What Is A Broker?

What is a Broker? In trading securities a broker is an agent that assists with a transaction. There exist many different types of brokers who specialize in many different facets of the investment world. From a currency broker to a bond broker however they all have one major element in common: brokers act as the middle-men when a financial instrument is exchanged. Additionally many brokers, typical stock brokers, offer additional services to their clients such as complete investment portfolio management. These types of full-service stock brokers are becoming less and less commonplace as the investing world goes digital. Much like travel agents, brokers are feeling the sting from an industry that now offers the average user an online and automated tool to replace a real person.

How Brokers Operate

Whether a currency broker or a stock broker, all brokers need to make their commission. How they get this fee for managing one’s transaction varies. Online stock brokers working for automated websites are usually paid by the brokerage firm a salary, and the consumer pays this salary via per trade fees. Stock brokers who work in their historical role as transaction executer and portfolio managers make their money primarily from commissions. When they trade stocks based on their experience utilizing their client’s money, the profit they make their clients is paid to them on a commission percentage. Currency brokers are another broker entirely. While much fewer in number, their tactics for making money vary. All currency brokers make their money by acting as both the intermediary between a buyer and a seller. In this difference lies a portion of each unit of a currency traded. The currency broker takes his commission from this amount. Additionally a currency broker can increase this bid-ask spread commission with benefits awarded by the institutions which govern the currency trading markets.

What Is A Broker?

How Brokers Operate

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