What Is a Broker?

Brokers—also known as trading members—perform a vital function in the stock

market. They execute transactions such as the buying and selling of stocks on
behalf of their clients. In return for this, they charge a brokerage commission.

But stock market brokers provide other services too. These include portfolio
management and financial advice, for example. With stock market transactions
taking place online, brokers also offer multiple platforms through which investors
and traders can access the stock market.

HOW BROKERAGE HOUSES SUPPORT TRADERS

Back when stock exchanges were a physical venue, brokerage firms represented
their clients on the exchange floor. As the legal representatives of their customers,
they carried out buy and sell orders as per the client’s instructions.

Brokers are registered members of the stock exchange. Moreover, they have to
comply with the regulatory guidelines imposed by the market regulator, the
Securities and Exchange Board of India (SEBI). Find out more about stockbrokers in
India.
Today, India has a dematerialised stock market where trades are executed online.
Stockbrokers still carry out the same primary function—executing orders on their
clients’ behalf. But the venue has moved to digital channels.

FUNCTIONS OF A BROKERAGE FIRM

 Order execution: Brokers execute their clients’ trading orders online. For this, the
brokerage charges a commission. This may be either a flat fee per transaction or a
percentage of the transaction value.
 Trading platforms: Having multiple secure platforms through which clients can place
orders is essential nowadays. Most of the bigger brokers provide trading apps and
software for smartphones, laptops, and tablets. You could also trade and invest via
phone or chat.
 Financial advisory: Both new and seasoned investors depend on stock
recommendations from their broker. But stockbrokers are required to disclose all
information when recommending a stock—that includes being transparent about the
risks.
 Margin financing: Traders who have accounts with large brokerage funds can
use margin funding facilities. This essentially means borrowing funds from the
broker to take bigger positions in the market.
To perform these stockbroking functions, the firm must get the necessary licenses.
For this purpose, they must register with SEBI and become a member of a stock
exchange. Know the advantages of using brokerage firms.

TYPES OF BROKERS
1. Full-service broker
Full-service brokers also provide educational materials and financial advisory. These brokers
offer customised support through tailored brokerage plans and services for investors with
different interests and varying levels of expertise.

2. Discount brokers
While full-service brokers provide a whole catalogue of services, discount brokers
focus on the basics. Discount brokers carry out buy and sell orders for their clients
but do not offer any additional services. For this reason, they also charge a much
lower commission. In some cases, the charge may be as low as Rs 10 per
transaction.
3. Robo-advisers
Robo-advisers are automated digital platforms that provide financial planning
services online. They use algorithms to come up with the financial advice and require
with very little human supervision. How do they work? The client completes an online
survey to provide information about their financial situation and goals. The robo-
adviser uses this data to offer investment advice.