What is a broker?

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What is a broker?

A broker is a person (or brokerage firm) who mediates in buying and selling trading instruments like stocks. As for online trading you will mostly have to sign up for an online broker which isn’t a person but a brokerage firm. For example: Plus500 is such an online broker with good reviews.

Their primary task is to act as an intermediator, but they can help you with other things as well, such sa:

  • Providing advise: investors or traders pay brokers a fee for trading advice.
  • Offering limited bank services: Brokers can offer you interest-bearing accounts and check writing.

How do online brokers make money?

You pay online brokers a commision for each time you buy or sell a stock or other trading instruments. It depends on which broker how much you have to pay.

There are also margin interest charges. This is interest charged to traders for borrowing against their brokerage account for trading purposes.

What else?

Lastly there could be service charges. These are charges for performing administrative tasks and other functions. For example, brokers charge fees to traders for individual retirement accounts (IRAs) and for mailing stocks in certificate form.

Important!

Any broker you deal with should be registered with the Financial Conduct Authority (FCA). The FCA regulates financial firms providing services to consumers and maintains the integrity of the UK’s financial markets.

 

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