October 21, 2021 5:06 AM

What does a Broker do?

A broker is an individual or a brokerage firm that acts as an intermediary between third parties who buy and sell goods and securities on regulated markets, so called exchanges.

Understanding the definition

Investors most commonly rely on brokers to trade various assets. To trade stocks, bonds, etc., and to connect people who want to buy or sell a security with the other part of the transaction, brokers must be licensed. To get such a license, a broker must fulfill some requirements that vary from one country to another. For instance, while in the US, a broker might be either a firm or a person, in Russia, it could only be a firm with its share capital, a certain number of staff members, etc. By convention, most brokerage firms charge a commission for the services.

EXAMPLE

There are dozens of brokerage firms throughout the world that vary in terms of services offered and fees charged. To name a few, we have Charles Schwab, Fidelity Investments, as well as others like Grid Capital, of course.

Broker basics

Brokers are registered firms (or representatives) that link investors who want to buy or sell stocks or other securities with the parties on the other side of the transactions. Besides offering a fast and efficient way to trade and connect with people on the other side of transactions, full-service brokers might also provide several additional services, such as: extensive market research, investment plans, market intelligence, and tailored investment solutions. A few decades ago, only wealthy people could afford a broker and access to the stock market. Nowadays, online broking has triggered the emergence of discount brokers that allow customers to trade at very low fees, but without access to professional personalized guidance.








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