Before the era of electronic recordkeeping, the end of the
trading day signaled the beginning of a mass migration of papers.
Stock certificates
representing thousands of shares were carted from the
brokerage firms
that sold them, where they were exchanged for the checks that paid for them.
But with as many as 3 billion shares or more currently trading each day on the
New York Stock Exchange
alone, a physical exchange of
securities
and checks would be virtually impossible.
That's why, in the majority of
equity
transactions today, neither paper money nor paper stock certificates actually
changes hands. The amount that's due is debited from the buyer's brokerage
firm account and credited to the seller's account — similar to paying your bills
electronically or having your paycheck direct deposited.
In most cases, paper securities certificates don't change hands either. In fact,
most brokerage firms will charge you an additional fee to issue paper
certificates. Instead, your purchase is recorded electronically in what's
known as
book entry form. And when you sell the security, the electronic records are updated,
deleting you as an owner and adding the purchaser.
