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 needs 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 market place 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? ›
A Shareholder cannot generally be forced to sell shares in a company unless you have either agreed to a process resulting in that outcome, or the court orders that outcome.
Can my broker sell my shares without my permission? ›
Brokers are not allowed to sell your stocks unless you have given them permission to do so. You have the ultimate authority over how the money you invest is handled. However, you can grant permission to a broker to trade your stocks in different ways.
Do you have to buy stocks through a broker? ›
Do you need a broker? The short answer is no—you don't need a living, advice-giving, fee-charging broker (although you shouldn't rule them out). You do, however, need a brokerage—the online storefront where you purchase stocks, bonds, exchange-traded funds (ETFs), and other investments.
What if nobody wants to buy your stock? ›
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.
Should you buy when everyone is selling? ›
So, while some people may think that property isn't such a good buy anymore we agree with Warren Buffett's overall sentiment: Buying when everyone else is selling could be a very good idea, AKA the time when everyone else is fearful could be a very, very good time – in the best sense of the word – to be greedy.
Can I sell my shares without a broker? ›
If you do not have a broker and would like to complete a one-off sale of your shares, Share Sales Direct is the service for you. Our simple and secure online solution allows you to sell your issuer-sponsored shares (with a SRN) without having to open a trading account.
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 I sell a share without buying? ›
Money can be made in equities markets without actually owning any shares of stock. The method is short selling, which involves borrowing stock you do not own, selling the borrowed stock, and then buying and returning the stock only if or when the price drops.
With street name registration, the securities you purchase are registered on the issuer's books in the name of an intermediary (such as your broker-dealer, a clearing agency, or a nominee affiliated with the broker-dealer or clearing agency), but your broker-dealer will maintain records showing you as the real or “ ...
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.
Do you have to use a broker to sell shares? ›
Usually you need to open an account with a broker to buy and sell stocks online. Some publicly traded companies, however, do offer a direct stock purchase plan (DSPP), where you can buy shares directly. Instead of using a broker, the company's transfer agent manages the transaction.
Why should no one use brokerage accounts? ›
If the value of your investments drops too far, you might struggle to repay the money you owe the brokerage. Should your account be sent to collections, it could damage your credit score. You can avoid this risk by opening a cash account, which doesn't involve borrowing money.
How much does it cost to hire a stock broker? ›
Full-Service Brokerage Fees
This fee can range from 0.20% to 1.5%, depending on the broker and type of management service. Some may even charge a flat monthly fee instead of a percentage.
How do I buy stocks myself without a broker? ›
Direct Stock Purchase Plans (DSPPs) allow investors to purchase shares of company stock directly from the company itself. Specifically, trades are completed through a transfer agent. That means you could buy stocks without a broker, full-service or online, to complete the transaction.
What happens if everyone sells a stock? ›
With the recent stock market drop, there was a mass sale off of stocks. This may lead to the question: If everyone is selling, is there a chance that there are stocks that no one wants to purchase? The answer is technically no. There are always as many buyers as there are sellers and that keeps the system going.
Who gets the money when a stock is sold? ›
Stocks work like this: Companies sell shares in their business, also known as stocks, to investors. Investors buy that stock, which in turn provides the companies money for expanding their business through creating new products, hiring more employees or other business initiatives.
What if there are no buyers for options? ›
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.
Who pays you when you sell a stock? ›
When you sell your stocks the buyer pays the money; when you buy the stocks the money you paid goes to the seller. The transactions are handled by stock brokers.
