How a stock exchange actually works

What happens when you press buy

You do not walk into a building. You send an instruction to your brokerage, and the brokerage — which is a member of the exchange — passes it to the exchange’s electronic system. There, your instruction goes into a queue with everybody else’s, and the system looks for someone whose instruction is the mirror of yours.

There are two basic instructions, and the difference matters more than beginners expect. A market order says buy at whatever the price is right now, so it fills immediately at a price you find out afterwards. A limit order says buy, but never above this price, so it fills at a price you chose or does not fill at all. The first one gives you certainty about the fill; the second gives you certainty about the price. You cannot have both.

The order book: a queue of buyers and a queue of sellers

Picture two lists. On one side, everyone who wants to buy, sorted by who is willing to pay the most. On the other, everyone who wants to sell, sorted by who will accept the least. That is the order book, and the top of each list is the price you see quoted.

The gap between them is the bid-ask spread. If the highest bid is 99.90 and the lowest ask is 100.10, then buying costs you 100.10 and selling right away gets you 99.90. Twenty centavos, gone, before anything has moved. That gap is the real cost of trading, and it is narrow on things everyone trades and wide on things almost nobody does — which is a working definition of liquidity.

Making sure there is always somebody on the other side is a job, not a coincidence. Market makers quote a buy price and a sell price at the same time, all session, and earn the spread for the trouble. They are the reason your two-thousand-peso order finds a counterparty in a second instead of waiting for a human whose plans happen to match yours.

Two markets in the same building

The exchange does two different jobs and they are easy to confuse.

In the primary market, a company sells new shares and receives the money — that is an IPO or a later issue, and it is how listing raises capital to build things.

In the secondary market, investors buy and sell those same shares among themselves. This is where you and almost everyone else operates. The company gets nothing from it. What it gets is something subtler and just as valuable: because people know they can sell later, they are willing to buy in the first place.

The BMV: hours, holidays, and who is inside

Mexico’s main exchange is the Bolsa Mexicana de Valores, founded in 1894 and based on Paseo de la Reforma in Mexico City. A session runs Monday to Friday and lasts about six and a half hours, opening with an auction that gathers orders before continuous trading begins. The exact clock times shift when the United States changes its own — the BMV keeps its session lined up with New York — so the trustworthy source is the exchange’s own published schedule, which is the first link in the sources below, along with the holiday calendar. On those days nothing trades, whatever your app shows.

Inside are issuers, brokerages trading for clients and for themselves, market makers, and the institutions that settle and safeguard the securities once a trade is done. The exchange itself never owns what is being traded. It runs the meeting place and the rules.

Who watches

The market runs on rules written in three layers: the Ley del Mercado de Valores, the regulator, and the exchange’s own internal rulebook. The regulator is the CNBV, which authorizes and supervises banks, brokerages and exchanges. “Regulated” means supervised — that the firm exists, reports, and answers to somebody. It has never meant that your investment cannot fall.

What an index is

An index is not something you can buy. It is a number that summarizes a basket of companies, so that “the market went up today” becomes a single figure instead of five hundred. Mexico’s reference index is the S&P/BMV IPC, built from the most traded companies on the exchange and weighted by size; the American one you hear about is the S&P 500. Same idea, different basket.

Practising it without risking a peso

All of this makes far more sense once you place an order and watch it fill. A simulator lets you do that with no real money: the Actinver Challenge is a student stock-market contest played with fictional money. On that page I publish every position with the reason I opened it and with what can go wrong, before knowing how it ends.

The short version

An exchange is a matching machine. Your order joins a queue, meets the mirror of itself, and ownership changes hands in seconds. The company only gets money the first time, in the primary market; after that it is investors trading with each other. The BMV runs six and a half hours a day under rules the CNBV supervises, and an index is just a way of describing that whole crowd with one number.