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What is a stock broker firm and what is its work?

What is a stock broker firm and what is its work? A stock broker firm is a financial institution that helps in buying and selling of shares, bonds and
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What is a stock broker firm

What is a stock broker firm?

A stock broker firm is a financial institution that helps in buying and selling of shares, bonds and other financial instruments between investors and stock markets. All such firms are based on the rules and guidelines of SEBI. These firms have some important elements which are important for investors and stock market such as intermediary, help in trading, demat and trading account, stock broker, commission and services. All these are explained in detail below.

How does a stock broker firm work?

  • Intermediary: Stock broker firms act as an intermediary between investors and the stock market.
  • Help in financial trading: Broker firms help investors to trade in shares, bonds and other financial instruments.
  • Demat and trading account: To invest money in the stock market and for trading, demat and trading accounts are required which are opened by a stock broker firms.
  • Share broker: Share brokers are the people working in the firm who execute orders for buying and selling shares for the investors' money.
  • Services: Stock broking firms also provide other services like investment advice, research reports and portfolio management so that you can invest in a better way.
  • Commission: Stock broker firms charge commission from investors for their services. All firms have different commissions which you can check on their websites and apps.
Note: Before investing money in the stock market, you must take advice from a professional investor as it can be risky.

How many types of stock brokers are there?

There are mainly three types of brokers in the stock market: full-service brokers, discount brokers and jobbers.

1. Full-time brokers

Full-time brokers provide a wide range of services to their clients. These services include securities trading, investment advice, retirement planning, management of investment portfolios, tax on capital gains, etc. Full-time stockbrokers charge heavy commissions.

2. Discount Broker

Discount brokers are brokerage firms that help investors buy and sell in the stock market at low fees, and they typically do not provide investment advice or recommendations.

3. Jobber and Arbitrage

  • Jobber: These are independent brokers who trade in securities for themselves, not on behalf of other investors. They are not licensed to trade in anyone else's name and cannot charge commissions to others.
  • Arbitrage: This is a subset of stock brokers who are known for buying securities at a lower price from a stock exchange and then selling them at a higher price on another stock exchange.

Qualifications of Stock Brokers

Stockbrokers must pass the Financial Industry Regulatory Authority's Common Securities Representative Examination (FINRA). A stockbroker must have a bachelor's degree in finance or business administration.