek access to strategic or confidential information about companies or market movements—always staying within legal boundaries. Their goal is to get ahead of the market by acting on information before it becomes public.
These pieces of information, often called catalysts, allow them to make well-timed and profitable investments. Insiders are usually the first to enter a new trend and the first to exit, securing profits before the public becomes aware. Once a news story reaches the masses, it's usually too late—the big money has already been made.
Delayers
A type of insider, delayers are traders who anticipate price movements in advance. They buy undervalued assets before a noticeable upward trend begins, based on their early knowledge, and sell them later at a higher price once the market catches up.
Accumulators
Accumulators, sometimes referred to as the "sharks" of the market, are aggressive market players. They look for companies that have high potential but whose stock prices are significantly undervalued compared to the company’s real worth (its net assets after debts).
Their strategy is to gradually acquire a majority of shares at low prices, gaining control of the company. Once in control, they may call for the liquidation of the company’s assets, allowing them to collect a large portion of its value.
Although this tactic is often legal, it is seen as ethically questionable because it can destroy healthy businesses, cause job losses, and end the careers of many people who helped build the company.
Risks for Companies and the Differences Between the US and European Markets
One of the main risks a company faces when listed on highly capitalized markets—such as the U.S. stock market—is the possibility of losing control of the company. In very liquid and open markets, it’s easier for an investor to quietly accumulate a large number of shares and eventually take over the company without immediately revealing their intentions.
To avoid this scenario, many European companies—especially in Italy—tend to list less than 50% of their total shares on the market during an IPO. This strategy ensures that the founders or major shareholders retain control, making it very difficult for outsiders to gain a majority stake.
This results in companies with restricted or closed ownership, where the decision-making power stays in the hands of the founding families or internal management. This structure tends to support long-term stability and ensures that those managing the company are directly involved in its survival and growth. However, it also often reflects a mindset focused more on protecting internal interests than on maximizing market efficiency.
The Downside: Lower Market Liquidity
The downside of this model is a lower market capitalization and liquidity. When only a small portion of shares is available for public trading, investors have fewer opportunities to buy or sell, and the market becomes less dynamic.
In contrast, the American model, based on public companies with open and widespread ownership, allows for a much higher number of shares to circulate freely. These companies often prioritize growing the long-term value of the business rather than short-term profits. This approach aims to satisfy shareholders, increase transparency, and foster a more liquid and competitive market.
Open vs Closed Markets
Markets like the U.S. are built on a high differentiation of supply and demand, with many independent participants. Closed markets, however, often see the dominance of a few powerful players, leading to situations like:
More Liquidity = More Risk
In this context, one equation is particularly relevant:
More liquidity = more risk
Highly liquid markets are more exposed to takeover attempts or manipulation by large players. That’s why many countries are working on new anti-takeover laws, designed to prevent “stealth accumulation” of shares by entities looking to gain control without a transparent process.
The Securities and Exchange Regulatory Commission – What It Is and Why It Exists
In every regulated and official financial market—whether national or international—there’s a governmental authority responsible for overseeing market activities and ensuring transparency in stock exchange operations. These institutions go by different names depending on the country: in Italy, it’s called CONSOB (Commissione Nazionale per le Società e la Borsa), while in the United States, it's known as the SEC (Securities and Exchange Commission).
Today, these commissions are considered independent administrative authorities with legal standing, even though their top-level executives are often appointed by government leaders.
Why This Authority Was Created
The main goal of these institutions is to protect investors, especially individual and retail investors, from fraud, market manipulation, or unethical practices. For example, in the U.S. before the 1929 market crash, many fake, misleading, and worthless investments were sold to the public. Lies and disinformation were common. This chaos highlighted the urgent need for a national regulatory body to act as a guarantor of fair market behavior.
What the Commission Actually Does
These commissions are responsible for:
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Enforcing trading and market rules;
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Preventing and punishing the use of insider information for illegal gain;
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Banning the spread of false or misleading news (also called “market manipulation” or "pump-and-dump" schemes);
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Fighting corporate espionage, sometimes even engaging in counter-espionage operations.
In short, this institution is like a market filter—without it, financial markets would be chaotic and vulnerable to exploitation.
Auditing and the Role of External Audit Firms
In addition to regulatory oversight, every company listed on an official stock exchange is legally required to have its financial statements audited regularly by certified external auditing firms. This system is meant to increase trust in the company’s financial health.
However, even this system isn’t foolproof. One of the most infamous examples is Parmalat, a case where external auditors failed to detect one of Europe’s largest accounting frauds. In fact, auditing firms themselves can become involved in corruption or false certifications. Still, when a firm is caught certifying fake accounts, it usually loses all credibility and is forced out of business due to a total loss of trust from investors.
To avoid long-term collusion, the law often requires a rotation system, meaning that companies cannot be audited by the same firm indefinitely—auditors are rotated periodically to ensure more objective and independent assessments.
All the Other Market Regulatory Bodies
Besides the main Securities and Exchange Commission (SEC) in the U.S. and similar authorities in other countries, there are several other key institutions responsible for ensuring the proper functioning of financial markets.
1. SEC and CFTC in the United States
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The SEC (Securities and Exchange Commission) oversees the stock markets, ensuring transparency and fairness.
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The CFTC (Commodity Futures Trading Commission) regulates the commodities markets, where futures and options on products like oil, wheat, and gold are traded.
Both agencies are government institutions, but they enjoy a high degree of legal, administrative, and operational independence, and are considered semi-privatized regulatory bodies.
2. The Clearing Corporation (OCC)
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In the U.S., it's called the OCC (Options Clearing Corporation).
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In Italy, it’s known as the Cassa di Compensazione e Garanzia.
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This entity acts as a guarantor of financial transactions, especially in derivatives markets.
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It ensures that each side of a trade fulfills its obligations, helping to maintain trust and order in the system.
3. The Stock Exchange Council
Both the Clearing House and the Exchange Council are privately operated institutions, but they function under the supervision of public regulators (like the SEC) and differ by market and country.
