How do I trade?
Trades occur between buyers and sellers through the stock exchange trading system. In order to be able to trade, investors must open an account with a specialized entity, an intermediary.
Intermediaries are financial investment services companies (SSIF) or credit institutions, authorized by the Romanian Financial Supervisory Authority (FSA). The main service offered by such institutions is to intermediate buy and sell trades (brokerage services). Intermediaries’ employees who are authorized to collect buy or sell orders from investors are called stockbrokers. Brokers are also authorized by the FSA.
Investors may benefit from additional services, such as:
- advice on developing the investment strategy
- analyses and recommendations related to financial markets and instruments
- access to online trading platforms.
After opening the trading account, it must be first supplied with money to cover any future purchases of financial instruments. The account can also be credited with financial instruments received during the mass privatization program (MPP), inherited or transferred from another intermediary. Once the money or the financial instruments are transferred in the account, the investor can buy or sell financial instruments, thus pursuing his/her investment objectives.
In order to perform trades, investors can place trading orders to the exchange system through brokers or directly by using the online trading platforms offered by intermediaries. In the first case, brokers pass the orders to the trading department, to exchange agents, throughout the trading session. The price of a particular financial instrument is determined in the exchange system through confrontation of demand and supply, at any moment during the trading session.
During trading hours, orders come to the market on a continuous basis, thus changing the balance between demand and supply and consequently generating a new price at any moment.
The execution of the trade is followed by the trade’s clearing and settlement and the transfer of ownership. Financial instruments are transferred to the new owner (the buyer) and their money equivalent is transferred to the seller’s account. The process is completed within two business days from the initial transaction date.