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stock broker can be either a person or a firm that trades in the stock market on behalf of its clients.
Stock brokers are responsible for issuing the buy or sell orders in the stock market when their clients ask them to do so. They do all the buying and selling of securities for their customers by charging a fee called a brokerage.
The transactions in a stock market can be done by two members of the exchange only. Therefore, any individual wishing to invest in the stock market cannot just go and invest in the market, but has to go through a registered broker to carry out his transaction. The stock broker can only carry out the client's instruction by buying or selling the stocks. While the brokers may advise their clients on the buying and selling of their shares, the client has the final say and the broker must carry out their wishes. Discretionary dealing is another service of the stock broker where the broker is responsible for all the dealings and decision making in the market on his client's behalf.
There are three types of stock brokers:
- Full Service Broker
- Discount Broker
- Direct-Access Broker
A full-service broker generally provides their clients with various financial services depending on the requirements of the clients. The services provided by them may be investment research advice, retirement planning and tax planning. A discount broker executes the client's instruction by buying or selling the stocks, but refrains from offering any kind of investment or financial advice. The direct access brokers are those who make the client's trade directly with electronic communication networks (ECN's) making the trading much faster.
Investors who are new to the stock market can go to a full service broker who will help the investors with necessary information, thus helping them to decide on which stock to invest in. For the experienced investors who are very well aware of the market, a discount broker is sufficient to do the trading on his or her behalf. Day traders generally prefer to use direct access brokers.
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