The Stock Trade

In an example of a trade, an investor wanting to buy 200 shares of IBM stock will telephone or e-mail the order to a brokerage firm. This communication is normally made to an individual called a stockbroker. The investor might want to buy the shares at the market, or current, price. On the other hand, the investor may choose to pay no more than a set amount per share. The brokerage firm then contacts one of its floor brokers at the NYSE, the exchange on which IBM stock is traded. The floor broker then goes to IBM‘s stock post—that is, the particular spot on the trading floor where IBM stock is traded. Here other floor brokers will be buying and selling the same stock. The activity around the post is an auction market with transactions typically communicated through hand signals.