When I ask a broker to buy stock, what does the broker do?
Here are a couple of articles that can help highlight the differences between a broker and an online investment service, which seems to be part of the question that you're asking. Pay attention to the references at the end of this link. http://finance.zacks.com/online-investing-vs-personal-broker-6720.html Investopedia also highlights some of the costs and benefits of each side, broke and online investment services. http://www.investopedia.com/university/broker/ To directly answer your question, a broker may do anything from using a website to making a phone call to submitting some other form of documentation. It is unlikely that he is talking directly to someone on the trading floor, as the volume traded there is enormous. You or the broker place an order to buy the share with the stock exchange. There has to be a matching sell order by someone.  Once a match is made, you pay the money and get the share. "My answer isn't a full one, but that's because I think the answer depends on, at minimum, the country your broker is in, the type of order you place (limit, market, algo, etc.,) and the size of your order. For example, I can tell from watching live rates on regular lot limit orders I place with my UK-based broker that they hold limit orders internally until they see a crossing rate on the exchange my requested stock is trading on, then they submit a limit order to that exchange.  I only get filled from that one exchange and this happens noticeably after I see my limit price print, and my fills are always better than my limit price. Whereas with my US-based broker, I can see my regular lotsize limit order in the order book (depth of book data) prior to any fills.  I will routinely be notified of a fill before I see the limit price print.  And my fills come from any number of US exchanges (NYSE, ARCA, BATS, etc.) even for the same stock. I should point out that the ""NBBO"" rule in the US, under SEC regulation NMS, probably causes more complications in handling of market and limit orders than you're likely to find in most countries."
"As far as I know, the answer to this is generally ""no.""  The closest thing would be to identify the stock transfer company representing the company that you want to hold and buy through them. (I have held this way, but I don't know if it's available on all stocks.)  This eliminates the broker, but there's still a ""middle man"" in the transfer company. Note this section from the Stock transfer agent Wikipedia article: A public company usually only designates one company to transfer its stock. Stock transfer agents also run annual meetings as inspector of elections, proxy voting, and special meetings of shareholders. They are considered the official keeper of the corporate shareholder records. The decision to have a single transfer company is a practical one, ensuring that there is one entity responsible for recording this data - Hence even if you could buy stock ""directly"" from the company that you want to own, it would likely still get routed through the transfer company for recording." It depends a large part on your broker's relationship with the issuing bank how early you can participate in the IPO round. But the nature of the stock market means the hotter the stock and the closer to the market (away from the issuing bank) you have to buy the higher the price you'll pay. The stock market is a secondary market, meaning the only things for sale are shares already owned by someone. As a result, for a hot stock the individual investor will have to wait for another investor (not the issuing bank) to trade (sell) the stock. There are 2 main types of brokers, full service and online (or discount). Basically the full service can provide you with advice in the form of recommendations on what to buy and sell and when, you call them up when you want to put an order in and the commissions are usually higher. Whilst an online broker usually doesn't provide advice (unless you ask for it at a specified fee), you place your orders online through the brokers website or trading platform and the commissions are usually much lower. The best thing to do when starting off is to go to your country's stock exchange, for example, The ASX in Sydney Australia, and they should have a list of available brokers. Some of the online brokers may have a practice or simulation account you can practice on, and they usually provide good educational material to help you get started. If you went with an online broker and wanted to buy Facebook on the secondary market (that is on the stock exchange after the IPO closes), you would log onto your brokers website or platform and go to the orders section. You would place a new order to buy say 100 Facebook shares at a certain price. You can use a market order, meaning the order will be immediately executed at the current market price and you will own the shares, or a limit price order where you select a price below the current market price and wait for the price to come down and hit your limit price before your order is executed and you get