I understand but I don’t. When I “sell” stocks, who am I selling to exactly? The people who are buying in that exact moment? The exchange institution? Same when I’m “buying”.
In: Economics
Your broker is “noting”, that you have bought a certain stock, when you buy it, thats all, same when you sell it. At the end of the day, there is balancing going on between brokers. The shares are somewhere else completely, so its just an accounting issue. A broker has actually bought much less shares, than his customers, because statistically, customer make bad decisions in general, so its better to take a risk and not buy all the shares, that customers bought. The risk managment is very important, but many brokers go out of bussiness, because they play risky games. This is actually a very complicated topic, because only recently settlement time changed to 1 day instead of 2. It actually doesnt really matter, because the broker doesnt buy shares on the open market. The market maker does(bigger financial institution supplying your broker with shares) market maker can extend settlement for much longer, years sometimes in hopes, that they will never have to buy it, since the customers will sell at a loss. This is not even 5% of an actual answer to your question. Its important to keep it complicated, so people like u and me will not bother trying to understanding how it works.
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