07 Mar What are the technicalities of buying and selling US shares?
Buying and Selling U.S. shares is the same as buying and selling Australian shares. You simply instruct your broker what you want to do, either using their online trading platform or website or by calling them and speaking to a representative.
Usually, the U.S. market doesn’t need to be open for you to place an order, but you’ll need to check with your broker on how they’ll route your order. Some brokers implement unusual rules around when and what type of order you can place.
Australia now has two viable exchanges that your order could be routed to, whereas the U.S. has dozens. This means that the share you want to buy could also be trading on several different exchanges at the same time. There might also be slight price variations between exchanges and different rules around the type of order you can place.
With the same stock trading on multiple exchanges, it becomes difficult to discern what the actual stock price is because it depends on which exchange you ask. To combat this, the United States Securities and Exchange Commission developed the National Best Bid and Offer (NBBO) regulation. This looks at the various exchanges and finds the highest bid and lowest offer and considers that as the price for the stock.
Capital 19 makes use of a clever piece of technology called SMART routing. This system checks your order and the prices on each exchange and then routes your order through to whichever exchange will get you the best price. SMART routing has been proven to get better prices than even the NBBO by up to 0.06 cents per share, ensuring you always get the best possible prices for your orders.
1 Interactive Brokers
This is an excerpt from the book ‘An Australian’s Guide To Investing In U.S. Stocks‘ by Matthew Jones.