Začínáme s investováním
How a Stock Exchange Works and What Happens When You Buy a Share
Key takeaways
- An exchange is a marketplace where supply and demand for securities meet.
- The price of a share is determined by the balance between what people want to sell for and what they want to pay.
- You do not have direct access to the exchange — you trade through a broker who forwards your order.
- A market order buys immediately at the current price; a limit order only at the price you specify or better.
- After a purchase, settlement takes place and the share is credited to your account.
A stock exchange is an organised marketplace where the supply and demand for securities meet and where prices are formed from them. When you buy a share, no magic happens — two people are simply matched on that marketplace: one who wants to sell, and you who want to buy. Let us go through it step by step.
What an exchange is and why it exists
An exchange brings buyers and sellers together and ensures that trades take place fairly and reliably. Companies raise capital through it (they issue shares and sell stakes to investors) and investors can buy or sell their stakes at any time. Without an exchange, shares would be hard to trade — the exchange provides liquidity, meaning the ability to buy and sell quickly.
How a share price is formed
No one sets the price "from above" — it arises from the balance of supply and demand. In the order book there are orders: someone is willing to sell at 100, another to buy at 99. When supply and demand meet at the same price, the trade executes and that price becomes the "last price". It changes every second depending on what participants think the share is worth.
Why you need a broker
As an individual you do not have direct access to the exchange — you need an intermediary, a broker. The broker forwards your order to the exchange, handles settlement, and maintains your securities account. For this it charges a fee. From your perspective it looks like a few clicks in an app, but the whole chain is running in the background.
Market vs. limit order
When you place a buy, you choose the type of order — and this matters:
- Market order — buys immediately at the current best available price. Fast, but you do not know exactly what you will pay (with less liquid securities you may be surprised).
- Limit order — buys only at your specified price or better. You control the price, but the order may not be filled if the market never reaches your price.
For a calm ETF purchase, a limit order is usually recommended — it protects you from an unexpected price spike.
What happens after the purchase
Once the trade is matched, settlement takes place — the exchange of money for securities — and the share (or ETF unit) is credited to your account. From that moment you are a co-owner and the value of your position moves with the market. The purchase itself takes seconds; the part that determines the outcome happens over years of holding. The growth projection shows how your position might grow.
FAQ
What happens when I click to buy a share?
The broker sends your order to the exchange, where it is matched with someone selling. Settlement takes place (exchange of money for the security) and the share is credited to your account. From your perspective it is a few clicks; the whole chain runs in the background.
Who sets the price of a share?
No single person — it arises from the balance of supply and demand in the order book. When the price at which someone wants to sell meets the price at which someone wants to buy, the trade executes and becomes the last price. That is why it changes every second.
Should I use a market or a limit order?
For a calm ETF purchase, a limit order is usually recommended — you buy only at your price or better and you are in control. A market order buys immediately but with less liquid securities you may not know the exact price in advance.
Why can I not trade on the exchange directly?
Only licensed members have access to the exchange. As an individual you therefore trade through a broker, who forwards your orders, handles settlement, and maintains your securities account. The broker charges a fee for this service.