Stockbroker

A stockbroker is a financial professional and specialist who buys and sells stocks as per the direction provided by the clients. A stockbroker is basically a middleman carrying expertise and the authority to buy or sell stocks on the stock exchange.

Who is a Stock Broker

A stockbroker, also known as a broker, is a financial market representative who operates in securities. Their primary job role dictates obtaining purchase and sale orders and execution of the same. Market participants or investors rely on their expertise and knowledge regarding market dynamics to invest in stocks and other investment options.

• Share brokers either work individually or as part of a brokerage firm.
  
  
• A broker is officiated after their registration with a recognised stock exchange such as the Bombay Stock Exchange or by working for a brokerage firm. Such brokers levy a charge in the form of commission, fee, or mark-up. This charge widely varies from broker to broker. Some dealers charge a flat fee, whereas some levy a percentage of the securities value traded.
  
  
• The share market brokers’ foray is dominated by discount brokers. This set of brokers has mustered widespread popularity because of their low charges, which make the security market more accessible to laymen.
  
  
• A key distinction between a discount broker and a regular stockbroker is that the latter is required to have a profuse knowledge of the market and has to go through arduous examination routines, while these parameters are not compulsory for a discount broker. 

Functions of Stock Brokers

Here are the significant roles of a stockbroker-

• Seamlessly managing the investment portfolio of an investor
• Buying and Selling securities on behalf of the client
• Carefully analysing and interpreting the financial reports
• Offering detailed investment advisory services
• Suggesting to the investors about the potential investment scope and opportunities

Types of Stock Brokers

Now that you know what a stockbroker meaning is, here are the different types of share brokers listed in detail-

• Traditional or Full-time Brokers

Full-time Brokers provide a vast assortment of products and services to its customers. These services involve securities trading, investment advice, retirement planning, management of investment portfolio, taxes on capital gains, etc. Full-time stockbrokers charge a hefty commission, however, given the range of their services, such cost might justify. 

As was earlier mentioned, such brokers go through rigorous training and examinations to attain the job and thus have in-depth knowledge regarding the stock market. Therefore, they are adequately trained to make a bid on your behalf, steer your portfolio to its maximum earning potential and minimise risks. 

• Discount Brokers

Discount or online stock brokers dominate the band of brokers. Along with their inexpensive nature, they also offer convenience to the laymen in terms of time and place utility. Market participants do not need to personally meet discount brokers and carry out their investments through the Internet. 

Investors with minimal disposable income can also start investing in the stock market through discount brokers. However, not all discount brokers offer the same level of expertise as a traditional broker and thus are a less profitable option for companies and individuals who can afford hefty investment corpus and costs. 

The following table illustrates the difference between Traditional Stock Broker and Discount Broker-

There are two other subtypes of stockbrokers who operate in the stock market. These are – 

• Jobbers

These are independent brokers who trade in securities for their own sake and not on behalf of other investors. They are not licensed to trade in someone else’s name and cannot levy commissions from others.

They quote two prices on stocks, one of which is the buy price quote and the other is the sale price quote. The gap between these two prices is their profit margin. 

• Arbitrageurs

This subset of stockbrokers is known to purchase securities from one stock exchange at a lower price and then sell the same at a higher price in a different stock exchange.

You may also want to know How to Build a Career in the Stock Market

Qualifications of a Stock Broker

Here is a brief overview of the stock broker qualifications required-

• Examination

A stockbroker must pass the Financial Industry Regulatory Authority's General Securities Representative Exam (FINRA). A person must be funded by a FINRA member firm or a Self-Regulatory Organization (SRO).

• Education

If a stockbroker wishes to work with an institutional client, they must have a bachelor's degree in finance or business administration. It is also preferable to know accounting processes, financial forecasting, and planning, as well as relevant rules and regulations.

• Experience

A stockbroker can begin working for a brokerage business in any function, even as a college intern, and obtain on-the-job experience. To be a stockbroker, however, he or she must be aware of accounting standards and financial market rules.

How The Advent Of The Internet Has Impacted The Stock Market

The rise of online stock brokers and investment platforms is a testimonial to the intensity of impact the internet has had on the stock market. Earlier, only high-end individuals could transact in the stock market by paying high charges to full-time brokers. However, after the ease in accessibility of the stock market and share stockbrokers on the internet, the stock market has percolated to a much more convenient level.

The shift in the stock market has significantly elevated the volume of transactions that took place and also forged the way for start-ups and small-scale businesses to raise capital by releasing stocks in the market. The stockbrokers play a crucial role in aiding investors to transact in the stock market day in and day out.