I feel you didn't get JeromeTash's reply.

When you bitcoin on an exchange, you are actually buy bitcoin from other users, not the exchange itself.
You deposit fiat and place a buy order. Someone else deposits bitcoin and sell it to you. After that, you will be able to withdraw bitcoin and the other user will be able to withdraw fiat.

So, for every satoshi added to a user's balance, one satoshi is deducted from another user's balance.

From the exchange's hot or cold wallets. Remember, you are not the only person participating in the trades through the exchange. While you are trying to buy the Bitcoin, There are some people out there who are also trying to sell off their Bitcoins for cash. So the Bitcoins they sell may temporarily be keep in hot or cold wallets waiting for you to make your purchase order so that they get transferred to you.