How shares are traded

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6. Placing buy/sell orders by telephone

Suppose you want to buy 1,000 shares in a middle-sized company called Midco:

1. You phone the broker and give your name, account number and security details. You ask what the current market price is for Midco.
2. The broker looks at the strip price on his screen and says 'Bid 105p - Offer 110p'. This means the market maker for Midco will buy your shares at 105p and sell your shares at 110p. The difference is known as the 'spread' and is the market maker's profit.
3. If you don't want to pay 110p, just tell your broker that and ring off.
4. If you are happy to pay 110p you have two choices. Either place the order 'at best' which means the broker will attempt to fill the order at 110p but may end up filling it slightly higher, or, for certainty, place a 'limit' order at 110p which means you will pay no more than that amount.
5. Once you have rung off, you cannot change your mind.
6. The broker then has to effect 'timely execution'. He will ring one of the market makers and execute the order as quickly as possible.
7. If the broker concludes the deal with the market maker, each enters the details into the Stock Exchange Automated Quotation (SEAQ) system on their computer.
8. At that point you own the shares. You can sell them again, even though you haven't received the contract note from your broker.

1. The role of brokers 2. What type of broker do you want? 3. Choosing a discretionary or advisory broker 4. Choosing an execution-only broker 5. Opening an account with a broker 6. Placing buy/sell orders by telephone 7. Placing buy/sell orders online 8. Normal market size 9. The spread 10. Contract notes 11. Settlement 12. Conclusion

• First Steps in Shares