How an exchange works

The lesson in full

When you buy a share in an app, the app is only the doorway. Your order is often sent to a stock exchange: a marketplace with strict rules.
Each exchange keeps an order book: buy orders with their prices on one side, sell orders on the other. When a buy price meets a sell price, a trade happens.
Most countries have one: the Indonesia Stock Exchange (IDX), Mexico's BMV, BME in Spain, the NSE and BSE in India, the London Stock Exchange. The two biggest are in the US: the New York Stock Exchange and Nasdaq.
Exchanges keep set hours. The NYSE trades from 9:30 a.m. to 4:00 p.m. New York time on weekdays. If big news breaks overnight, prices can jump at the open.
Companies join an exchange through an IPO, their first sale of shares to the public. Saudi Aramco's IPO in December 2019 raised about US$29 billion, a world record at the time.
Common mistake
Myth: "Forex trades on one big exchange." It has no central exchange. Banks and dealers trade directly with each other, called over-the-counter (OTC), almost nonstop on weekdays.
Key takeaway
An exchange is a rule-based meeting place where the order book matches buyers and sellers. Shares mostly trade on exchanges; forex trades over-the-counter.

An order book lists... Orders and their pricesIt shows who wants to buy and sell, and at what price, so the exchange can match them.
A company's first sale of shares to the public is an... IPOIPO stands for initial public offering: the moment a company first sells shares to the public.
Forex mostly trades... Directly between banksThere's no central forex exchange. Banks and dealers trade directly with each other.
The best buyer bids 100 and the best seller asks 101. What happens? No trade yetA trade needs a buy price and a sell price that meet. Until someone raises a bid or lowers an ask, both wait.