Final answer:
Brokers buy or sell stocks using electronic trading systems, allowing them to conduct trades without being on the stock exchange floor. These systems match orders with buyers or sellers, streamlining the process that was historically done in person. The switch to electronic platforms has significantly modernized the trading process.
Step-by-step explanation:
When a broker is not physically present on the floor of a stock exchange, they typically buy or sell stock on behalf of their clients through electronic trading systems. These systems allow brokers to place orders that are then matched with sellers or buyers through an electronic network. This process has become the norm, especially with advancements in technology and the rise of online brokerage services. While historical images, like the one in Figure 1.3.20, show brokers trading on the floor, today, much of the trading is done electronically, and the concept of an actual trading floor is more symbolic rather than a necessity for conducting trades.
The trading of securities is a way to generate revenue for a company when the stock is initially offered through an IPO (Initial Public Offering); however, subsequent trades are between private traders and do not involve the company directly. Instead, like buying a house, purchasing stock means acquiring a portion of ownership from the current shareholders. Therefore, after the IPO, the company does not benefit financially from secondary market transactions. Much like the frenzy depicted during historic stock market crashes, today's electronic systems are designed to handle the high volume of trades without such chaos.