What happens when I give my broker a buy or sell order?

What happens when I give my broker a buy or sell order?

In the very traditional sense of trading and security, you're going to call up your broker and you're going to say sell 100 shares of XYZ at market. That means the broker is just going to go and put those shares out for sale. So, they'll write a trade order and that trade order gets sent down to the floor of the New York Stock Exchange (for example). There's the market maker down there, who says, "Oh, here's 100 shares of XYZ someone wants to sell. Do I have any buyers out there? Oh, I do. I'll buy it in at $10 and I'll turn around and sell it for $10.50." Then, it goes out the other side to a buyer of the security. The reality of it is that most trades happen within the brokerage firm themselves. They never, necessarily, hit the floor of the market. Merrill Lynch is huge; there are gigantic brokerage firms. So, one broker in New York might be suggesting we sell XYZ and the broker in LA is saying let's buy XYZ., and they could be trading within their own book, within their own company's book and matching things up, at which point they'll charge commissions to clients on both sides and become their own market maker.