Stage 1 of 10
You press Buy
The app, during market hours
You open the app, type AAPL, choose 10 shares and a market order, and press Buy. A market order says: buy now, at whatever the best price is. The app shows a quote of about $250.00 to buy-side and $250.01 to sell-side, so roughly $2,500.10 in all.
What’s going on
- You choose the stock, the number of shares and the order type.
- A market order is filled straight away, but the price is not guaranteed: it is whatever the best available price is at that moment.
- A limit order would set a maximum price, and might not fill at all.
- The prices here are illustrative: the story is the same at any price.
Why it works this way
A market order trades certainty of filling for certainty of price. For a very liquid stock like Apple, the gap between the 2 is usually a cent or less.
In everyday terms
Like saying “I’ll take it” at the market stall, without haggling.
- Order
- Buy 10 AAPL, market, good for the day
- Quote
- $250.00 bid, $250.01 ask Estimate
- Commission
- None on most US apps
Sources: Investor.gov, types of orders, Robinhood, market orders
Stage 2 of 10
Your broker checks it
Your broker’s systems
The order reaches your broker in a fraction of a second. Before sending it anywhere, the broker checks that you can pay, that the market is open and that the stock is trading normally.
What’s going on
- Your phone sends the order to the broker over the internet.
- The broker checks you have enough cash or buying power: about $2,500.10 plus a margin for the price moving.
- It checks the market is open and AAPL is not halted.
- It gives the order an ID, which will follow it to the end.
Why it works this way
The broker is responsible to the rest of the market for every trade it sends. If you cannot pay, it must.
In everyday terms
Like a shop checking your card works before ringing up the sale.
- Checks
- Buying power, market hours, trading halts
- Hours
- 9:30 a.m. to 4 p.m. New York time
- Closed?
- A market order waits for the next open
Stage 3 of 10
Where the order goes
The broker’s order router
Most retail market orders in the US do not go to an exchange. The broker sends them to a wholesaler, a firm such as Citadel Securities, Virtu, Jane Street or Hudson River Trading, which fills them itself and pays the broker for the business. This is payment for order flow.
What’s going on
- The broker’s router looks at the order: market, 10 shares, a very liquid stock.
- It sends it to a wholesaler, usually one of a handful of large trading firms.
- The wholesaler pays the broker a small amount per share for the order.
- A different broker, or a different order, might go straight to an exchange instead.
Why it works this way
Small retail orders are, on average, safe for a market maker to fill: they rarely know something the market does not. Wholesalers compete for them, and some of that value goes to the broker, which is how apps can charge no commission. In 2022 the SEC proposed forcing these orders into auctions; it withdrew the proposal in June 2025.
In everyday terms
Like a supermarket paying a supplier for shelf space, the other way round.
- Wholesalers
- Robinhood’s S&P 500 market orders, Q2 2026: Virtu 34%, Citadel 21%, Jane Street 14%, G1 14%, Hudson River 12%
- Payment
- About 1 to 2 cents a share to the broker Check
- Disclosed
- Every quarter, in each broker’s Rule 606 report
Sources: Robinhood Securities, Rule 606 and 607 disclosure, SEC, Order Competition Rule (proposed 2022, withdrawn 2025)
Stage 4 of 10
The national best price
The exchanges and the tape
There are more than a dozen US exchanges, each with its own buyers and sellers for Apple. The consolidated tape combines their best prices into 1 national best bid and offer. Right now that is $250.00 to buy and $250.01 to sell. Your wholesaler must do at least as well as the best offer.
What’s going on
- Every exchange publishes the prices people are bidding and offering on it.
- The securities information processor, the tape, collects them all.
- It publishes the highest bid and the lowest offer in the country: the NBBO.
- A buyer should never pay more than the best offer, here $250.01.
Why it works this way
With the market split across many venues, the NBBO is the yardstick that stops anyone being filled at a worse price than was available elsewhere.
In everyday terms
Like a price-comparison site that shows the cheapest shop in the country.
- Best offer
- $250.01, the cheapest anyone will sell Estimate
- Best bid
- $250.00, the most anyone will pay Estimate
- Rules
- Best execution, FINRA Rule 5310; no trade-throughs, Rule 611
Sources: FINRA Rule 5310, best execution, 17 CFR 242.611, order protection rule
Stage 5 of 10
The order book and the spread
On every exchange
Each exchange keeps an order book: offers to sell stacked from the cheapest up, bids to buy from the highest down. The gap between them is the spread, here 1 cent. A market order to buy takes the cheapest offer, so you pay the top of the spread, unless someone gives you a better price.
What’s going on
- Sellers post the lowest price they will take: the offers, or asks.
- Buyers post the highest price they will pay: the bids.
- When a new order crosses the gap, it trades at the waiting price.
- A market buy for 10 shares would take 10 of the shares offered at $250.01.
Why it works this way
The spread is the price of trading immediately. People who post bids and offers and wait earn it; people who want to trade now pay it.
In everyday terms
Like the buy and sell rates at a currency exchange desk.
