Now let's imagine that Customer A sends in a new sell order. Customer 3 is happy because he got the price he wanted, and Customer A is happy because he got a small discount. The matching engine is doing this kind of thing across thousands of listed stocks, and millions of matches are handled by the matching engine every day. Once the match is made, information about the completed transaction flows out of the matching engine and goes back to the broker dealers of the buyer and seller. Information also flows to the quote servers so that anyone who's interested can see what happened.
This is a highly simplified explanation, of course, In reality, because of the number of people trading, the system takes thousands of computers and brokers to implement, and the process gets very complicated very quickly. Sign up for our Newsletter! Mobile Newsletter banner close. Mobile Newsletter chat close. Mobile Newsletter chat dots.
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Location, Location, Location. Dealer vs. Auction Market. The exchange itself is a dealers' market, so brokers buy and sell stocks through a market maker rather than from each other directly. A market maker handles a specific stock and holds a certain amount of stock in his or her books.
When a broker wants to purchase shares, he or she does it directly from the market maker. Now, trading on the NASDAQ occurs using automated trading systems, which offer full financial reports on trades and on daily trading volumes.
Automated trading also offers automatic execution of trades based on parameters set by the trader. This low fee enables the trading of many new, high growth, and volatile stocks.
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