How do stockbrokers purchase shares?

Question

Do they use "Direct Stock Plans," or some other method?

Not sure if this is the right place to ask, but I'm curious.

Answer 1

Technically, a stock broker brokers stock purchases: they execute transactions for clients. That is, they buy on the behalf of clients. (This is not true for bonds, where the practice is that they sell clients bonds from their inventories.)

Direct stock purchase plans are aimed at individuals, to the best of my knowledge. Brokers might help set up such purchases, but historically they existed as a way to buy equities without using a broker.

A broker will transact in two forms.

1. Primary market: buying shares directly from the company, such as in an initial public offering (IPO) or secondary offering.
2. Secondary market: buying shares from other entities on stock exchanges or other markets (“dark pools”, etc.).