your shares. There are other types of orders available with different brokers which you will learn about when you log onto their website. You also need to be careful that you have the funds available to pay for the share at settlement, which is 3 business days after your order was executed. Some brokers may require you to have the funds deposited into an account which is linked to your trading account with them. To sell your shares you do the same thing, except this time you choose a sell order instead of a buy order. It becomes quite simple once you have done it a couple of times. The best thing is to do some research and get started. Good Luck. "When I have stock at my brokerage account, the title is in street name - the brokerage's name and the quantity I own is on the books of the brokerage (insured by SIPC, etc).  The brokerage loans ""my"" shares to a short seller and is happy to facilitate trades in both directions for commissions (it's a nice trick to get other parties to hold the inventory while you reap income from the churn); by selecting the account I have I don't get to choose to not loan out the shares." 2 things may happen. Either your positions are closed by the broker and the loss or profit is credited to your account. Else it is carried over to the next day and you pay interest on the stocks lent to you. What happens will be decided by the agreement signed between you and your broker. Purchases and sales from the same trade date will both settle on the same settlement date. They don't have to pay for their purchases until later either. Because HFT typically make many offsetting trades -- buying, selling, buying, selling, buying, selling, etc -- when the purchases and sales settle, the amount they pay for their purchases will roughly cancel with the amount they receive for their sales (the difference being their profit or loss). Margin accounts and just having extra cash around can increase their ability to have trades that do not perfectly offset. In practice, the HFT's broker will take a smaller amount of cash (e.g. $1 million) as a deposit of capital, and will then allow the HFT to trade a larger amount of stock value long or short (e.g. $10 million, for 10:1 leverage). That $1 million needs to be enough to cover the net profit/loss when the trades settle, and the broker will monitor this to ensure that deposit will be enough. "During market hours, there are a lot of dealers offering to buy and sell all exchange traded stocks. Dealers don't actually care about the company's fundamentals and they set their prices purely based on order flow. If more people start to buy than sell, the dealer notices his inventory going down and starts upping the price (both his bid and ask). There are also traders who may not be ""dealers"", but are willing to sell if the price goes high enough or buy if the price goes low enough. This keeps the prices humming along smoothly. During normal trading hours, if you buy something and turn around and sell it two minutes later, you'll probably be losing a couple cents per share. Outside normal market hours, the dealers who continue to have a bid and ask listed know that they don't have access to good price information --  there isn't a liquid market of continuous buying and selling for the dealer to set prices he considers safe. So what does he do? He widens the spread. He doesn't know what the market will open tomorrow at and doesn't know if he'll be able to react quickly to news. So instead of bidding $34.48 and offering at $34.52, he'll move that out to $33 and $36. The dealer still makes money sometimes off this because maybe some trader realized that he has options expiring tomorrow, or a short position that he's going to get a margin call on, or some kind of event that pretty much forces him to trade. Or maybe he's just panicking and overreacting to some news. So why not trade after hours? Because there's no liquidity, and trading when there's no liquidity costs you a lot." The traditional role of a stockbroker is to arrange for the buying and selling of stock by finding buyers and sellers at an agreed upon price.  The broker does not purchase the stock for himself but merely arranges for the stock to be traded. A trader is one who purchases stock with the hope of selling it for a gain.  The trader will use a broker to help with the purchase and sale of a stock. It is not your brokerage's responsibility to tell you **what** to buy, whether explicitly, or implicitly through their fee structure.  This is **not** an article about Robin Hood.  It's an argument condemning all active investing with repeated mostly-irrelevant mentions of Robin Hood as one of the hundreds of entities that makes that possible. "Price is decided by what shares are offered at what prices and who blinks first.  