is a person or firm who arranges transactions between abuyerand asellerfor acommissionwhen the deal is executed. A broker who also acts as a seller or as a buyer becomes aprincipalparty to the deal. Neither role should be confused with that of anagentone who acts on behalf of a principal party in a deal.
A broker is an independent party, whose services are used extensively in some industries. A brokers prime responsibility is to bring sellers and buyers together and thus a broker is the third-person facilitator between a buyer and a seller. An example would be a real estate broker who facilitates the sale of a property.1
Brokers can furnishmarket researchandmarket data. Brokers may represent either the seller or the buyer but generally not both at the same time. Brokers are almost always necessary for the purchase and sale offinancial instruments. Brokers are expected to have the tools and resources to reach the largest possible base of buyers and sellers. They then screen these potential buyers or sellers for the perfect match. An individual producer, on the other hand, especially one new in the market, probably will not have the same access to customers as a broker. Another benefit of using a broker is costthey might be cheaper in smaller markets, with smaller accounts, or with a limited line of products.1
Some types of brokers, such as real estate brokers, often have strict state requirements for using the term, while others, such as aircraft brokers, typically have no formal licensing or training requirements.citation needed
Some brokers, known as discount brokers, charge smallercommission, sometimes in exchange for offering less advice or services than full service brokerage firms.2
Abroker-dealeris a broker that transacts for its own account, in addition to facilitating transactions for clients.3
Brokerage firms are generally subject to regulations based on the type of brokerage and jurisdictions in which they operate. Examples of brokerage firm regulatory agencies include theU.S. Securities and Exchange Commissionand theFinancial Industry Regulatory Authority(FINRA), which regulatestockbrokersin the United States.
The word broker derives fromOld Frenchbroceursmall trader, of uncertain origin, but possibly from Old Frenchbrocheormeaning wine retailer, which comes from the verbbrochier, or to broach (a keg).4
Spiro, Rosann L.; Stanton, William J.; Rich, Gregory A. (2003).
What is a Discount Broker?Investopedia. March 5, 2019.
JOHNSTON, KEVIN B. (February 23, 15 Broker-Dealer Firms in 2018Investopedia.
Salt of the earth: High-end auto broker has seen his share of scrap
Save time, hassle, and money with our guide to painless car buying and leasing
Articles with unsourced statements from January 2018
This page was last edited on 15 July 2019, at 13:24