Different types and roles of brokers in the trading industry

Author: Forex Live | Category: Education

Getting to know brokers in the industry

FXL
Brokers are professionals who serve as middlemen in planning and organizing negotiations between a securities exchange and an investor.

Other terms for brokers are intermediaries and negotiators. They facilitate bargains such as stock trade, bond trade, foreign exchange, real estate, insurance, personal assets, commodities, or properties.

They can be independent agents or else employed with brokerage companies.

Securities exchange practices exclusivity because they don't accept orders from people or individuals who are not their members.

This reason leaves traders and investors who are non-members the need for a broker to be their middleman.

Brokers will usually ask for compensation before every order, and their mode of payment can be in the form of commission, fee, cash, and the like.

The full-service broker

Full-service brokers can perform multiple services like retirement plans, insurance plans, market research, and investment plans.

They are professionals who can manage your finances and give you advice in their specialization. Since they can offer more than one service, they usually charge or expect a higher commission.

The more they bring in trades and the bigger their sales in their products, the higher their compensation is if they are under any brokerage firms.

The discount broker

If you feel like you can manage your portfolio and are just looking for someone to execute a trade, a discount broker is the best person for you.

Discount brokers charge lower than full-service brokers because they only perform the execution - they are compensated with salary and not commission.

With this said, you can cut more expenses if one discount broker executes for trades for you. Recently, discount traders come with online trading platforms that help them entice more investors.

Let's classify brokers

There are multiple types of brokers, but these specified ones are the most common. Even though their roles are all negotiating between two entities, they are very different from each other.

While some who have licenses can give you advice and execute a sale, others can only complete the deal for you.

The stockbroker

A stockbroker's role is to buy and sell stocks in the stock market since individuals can't do this directly. They are also known as investment brokers.

The forex broker

If you want to invest in a foreign exchange where you can buy and sell currencies, a forex broker has 24-hour access to the currency pair market across the globe. These transactions are always in currency pairs.

Real Estate Brokers

Real estate brokers are licensed professionals who can either represent a property seller or a buyer in the real estate industry.

A real estate broker's responsibility for representing sellers is market value determination, listing and advertising, ocular for potential buyers, advising, and offer submittals to the owner if he can consider it. 

Being a middleman, a real estate broker can also represent the buyer. For example, Mr. A is a real estate buyer, and he hired Mr. B to represent him.

Mr. B will now look for a property in Mr. A's desired area. When he manages to find the perfect property, he will prepare an initial offer and purchase agreement on behalf of Mr. A and try to negotiate with the seller.

He will also inspect the property and bargain for repairs. Finally, he will help Mr. A close and takeover.
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