Journey Map

Chapter 02 of 08

Who Runs It?

You don't buy a share from the company that issued it.

The most common misconception

Who am I actually buying from?

When you buy a listed share, you're almost always buying it from another investor who is selling \u2014 not from the company itself. The company already sold its shares once, when it first listed. After that, shares just change hands between investors.

Where it happens

Where do buyers and sellers actually meet?

On an exchange\u2014 in India, mainly the NSE or BSE. An exchange doesn't buy or sell anything itself; it's the marketplace where buy orders and sell orders are matched against each other.

You don't place an order directly on the exchange, though. You place it through a broker \u2014 the app or platform you signed up with \u2014 which is registered to send orders to the exchange on your behalf.

The full path

What happens between tapping “Buy” and owning the share?

Roughly, in order:

  1. You place a buy order with your broker.
  2. Your broker sends it to the exchange.
  3. The exchange looks for a matching sell order \u2014 from another investor.
  4. When a match is found, the trade executes at an agreed price.
  5. The share moves into your Demat account; the seller's moves out of theirs.

Put together

Your broker routes your order to an exchange, where it's matched with another investor's opposite order \u2014 not with the company. The exchange is the marketplace; the broker is your entry point into it; the other investor is who you're actually trading with.

Now you're probably wondering

“Where does my money actually sit while all this happens?”

Explore Chapter 03 — Where Does My Money Go? →