• The Stock Markets

How do people buy and sell the stock the stock get traded?

• Home -> The Stock Markets -> Understanding the Stock Markets
• Mar 29 2024

Table of Contents : Middlemen in the Market    1. Public Limited company(PLC)    2. How does the stock market operate?    3. What makes the stock price move?    4. How do people buy and sell the stock the stock get traded?    5. What occurs once one acquires stock?    6. How to calculate returns?    7. Where do you fit in the market?

the stock trading process involves a series of steps that facilitate the buying and selling of shares in publicly traded companies. Investors rely on brokerage firms, stock exchanges, and regulatory authorities to ensure fair and orderly markets.

Stock trading involves the buying and selling of shares of publicly traded companies. Here's an overview of how the process typically works:

Order Placement:

Investors place orders to buy or sell shares through brokerage firms. Orders can be placed through various channels, including online trading platforms, mobile apps, or by calling a broker.

Order Types:

Investors can choose from different types of orders, including market orders, limit orders, stop orders, and others. Each order type has specific instructions for executing the trade.

Routing:

Once an order is placed, it is routed to the stock market for execution. Stock orders are typically routed through electronic trading systems to ensure fast and efficient execution.

Matching Buyers and Sellers:

In the stock market, buy orders are matched with sell orders based on price and time priority. This process is facilitated by stock exchanges or alternative trading systems.

Execution:

When a buy order is matched with a sell order at a mutually agreed-upon price, the trade is executed. This typically happens instantaneously for liquid stocks traded on major exchanges. However, for less liquid stocks or during times of high market volatility, execution may take longer.

Confirmation:

After a trade is executed, the brokerage firm sends a trade confirmation to the investor. The confirmation includes details such as the number of shares traded, the price, the total cost or proceeds, and the trade date.

Settlement:

The settlement process involves the transfer of shares and funds between the buyer and seller. In most markets, including the U.S., stock trades settle on a T+2 basis, meaning the transaction is settled two business days after the trade date. During this time, the brokerage firms involved in the trade reconcile the transaction and ensure that shares and funds are properly transferred.

Record-Keeping:

Brokerage firms maintain records of all trades executed by their clients. Investors can access their trade history, account statements, and other relevant information through their brokerage accounts.

Market Surveillance:

Stock exchanges and regulatory authorities monitor trading activity to detect any irregularities or potential market manipulation. Market surveillance systems use advanced algorithms and data analysis techniques to identify suspicious trading patterns and enforce securities regulations.

The shares will be electronically credited to your DEMAT account following the execution of the transaction. Similarly, the shares will be debited from the DEMAT account of the seller via electronic means.