Going by technical term a brokerage firm or house constitutes a financial institution which proffers chances to traders and investors who are readily available in the stock market involved in purchasing and selling financial securities. In case you wish to execute an agreement in the industry, two parties are required for it for example buyer who retains long-term position and on the other hand seller who can be called here short position holder. Basically, it must be understood that the broker functions as an intermediary in between purchaser and seller and tenders prospects of carrying out the trade on varied financial securities. Brokerage houses and firms in lieu acquire recompense by means of fees and commission whenever there occurs any transaction. You will note the presence of two classes of brokers as:
Two kinds of brokers present in the industry are discount brokers and traditional brokers that aid traders and investors in performing trade evenly and accumulate the money. For a broker, it is not the status that matters but the moment he compromises with the rate of brokerage he falls into the category of a discount broker. There are some situations where client prefers to have a discount on brokerage rates. For a client who deals in once in a week or twice it does not matter much, but for a regular trader, the high rate of brokerage can be difficult and hence does not agree to that. In such case, the broker has to reduce the rate of brokerage to tap the client.
Full-service brokers / traditional brokers
These full-service brokers are said to be traditional brokers who make their presence in the stock market. They normally receive too much more than simply acting similar to an intermediary to accomplish the trading process. In the list of their services they also include conducting proper research regarding the most recent developments of the stock market and also proffer crucial recommendations to the traders that are trading in the stock market. At times the brokerage companies also arrange margin loans for some clientele to make them able to acquire investment on credit that after noting down necessary terms and conditions is agreed by both parties.
About Discount brokers
These discount or online brokers realize from their clientele fairly low brokerage charges in India than traditional brokers. It is the electronic medium that can be taken as the cause by way of which they enable their clientele to undertake trade for instance desktops and laptops which function as computerized trading systems as a substitute to a real stockbroker who can assist them in carrying out trading method.
The procedure that is adopted by discount brokers for proffering low brokerage is thought to be the orders that are executed scarcely few times in a day. The process they use is that they draw together all the orders which are mainly put forth by small investors being large in number are drawn in one block trades that come into being at correct times in a day.