A broker is not required to buy from you if you want to sell shares and there is no one willing tobuy. A broker won't lose money when a stock goes down in a bear market because the broker is usuallynothing more than an agent acting on the seller's behalf when they find somebody else who wants to buy the shares.
Key Takeaways
- For a transaction to occur, there must be a buyer on one side and a seller on the other; even when prices are falling, there are buyers of the falling securities.
- A broker does not have to buy the stock you are trying to sell; a broker is there to act as an agent on behalf of the seller, finding someone to make the purchase.
- While brokers are there to facilitate trade, market makers take the opposite side of a trade and buy or sell; yet, market makers don't always offer the best prices.
Is it True That Everyone Is Selling?
Other traders and investors areon the opposite side of a transaction, not usually the broker. To say "everyone is selling" is usually an erroneousstatement, because in order for transactions to occur there need to be buyers and sellers transacting to create trades—even though those trades may occur at lower and lower prices. If everyone were to sell, there is no market in that stock (or other assets) anymore untilsellersand buyers find a price they are willing to transact at.
When a stock is falling it does not mean there areno buyers. The stock market works on theeconomic concepts of supply and demand. If there is more demand, buyers will bid more than the current price and, as a result, the price of the stock will rise. If there is more supply, sellers are forced to ask less than the current price, causing the price of the stock to fall.
For every transaction, there must be a buyer and a seller. If the last price keeps dropping, transactions are going through,which means someone sold and someone else bought at that price. The person buying was not likely the broker, though. It could be anyone, like another trader or investor who thinks the price offers an opportunity to make a profit, whether in the short term or long term.
Can a Stock Have No Buyers?
That said, it is possible for a stock to have no buyers. Typically, this happens inthinly traded stocks on the pink sheets or over-the-counter bulletin board (OTCBB), not stocks on a major exchange like the New York Stock Exchange (NYSE).
When there are no buyers, you can't sell your shares—you'll be stuck with them until there is some buying interest from other investors. A buyer could pop in a few seconds, or it could take minutes, days, or even weeks in the case of very thinly traded stocks. Usually, someone is willing to buy somewhere: it just may not be at the price the seller wants.This happens regardless of the broker.
The broker only places your order in the marketplace so it can transact with other orders. The broker itself does not typically try to solicit a trade in a stock, which means your decisions to buy and sell are up to you, and the broker just facilitatesthose decisions.
If an institution acts as the principalto a certain amount of stock, a rapidly declining stock price willaffect them. This is because, unlike an agent, the dealer is an owner of the stock. Examples of this include market makers.
Investors holding thinly traded stocks may have a hard time finding buyers, necessitating patience as they wait for a buyer to show up.
Brokers and Market Makers
As discussed above, many brokers are just trading facilitators. They don't take a position opposite to your orders. Market makers do take the opposite side of a trade, and they may act as a buyer if you are a seller or vice versa.
Some firms that offer brokerage services are also market makers.Market makers are there to help facilitate trade so there are buyers and sellers in stocks listed on the major exchanges. This doesn't mean they will always give a good price—they are just providing some liquidity. After a market maker has taken on a trade, they will then attempt to move those shares along (buy or sell) to another party, attempting to make a profit along the way.
There are also times when the market maker may decide to purchase a stock from you and add the position to the firm's inventory or sell you shares from their current inventory. The inventory is a compilation of securities out of which the firm may trade in the near term or hold for the long haul.
The Bottom Line
On most trades, brokers act as conduits. They simply post your trade in the marketplace so others can choose to transact with it. This means anyone may interact with your order, including other traders and investors, or market makers. There are times when a market marker will take the opposite side of your trade. They are providing liquidity, but will also try to turn a profit for providing that service, as any other trader or investor is hoping to do.
Most market makers and other traders will not buy something if they don't think they can make a profit on it, which means prices will drop as far as they have to in order to entice buyers back in.
FAQs
A broker is not required to buy from you if you want to sell shares and there is no one willing to buy. A broker won't lose money when a stock goes down in a bear market because the broker is usually nothing more than an agent acting on the seller's behalf when they find somebody else who wants to buy the shares.
Who buys stock when everyone is selling? ›
But there's one group of investors who charge in to buy when stocks are selling off: the corporate insiders. How do they do it? They have 2 key advantages over you and me that provide them the edge during uncertain times. If you follow their lead, you can have that edge too.
