Brokerage firm
Encyclopedia
A brokerage firm, or simply brokerage or broker in context, is a financial institution
that facilitates the buying and selling of financial derivatives between a buyer and a seller. Brokerage firms serve a clientele of investor
s who trade public stocks and other securities.
Other ways to lower costs for these brokers is by executing orders only a few times a day by aggregating orders from a large number of small investors into one or more block trade
s which are made at certain specific times during the day. They help lower costs in two ways:
Since investor money is pooled before stocks are bought or sold, it enables investors to contribute small amounts of cash using which fractional shares of specific stocks can be purchased. This is usually not possible with a regular stock broker
.
Financial institution
In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...
that facilitates the buying and selling of financial derivatives between a buyer and a seller. Brokerage firms serve a clientele of investor
Investor
An investor is a party that makes an investment into one or more categories of assets --- equity, debt securities, real estate, currency, commodity, derivatives such as put and call options, etc...
s who trade public stocks and other securities.
Discount brokers
A discount broker is a firm that charges a relatively small commission by having its clients perform trades via automated, computerized trading systems rather than by having an actual broker assist with the trade. Most traditional brokerage firms offer discount options and compete heavily for client volume due to a shift towards this method of trading.Other ways to lower costs for these brokers is by executing orders only a few times a day by aggregating orders from a large number of small investors into one or more block trade
Block trade
A block trade is a permissible, noncompetitive, privately negotiated transaction either at or exceeding an exchange determined minimum threshold quantity of shares, which is executed apart and away from the open outcry or electronic markets...
s which are made at certain specific times during the day. They help lower costs in two ways:
- By matching buy and sell orders within the firm's order book the overall quantity of stock to be traded can be reduced thus reducing commissions.
- The broker can split the bid-ask spread with the investor when matching buy and sell orders - a win-win situation in most cases
Since investor money is pooled before stocks are bought or sold, it enables investors to contribute small amounts of cash using which fractional shares of specific stocks can be purchased. This is usually not possible with a regular stock broker
Stock broker
A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors...
.
See also
- BrokerBrokerA broker is a party that arranges transactions between a buyer and a seller, and gets a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal...
- Stock brokerStock brokerA stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors...
- Real estate broker/agent
- Mortgage brokerMortgage brokerA mortgage broker acts as an intermediary whose brokers mortgage loans on behalf of individuals or businesses.Traditionally, banks and other lending institutions have sold their own products. However as markets for mortgages have become more competitive, the role of the mortgage broker has become...
- Insurance brokerInsurance brokerAn insurance broker finds sources for contracts of insurance on behalf of their customers. The three largest insurance brokers in the world, by revenue, are Aon, Marsh & McLennan, and Willis Group Holdings.-Purpose of insurance brokers:...
- Commodity brokerCommodity brokerA commodity broker is a firm or individual who executes orders to buy or sell commodity contracts on behalf of clients and charges them a commission. A firm or individual who trades for his own account is called a trader. Commodity contracts include futures, options, and similar financial...
- Options brokerOptions brokerOptions brokers specialize in offering options trading, research, education and other tools to individual investors. In addition to common options trades like covered calls, option spreads, and straddles, many options brokerages offer trading in products related to options, including stocks, ETFs,...