Thanks to the introduction of technology, trading shares, which was once facilitated by brokers running all over the place at the ‘trading floor’ of the stock exchange, most transactions are facilitated electronically.
Participants in the stock market range from individuals, known as retail investors, to big institutional investors, such as fund managers, insurance companies, banks and pension funds.
Odds are that if you don’t have any shares but are currently employed in Australia – even if you are employed part-time as a student – you will have a superannuation account. That account is effectively a managed fund, and the way a managed fund works is that all your money is pooled with other peoples and the fund manager buys & sells shares, bonds, currencies, property, invests in other funds all to increase the value of the fund, and your super. Apart from property, most of those transactions are facilitated on share markets – such as the ASX.
Similar to most markets, when an investor (or buyer) finds a share that they would like to purchase, they select a three-letter code – such as VRL for Village Roadshow Limited or ANZ for ANZ Bank – enter the number of shares they want and the price they wish to pay, then place the order.
The trading platforms allow for buyers to either select the price as ‘market price’ in which case the share is simply purchased at the ‘going rate’. Alternatively, the share trading platforms allow you to stipulate a price you are willing to pay per share and waits until that price comes available before activating the trade.
Once the order is placed, and buyers and sellers are matched, the shares are purchased utilising the CHESS system, and money changes hands, while shares are transferred from the sellers account to the buyers’ account.
It is important to note that the amount of shares you want doesn’t need to perfectly match up with an amount another person (buyer) is looking to buy. If you want more or less, the trading systems allow for packages of shares to be split up and disseminated as required between one or multiple buyers in the market.