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We can look up the price of a stock, like that of Google, and it gives a particular figure. I would like to know how the price signal is "centralized". What I mean is: if the trades happen between individuals holding the stocks, then how is the overall trading price arrived at? Surely, the individuals who are on the buy side and the sell side would have to "register" the sale with the SEC or something? That's the way it happens with other tangible items, like houses and cars, etc.

The stock price on the market acts as a global signal, which efficiently moves financial capital around. Without it, we would be left to our best guesses, which might take too long to converge on a single number, if it ever did at all.

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  • $\begingroup$ There’s very little stopping people from exchanging shares at different prices. However, any stock price quote should indicate the source, which is typically based on stock exchanges. Stock exchanges have rules that determine how orders (which have prices attached) are executed. I think you need to look up some primers on stock exchanges. $\endgroup$ – Brian Romanchuk Nov 8 '18 at 19:41
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Think of the stock certificate as a physical object being traded around. It may be traded on more than one market. The centralisation you speak of depends on the source for the quote. The quote, generally (some exceptions), is a last trade price (a delayed last trade price). It is not global. I have trading software that allows me to see quotes with less delays, I can choose to see it only on certain markets or last trade from any market. I see different signals than you do.
The most direct answer to the question in the title is "they're not". There is no central, global signal. What you are likely referring to is just the (delayed) last trade price of the security on the markets that the quote service pulls from.

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If you want to buy a share of Google, then you have to find someone who's willing to sell a share. You could try to find such a person on your own, but it's a lot easier to go to an organization that specializes in matching people who want to buy with people who want to sell. Such organizations are called "stock exchanges". How they work is you tell them how much you're willing to pay, and someone else says how much they're asking for, and if what you're willing to pay is at least as much as how much the seller is asking for, then the exchange matches you up. So the exchange keeps track of how much people are willing to pay (known as the "bid" price), and how much people are asking for (the "ask" price). When you look up "the" price of a stock, that's a summary of this information (I have "the" in quotes because there is no one "true" price of a stock; at minimum there are the bid and ask).

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