Share Broker

Details

Category: Shares

A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors. A broker may be employed by a brokerage firm. A transaction on a stock exchange must be made between two members of the exchange—an ordinary person may not walk into the New York Stock Exchange (for example), and ask to trade stock. Such an exchange must be done through a broker. There are three types of stock broking service. Execution-only, which means that the broker will only carry out the client's instructions to buy or sell. Advisory dealing, where the broker advises the client on which shares to buy and sell, but leaves the final decision to the investor. Discretionary dealing, where the stockbroker ascertains the client's investment objectives and then makes all dealing decisions on the client's behalf.

Roles similar to that of a stockbroker include investment advisor, and financial advisor. A stockbroker may or may not be also an investment advisor, and vice versa. Stockbrokers also sometimes or exclusively trade on their own behalf, as a principal, speculating that a share or other financial instrument will increase or decline in price. In such cases the term broker makes little sense and the individuals or firms trading in principal capacity sometimes call themselves dealers, stock traders or simply traders. There are many other types of traders within capital markets, for example trading within the foreign exchange market.

While the term "stockbroker" is still in use, more common terms are "broker", "registered rep." or simply "rep." — the latter being abbreviations of the official Financial Industry Regulatory Authority (FINRA) designation "Registered Representative", obtained by passing the FINRA General Securities Representative Exam (also known as the "Series 7 exam") and being employed ("associated with") a registered broker-dealer, also called a brokerage firm, typically a FINRA "member" firm. More restrictive FINRA licenses or series exams exist for brokers or reps that do not need the full array of capabilities with the Series 7 (see list of securities examinations). Variable products such as a variable annuity contract or variable universal life insurance policy typically require the broker to also have one or another state insurance department licenses.