Can my shares be sold without my permission? ›
No ❌. We do not close positions / sell shares on your behalf unless there was an event that forced us to undertake such action - e.g. a given company has filed for bankruptcy or it has been delisted from its market.
Do you have to buy stocks through a broker? ›
Technically, you cannot buy stocks without a broker. However, you can take part in self-directed trading by using a broker-dealer platform. Stock trading without the typical broker can help you avoid hefty brokerage fees while still participating in the stock market.
Can my broker sell my shares without permission? ›
Discretionary vs.
In non-discretionary accounts, a broker or financial advisor must obtain a client's permission before making any transactions. Any buying or selling of securities without a client's authority is considered unauthorized trading and is a direct violation of FINRA Rule 2010.
What to do if there are no buyers for a stock? ›
How to sell a stock if there is no buyer? You won't be able to sell your shares without buyers; you'll be stuck with them until there is some purchasing interest from other investors. A buyer may appear in seconds or take weeks for exceptionally lightly traded securities.
What happens if there are no buyers for an option? ›
Assuming you have sold a call option and you find no buyers, this can happen in below cases: Your strike has become deep In The Money. And hence, if you are not able to square off the position, you option will be squared off automatically at expiry and you will incur a loss. You strike has become deep Out of The Money.
Why was my stock sold without permission? ›
The Bottom Line
If you find that your broker has sold securities in your account without express permission, chances are that they've done nothing wrong. If you have given a broker discretionary power to trade for you, they may do so without contacting you first.
Can you be forced to sell your stock? ›
Through a buy-sell agreement, it is possible for the majority to compel minority shareholders to sell their shares. This commonly occurs in cases of company-wide buyouts where there is a need for a forced buyout of all or certain shares held by minority shareholders.
Can a brokerage lose your stocks? ›
SIPC coverage is restricted to the insolvency of the investment brokerage firm. It will not cover losses that are the result of poor investment decisions, fraud, or misrepresentation. So, while your stocks and other eligible investments are insured up to SIPC limits, they can still lose value.
Key Takeaways
The name that appears on the stock or bond certificate is that of the broker, but the person who paid for the securities retains ownership rights. Having securities held electronically in street name facilitates speedy trading and reduces trading costs.
What is the best time to buy stocks? ›
The opening period (9:30 a.m. to 10:30 a.m. Eastern Time) is often one of the best hours of the day for day trading, offering the biggest moves in the shortest amount of time. A lot of professional day traders stop trading around 11:30 a.m. because that is when volatility and volume tend to taper off.
How much does it cost to hire a stock broker? ›
Full-Service Brokerage Fees
If you want one of the broker's advisors to manage your portfolio and make investment decisions on your behalf, you'll typically pay a percentage of your portfolio's value each year. This fee can range from 0.20% to 1.5%, depending on the broker and type of management service.
Can my broker lend out my shares to short sellers without asking? ›
The only case where your broker might lend your securities without your knowledge is when you have a margin account and you are actually borrowing money. > brokers cannot lend your shares without a written agreement allowing it.
Can shareholders refuse to sell their shares? ›
You have the right to accept or reject the offer—as long as you know what the consequences are. Most people don't own enough shares to viably reject an offer, and therefore, won't have a big effect on how the company's management will react. In the end, you may even be forced to sell your shares.
Can I transfer my shares from one broker to another without selling? ›
In general, most stocks, bonds, options, exchange-traded funds and mutual funds can be transferred as is. Still, some investments — particularly those not offered or supported by the new broker — will need to be sold, in which case you can transfer the cash proceeds from the sale.
What happens if everyone sells a stock? ›
If everyone were to sell, there is no market in that stock (or other assets) anymore until sellers and buyers find a price they are willing to transact at. When a stock is falling it does not mean there are no buyers. The stock market works on the economic concepts of supply and demand.
Who buys stocks for people? ›
Stock traders can trade on their own account, called proprietary trading or self-directed trading, or through an agent authorized to buy and sell on the owner's behalf. That agent is referred to as a stockbroker. Agents are paid a commission for performing the trade.
Who is someone who buys stocks? ›
A stock trader is someone who buys and sells stocks, whereas a stockbroker is a middleman or entity that helps a trader facilitate those trades.
Who raises money by selling stock? ›
Companies can raise money by selling stock to investors. Stock is an ownership interest in a company. There are different types of stock. Common stock provides for dividends and voting rights.
