stock exchange

What Does A Stockbroker Do?

Summary: This section describes the work and services offered by a stockbroker or a brokerage firm. They can be thought of as the lubricant that makes various parts of the stock market work smoothly together. We also discuss how their services might be suitable - or not - for you, the individual.

A stockbroker has the role of being in between buyer and seller when a stock or share is traded. It is they that enable the trade to be completed smoothly.

If it were not for such a middleman / matching service, we would all need to spend months hoping that we somehow crossed paths with someone who was willing and able to trade stock in the same company as us and at a price we found acceptable.

Clearly, there is a need for these middlemen (and women!) in order to enable the smooth running of a stock exchange.

As you will from the pages below, there are a number of different service and business models. However, for a broker to make money, they generally charge a fee in the transaction. In the case of stocks, the difference is called the 'bid/offer spread'. This means that the price quoted to you has a commission built in.

To remember which term is which, try this: 'bid to get rid'. This means that the 'bid price' is being offered to entice you to sell your holdings. The offer price is being 'offered' to you to make you want to purchase.

Though with the recent advances of the internet and the impact that new technology is having on hundreds of industries, the traditional role of a stockbroker is being changed. New online only firms enable trades and information exchange at very low costs and with almost instantaneous precision.

As explained elsewhere on this site, there are generally three levels of service. These are:

Execution Only Stockbrokers

Advisory Management Stockbroker

Discretionary Management Stockbroker

Also related to this topic are:

Internet Stock Broker

Stockbroker Commission

Discount Stockbroker

Stockbroker Misconduct

Stockbroker Fraud

Stockbroker Churning

A question to ask a stockbroker

How To Choose A Stockbroker