- Spread
- 1 cent, about 0.004% of the price Calculated
- Market buy
- Would pay $250.01 on an exchange
- Tick size
- 1 cent for now; a half-cent tick for some stocks is due in November 2027
Sources: Robinhood, market orders
Stage 6 of 10
Filled
The wholesaler, about 50 milliseconds after routing
The wholesaler sells you the 10 shares from its own inventory at $250.008: a fifth of a cent below the best offer. That small saving is price improvement. The confirmation flies back to your broker and your phone.
What’s going on
- The wholesaler checks the national best offer: $250.01.
- It sells you the shares itself, at a slightly better price, and buys or sells elsewhere later to even out its position.
- It sends an execution report back: 10 shares, at what price, at what time.
- Your app shows the order as filled. You are now committed to the trade.
Why it works this way
The wholesaler earns a little from the spread on millions of small orders, and gives part of it back as price improvement, because brokers route to the wholesalers that give the most.
In everyday terms
Like a shopkeeper selling you something at just under the sticker price to keep your custom.
- Fill
- 10 shares at $250.008 Estimate
- Cost
- $2,500.08 Calculated
- Saved
- $0.02 against the best offer Calculated
- Speed
- About 0.05 s from routing, Schwab’s average
Sources: Schwab, order routing and execution quality, OnixS, FIX 4.4 execution report
Stage 7 of 10
The trade is reported
FINRA’s trade reporting facility
Because it happened off an exchange, the wholesaler must report the trade to FINRA within 10 seconds. It then appears on the consolidated tape with everyone else’s trades, so the whole market can see the price.
What’s going on
- The wholesaler sends the trade details to a FINRA trade reporting facility.
- FINRA passes it to the tape.
- The tape publishes it: price, size and time, without names.
Why it works this way
Off-exchange trading is a large share of US volume. Reporting keeps prices public, so every investor sees what shares really changed hands for.
In everyday terms
Like a house sale being entered in the public land register.
- Deadline
- 10 seconds after the trade, FINRA Rule 6380A
- Shown as
- An off-exchange trade on the tape
- Your name?
- No: trades on the tape are anonymous
Sources: FINRA Rule 6380A, trade reporting
Stage 8 of 10
Clearing
NSCC, part of DTCC
That night the trade goes to the National Securities Clearing Corporation. It steps in between buyer and seller, so each side owes NSCC, not each other, and it guarantees the trade will complete. It nets everything: millions of trades become 1 amount of shares and 1 amount of cash per firm.
What’s going on
- Your broker, or the clearing firm it uses, and the wholesaler both send the trade to NSCC.
- NSCC matches the 2 sides and takes the place of each: this is novation.
- It adds up each firm’s buys and sells in Apple for the day and works out 1 net figure.
- Firms post collateral with NSCC in case one of them fails before settlement.
Why it works this way
If a firm collapses overnight, NSCC still completes its trades. Netting means far less cash and far fewer shares need to move.
In everyday terms
Like a referee holding both sides’ stakes until the match is over.
- Guarantee
- NSCC becomes the counterparty to both sides
- Netting
- 98.6% of value netted away, Q3 2026
- Daily value
- About $5.55 trillion processed in a day
Sources: DTCC, NSCC Continuous Net Settlement
Stage 9 of 10
Settlement, the next business day
DTC, the depository
On the next business day, T+1, the trade settles. Your broker’s cash goes to NSCC, and the shares move to your broker’s account at the Depository Trust Company, as an entry in a ledger. No certificate moves anywhere.
What’s going on
- NSCC tells each firm what to pay and what to deliver.
- Cash goes in and shares come out, as entries at DTC.
- Your broker’s account at DTC now has 10 more Apple shares.
- Apple’s own share register still shows Cede & Co. as the owner of almost all of them.
Why it works this way
Holding shares as ledger entries in 1 place lets trillions of dollars change hands each day without paper. The SEC cut settlement to 1 day to reduce the risk that builds up while trades are waiting.
In everyday terms
Like the deeds of a house changing hands at the registry, the day after the handshake.
- When
- T+1, since 28 May 2024; it was T+2 before
- How
- Book entry at DTC: a ledger changes
- Holder of record
- Cede & Co., DTC’s nominee
Sources: SEC, shortening the settlement cycle to T+1, DTCC, NSCC Continuous Net Settlement, Wikipedia, Cede and Company
Stage 10 of 10
What you actually own
Your broker’s books
Your broker holds the shares for you, in its name, and its records say they are yours: this is street name. You get the dividends and can vote, through the broker. If the broker fails, SIPC protects up to $500,000 of your securities and cash, though not against the shares falling.
What’s going on
- Apple’s register lists Cede & Co.
- DTC’s records list your broker.
- Your broker’s records list you.
- Dividends and votes pass down the same chain, from Apple to you.
Why it works this way
Street name makes trading fast and cheap, because nothing needs re-registering when you sell. The cost is that your ownership is a chain of records, which is why broker segregation rules and SIPC exist.
In everyday terms
Like money in a bank: it is yours, but it sits in the bank’s accounts.
- Held
- In street name, by your broker, for you
- Protection
- SIPC: up to $500,000, of which $250,000 cash
- Not covered
- Market losses
Sources: Wikipedia, Cede and Company, SIPC, what SIPC protects