Thanks, this is what I was looking for. Someone that knows. Now that you outline it, it really seems obvious. 

When I was at The Bitcoin Company we looked into making a brokerage and that's just how it is done. 

benthecarman

Interesting. Are you saying this becuase that is what they say they do or is it proven?

kepford

bitcoin

How do exchanges acquire bitcoin?

Depends on which exchange. Exchanges with order books like coinbase, kraken, etc just get their bitcoin from customers, people buying and selling fill out the order book. Exchanges like River, Swan, Strike, etc are brokerages and get their bitcoin from market makers and other services. Lots of these services just have accounts on the other exchanges and buy at whichever has the best price.