Re:How the Stock Market Works
by gchokov on Monday August 05, 2019 @01:18AM
(#20611475)
You are partially right. What you miss is that there are the so called market makers - exchanges that ensure liquidity. They buy from you and sell to you while managing order books. These are simply trades records that have a key role in determining the price pressures for it go up or down.
[ Parent
| on HN ]
> exchanges that ensure liquidity
"market participants" which provide liquidity on an exchange.
The exchange itself has a goal to ensure liquidity. Do you really think all your orders are instant because there's somebody on the other side to buy it? I mean, yeah, right - for the very common stocks this is the case, but what about those low liquidity stocks that are still being executed instantly?
The exchange can't trade on their own platform, it would be a massive conflict of interest. The liquidity is typically provided by market makers, who are given incentives to do so. They also get to capture the spread, which is itself fairly valuable. You don't need a conspiracy theory to explain it.