What actually happens when I press buy?Start here

A route, a match, a confirmation, and two days of paperwork you never see. Each step has a cost, and one of them is not on the contract note.

It feels instant and it is not. Between the tap and actually owning the share there are four steps, and knowing them explains most of what looks strange on a statement.

Where does my order go first?

To your broker, who decides where to send it. There is usually more than one venue trading the same share — the main exchange plus several alternatives — and the broker routes to one of them, or to a firm that will trade against you directly.

Some brokers are paid by the firm they route to. That does not automatically make the price worse, and it is exactly why the rules require brokers to publish where orders go and to show they sought the best result. It is worth reading once for whichever broker you use.

How does it get matched?

At the venue there is an order book: everyone willing to buy, listed by price, and everyone willing to sell, listed by price. The highest bid and the lowest offer sit facing each other with a gap between them — the spread.

If you sent a market order, you take the best price available right now and it fills immediately. If you sent a limit order, you name your price and wait; you might get a better price, or you might not trade at all. That trade-off is the subject of market vs limit orders, and it is the one order-entry decision that regularly matters.

What did the trade cost me?

Two things, and only one of them appears on the confirmation.

The commission is printed. It may be zero.

The spread is not printed, and it is real. If the market is 99.90 bid and 100.10 offered, you bought at 100.10 and could immediately sell at 99.90. That 0.20 is a cost you paid the moment you traded. On a liquid share it is tiny. On a small company, an obscure bond or an exotic fund it can dwarf any commission you were charged.

A "zero commission" broker has not made trading free. It has moved the cost somewhere you do not see it. Market microstructure is where this is taken apart.

Why do I own it only two days later?

Because the trade and the transfer are separate events. You agreed the deal today; the share and the money actually change hands a day or two later, when the settlement system does its work. Most markets now settle one business day after the trade, some still two.

Between those moments each side is relying on the other to turn up. That is what clearing houses exist to remove, by standing in the middle and guaranteeing both sides. Clearing and settlement is the unglamorous machinery that makes the whole thing safe, and it is the part that broke in 2008.

Whose name is the share in?

Usually not yours, directly. Most brokers hold client shares in a pooled account in the broker's name, with their own records showing which portion is yours. It is called nominee holding and it is normal.

It works, provided the records are right — which is why what happens if your broker fails is worth reading once. In some countries you can instead hold shares registered in your own name, which is safer and less convenient.

What is worth doing differently?

• Use a limit order for anything that is not heavily traded.
• Look at the spread before trading something unfamiliar. It is the real price of entry and exit.
• Avoid the first and last minutes of the trading day, when spreads are widest.
• Check the confirmation against what you expected. That is the only moment a mistake is cheap to fix.