How to buy & sell shares
Buying and selling shares
The most common way to buy and sell shares is on the share
market using a broker or broking service.
You can also buy shares through a prospectus when they are first
put on the market or indirectly through a managed
fund. Another way to buy shares is through an employee share
Buying shares on a share
There are five public share exchanges in Australia. Four of them
directly supervise the companies that issue the shares that trade
on their markets. The fifth exchange, Chi-X, currently only
provides the infrastructure for trading shares already quoted on
The five exchanges are:
Buying shares on the ASX or Chi-X
While Chi-X commenced on 31 October 2011, your broker may
continue to buy ASX-quoted shares only on the ASX until 1 March
2013. After that date your broker must consider whether they can
achieve a better outcome for you by trading on Chi-X.
As there are now two markets to choose from when you trade
ASX-quoted shares, once your broker joins and trades on Chi-X they
must provide the best execution for your trade across both markets,
in terms of best outcome (e.g. price). Your broker should send you
their best execution policy. If you have not received it you
- Ask your broker to provide their best execution policy to
- Look for the best execution policy on your
You can also ask your broker to demonstrate they have
complied with their best execution policy on your
If your trade is executed on both the ASX and
Chi-X, you can ask your broker for a single trade confirmation
that takes into account orders executed across both of these
You should also ask your broker whether they are using dark pools or internalising your trades
and decide whether you would prefer them to be executed on the ASX
If you are not happy with how your trade has been executed you
should complain to your broker. Details of how to do this
will be on their website. You can also complain to
the Financial Services
Using a broker
You can choose whether you want to a use an online broking
service (sometimes know as a 'discount broker') and make your own
investment decisions, or use a full service broker who can provide
you with advice and recommendations.
Online broking service
If you are looking for the lowest possible fees, then you should
look at an online trading account. The fee to buy or sell a parcel
of shares starts from around $30. They charge you only when you buy
or sell a share.
Full service brokers
A full service broker will charge more but they can also give
you advice on what to buy and sell. The law requires brokers to
have a reasonable basis for any recommendation they make to you.
They must also tell you about any interests they have in investment
decisions which they recommend to you.
Brokerage fees are usually based on a percentage of the value of
the purchase or sale. The percentage typically reduces as the
amount of the transaction gets bigger. Most brokers have a minimum
fee which they charge. Typically, the fee on a transaction of up to
$5000 will be 2.5%. For large trades, it may only be 0.1%. Small
trades worth a few thousand dollars can therefore be relatively
Use the Australian Securities Exchange find a broker tool to help you find
a broker that suits your needs. You should check whether the broker
uses dark pools or internalisation to execute
trades, as this may have an impact on the price you pay for
Case study: Katarina buys some shares
Katarina, 35, inherited $10,000 from her
grandmother and decided to invest in shares. She has some knowledge
of the share market but decided to ask a stock broker for advice to
be on the safe side. When Katarina presented her choices to the
stock broker, he cautioned her against investing in one company
that had recently been hit with a lawsuit. He then organised for
her to buy shares in the other companies she nominated. While his
fees were higher than an online broker's, Katarina was happy to pay
extra for his advice and service.
Buying shares in a float
Companies may decide to offer new shares to the market as a way
of raising capital. This is called a 'float' or an 'initial public
offering' (IPO). You don't actually need a broker to buy shares in
a float. All you do is send the application form in the prospectus
and your cheque to the company.
Many popular floats are oversubscribed, which means you may get
only a proportion of the shares you applied for, or in some cases,
no shares at all. Keep this in mind when sending off your
application cheque, because your money can be tied up for a couple
of months before you will get a refund. For more information, see
Buying shares via a managed
You can buy shares indirectly by buying units in a managed share
fund. For more information, see choosing a managed fund.
Buying shares via an
employee share scheme
Some companies offer their employees the opportunity to purchase
shares in the company. The shares might be offered without a
brokerage or at a discount to the market price. For more
information, see employee share schemes.
Selling your shares
Whether you buy shares through a broker, IPO, employee share
scheme or through a managed fund, at some stage you may want to
If you hold the shares directly you can sell them by placing a
trade online or contacting your broker. When your trade is executed
you will be charged a brokerage fee, just like when you buy
When you sell shares the legal title of ownership is
exchanged. Settlement for the sale and transfer of ownership occurs
3 business days after the trade takes place (this is known as T +
Once settlement is completed, the money for the sale of
the shares is transferred into your designated bank
Selling shares in a managed fund
If you hold shares indirectly through a managed fund you can
sell the shares by selling your units in the managed fund. Before
you sell units in a managed fund it's important to check if there
are any withdrawal costs. For more information see how to buy and sell
Keep the paperwork
When you sell your shares or units in a managed fund make sure
you keep a copy of the trade confirmation or receipt for tax
Types of orders
When you buy or sell shares through a broker there are different
types of orders you can use. It's important to know how each order
works and the impact different orders could have on the price when
you buy or sell.
A market order is an order to buy or sell shares at the best
available price at the time the order reaches the market.
These orders are generally executed very quickly once you send
them to your broker, however, the price the market order is
executed at is not guaranteed. If the share price moves from when
you submit the order, to when it is executed, the final trade price
could be higher or lower than you expect.
A limit order is an order to buy or sell shares at a specified
'limit' price or better. If you are buying shares and place a limit
order, it will only be executed if the share price falls to the
limit price you set or lower. If you are selling shares, a limit
order will only be executed when the price reaches the limit price
you set or higher.
For limit orders, it's important to remember if the share price
does not reach the limit price you set, your trade won't be
executed and there may be an expiry date for how long the trade can
sit there unfilled.
A stop-loss order is an instruction placed with your broker to
sell shares you hold, if the share price falls to a specified
price. Stop-loss orders, as the name suggests, are used to limit
the amount you could lose if the share price falls.
If the share price falls and your specified price is reached,
your order to sell is automatically placed as a market order and
executed at the best possible price.
Many brokers have a range of conditional orders that can be
placed and are executed only if a certain set of conditions are
Before you place conditional orders, it's important to
understand how they work, if there is an expiry date on the order
if the conditions are not met and the brokerage fees to place the
trade. You should be able to find more information on conditional
orders on your broker's website or ask them to explain how they
manage these types of orders.
Invest in shares only if you are happy with your
understanding of the stock market and are prepared to research and
manage your portfolio on a regular basis. Otherwise, you should get
advice and assistance.
Last updated: 08 Oct 2015