The buyer and seller are both trying to find the best offer, for their definition of best, within the constraints then have set on their bid or ask. The seller will sell to the highest bid they can get that they consider acceptable. The buyer will buy from the lowest offer they can get that they consider acceptable. The price -- and whether a sale/purchase happens at all -- depends on what other trades are still available and how long you're willing to wait for one you're happy with, and may be different on one share than another ""at the same time"" if the purchase couldn't be completed with the single best offer and had to buy from multiple offers. This may have been easier to understand in the days of open outcry pit trading, when you could see just how chaotic the process is... but it all boils down to a high-speed version of seeking the best deal in an old-fashioned marketplace where no prices are fixed and every sale requires (or at least offers the opportunity for) negotiation. ""Fred sells it five cents cheaper!"" ""Then why aren't you buying from him?"" ""He's out of stock."" ""Well, when I don't have any, my price is ten cents cheaper."" ""Maybe I won't buy today, or I'll buy elsewhere. ""Maybe I won't sell today. Or maybe someone else will pay my price. Sam looks interested..."" ""Ok, ok. I can offer two cents more."" ""Three. Sam looks really interested."" ""Two and a half, and throw in an apple for Susie."" ""Done."" And the next buyer or seller starts the whole process over again. Open outcry really is just a way of trying to shop around very, very, very fast, and electronic reconciliation speeds it up even more, but it's conceptually the same process -- either seller gets what they're asking, or they adjust and/or the buyer adjusts until they meet, or everyone agrees that there's no agreement and goes home." "I assume that mutual funds are being discussed here. As Bryce says, open-ended funds are bought from the mutual fund company and redeemed from the fund company.  Except in very rare circumstances,  they exist only  as bits in the fund company's computers and not as share certificates (whether paper or electronic) that can be delivered from the selling broker to the buying broker on a stock exchange. Effectively, the fund company is the sole market maker: if you want to buy, ask the fund company at what price it will sell them to you (and it will tell you the answer only after 4 pm that day when a sale at that price is no longer possible unless you committed to buy, say, 100 shares and authorized the fund company to withdraw the correct amount from your bank account or other liquid asset after the price was known).  Ditto if you want to sell: the mutual fund company will tell you what price it will give you only after 4 pm that day and you cannot sell at that price unless you had committed to accept whatever the company was going to give you for your shares (or had said ""Send me $1000 and sell as many shares of mine as are needed to give me proceeds of $1000 cash."")" "Also, in the next sentence, what is buyers commission? Is it referring to the share holder? Or potential share holder? And why does the buyer get commission?  The buyer doesn't get a commission.  The buyer pays a commission.  So normally a buyer would say, ""I want to buy a hundred shares at $20.""  The broker would then charge the buyer a commission.  Assuming 4%, the commission would be  So the total cost to the buyer is $2080 and the seller receives $2000.  The buyer paid a commission of $80 as the buyer's commission.   In the case of an IPO, the seller often pays the commission.  So the buyer might pay $2000 for a hundred shares which have a 7% commission.  The brokering agent (or agents may share) pockets a commission of $140.  Total paid to the seller is $1860.   Some might argue that the buyer pays either way, as the seller receives money in the transaction.  That's a reasonable outlook.  A better way to say this might be that typical trades bill the buyer directly for commission while IPO purchases bill the seller.  In the typical trade, the buyer negotiates the commission with the broker.  In an IPO, the seller does (with the underwriter).   Another issue with an IPO is that there are more parties getting commission than just one.  As a general rule, you still call your broker to purchase the stock.  The broker still expects a commission.  But the IPO underwriter also expects a commission.  So the 7% commission might be split between the IPO underwriter (works for the selling company) and the broker (works for the buyer).   The broker has more work to do than normal.  They have to put in the buyer's purchase request and manage the price negotiation.  In most purchases, you just say something like ""I want to offer $20 a share"" or ""I want to purchase at the market price.""  In an IPO, they may increase the price, asking for $25 a share.  And they may do that multiple times.  Your broker has to come back to you each time and get a new authorization at the higher price.  And you still might not get the number of shares that you requested.   Beyond all this, you may still be better off buying an IPO than waiting until the next day.  Sure, you pay more commission, but you also may be buying at a lower price.  If the IPO price is $20 but the price climbs to $30, you would have been better off paying the IPO price even with the higher commission.  