Financial Advisor

Share Trading – Behind the Scenes

When a person decides to trade shares – in other word, they buy and sell shares – a lot goes on behind the scenes that they may not be aware of. Normally they don’t need to know about it either, but if anything goes wrong its good to have some idea of what’s happening. The ordinary individual cannot buy and sell shares himself, but must hire a broker to do it. Only brokers have access to the stock exchange.

There are two ways in which shares may be traded; on the floor of the stock exchange and electronically. We often see seemingly chaotic scenes of people working on the floor of a stock exchange and wonder how on earth anyone knows what they are doing. What happens is that you let your broker know what you want to buy or sell, his department sends your order to their representative – floor clerk – on the exchange. He contacts one of the firm’s floor traders who finds yet another trader who wants to sell what you want to buy. Or if you want to sell shares, then he finds another trader who wants to buy them.

These two agree on a price and notify the floor clerk who gets in touch with your broker and you finally receive notice of the trade. While the trade may be done in a few minutes, your notification may take a few days to get to you. When it is done electronically the process is much faster and takes fewer people, that’s why it is usually cheaper. But you still need a broker to actually do the trade.

Mel C writes about the Australian Share Trading including unit trust and manged funds.

Share Trading – Behind the Scenes / Author: Mel C