Maybe the exchange converts a certain portion of Bitcoin into Fiat, this way they can use it for investment purposes... heck, Coinapult's LOCKS system is based on a similar concept.
But the only way we can know is to start a run on the exchange, but who'd want to do that?
If they did this then they would have exchange rate risk because they would lose money in the event that bitcoin would increase in value verses what they sold the coins for.
I think that any exchange that does not charge any kind of trading fee is almost certain to be scamming in some way and customers will almost certainly end up loosing money.