However, if the IPO price is $20 and the price falls to $19.20, you'd be better off buying at $19.20 after the IPO.  Even though in that case, you'd pay the 4% commission on top of the $19.20, so about $19.97.   I think that the overall point of the passage is that the IPO underwriter makes the most money by convincing you to pay as high an IPO price as possible.  And once they do that, they're out of the picture.  Your broker will still be your broker later.  So the IPO underwriter has a lot of incentive to encourage you to participate in the IPO instead of waiting until the next day.  The broker doesn't care much either way.  They want you to buy and sell something.  The IPO or something else.  They don't care much as to what.   The underwriter may overprice the stock, as that maximizes their return.  If they can convince enough people to overpay, they don't care that the stock falls the day after that.  All their marketing effort is to try to achieve that result.  They want you to believe that your $20 purchase will go up to $30 the next day.  But it might not.   These numbers may not be accurate.  Obviously the $20 stock price is made up.  But the 4% and 7% numbers may also be inaccurate.  Modern online brokers are very competitive and may charge a flat fee rather than a percentage.  The book may be giving you older numbers that were correct in 1983 (or whatever year).  The buyer's commission could also be lower than 4%, as the seller also may be charged a commission.  If each pays 2%, that's about 4% total but split between a buyer's commission and a seller's commission." Off the top of my head, a broker: While there are stock exchanges that offer direct market access (DMA), they (nearly) always want a broker as well to back the first two points I made.  In that case the broker merely routes your orders directly to the exchange and acts as a custodian, but of course the details heavily depend on the exchange you're talking about. This might give you some insight: Direct Market Access - London Stock Exchange "The correct answer to this question is:  the person who the short sells the stock to. Here's why this is the case.  Say we have A, who owns the stock and lends it to B, who then sells it short to C. After this the price drops and B buys the stock back from D and returns it to A. The outcome for A is neutral.  Typically stock that is sold short must be held in a margin account; the broker can borrow the shares from A, collect interest from B, and A has no idea this is going on, because the shares are held in a street name (the brokerage's name) and not A. If A decides during this period to sell, the transaction will occur immediately, and the brokerage must shuffle things around so the shares can be delivered.  If this is going to be difficult then the cost for borrowing shares becomes very high. The outcome for B is obviously a profit: they sold high first and bought (back) low afterwards. This leaves either C or D as having lost this money.  Why isn't it D? One way of looking at this is that the profit to B comes from the difference in the price from selling to C and buying from D.  D is sitting on the low end, and thus is not paying out the profit.  D bought low, compared to C and this did not lose any money, so C is the only remaining choice. Another way of looking at it is that C actually ""lost"" all the money when purchasing the stock.  After all, all the money went directly from C to B.  In return, C got some stock with the hope that in the future C could sell it for more than was paid for it.  But C literally gave the money to B, so how could anybody else ""pay"" the loss? Another way of looking at it is that C buys a stock which then decreases in value.  C is thus now sitting on a loss.  The fact that it is currently only a paper loss makes this less obvious; if the stock were to recover to the price C bought at, one might conclude that C did not lose the money to B.  However, in this same scenario, D also makes money that C could have made had C bought at D's price, proving that C really did lose the money to B. The final way of seeing that the answer is C is to consider what happens when somebody sells a stock which they already hold but the price goes up; who did they lose out on the gain to?  The person again is; who bought their stock.  The person would buys the stock is always the person who the gain goes to when the price appreciates, or the loss comes out of if the price falls." underwriters aren't subject to lock-up.  They actually don't hold anything.  They oversell at IPO, with their short position covered by the green shoe (an option from the company).  If the deal does well, the underwriters exercise the green shoe to cover their short.  If the deal runs into some pressure, they step in to support the price by buying back shares... thereby covering their short.  So they are doing price support in the early days of a deal, but it is almost always paid for by the company granting them an option.  But the underwriters aren't taking stock.  Correct that typically all insiders and existing investors are expected to sign-up a lock-up.