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A broker is a person or firm who arranges transactions between a
buyer Procurement is the process of finding and agreeing to terms, and acquiring goods In economics Economics () is a social science Social science is the branch A branch ( or , ) or tree branch (sometimes referred to in bo ...
and a
seller Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. The seller, or the provider of the goods or services, completes a sale in ...

seller
for a
commission Commission or commissioning may refer to: Business and contracting * Commission (remuneration), a form of payment to an agent for services rendered ** Commission (art), the purchase or the creation of a piece of art most often on behalf of another ...
when the deal is executed. A broker who also acts as a seller or as a buyer becomes a
principal Principal may refer to: Title or rank * Principal (academia) The principal is the chief executive and the chief academic officer of a university A university ( la, universitas, 'a whole') is an educational institution, institution of higher ...
party to the deal. Neither role should be confused with that of an
agent Agent may refer to: Espionage, investigation, and law *, spies or intelligence officers * Law of agency, laws involving a person authorized to act on behalf of another ** Agent of record, a person with a contractual agreement with an insuran ...
—one who acts on behalf of a principal party in a deal.


Definition

A broker is an independent party whose services are used extensively in some industries. A broker's prime responsibility is to bring sellers and buyers together and thus a broker is the third-person facilitator between a buyer and a seller. An example would be a real estate or stock broker who facilitates the sale of a property. Brokers can furnish
market research Market research is an organized effort to gather information about target markets A target market is a group of customers within a business Business is the activity of making one's living or making money by producing or buying and selling Pr ...

market research
and
market data In finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investments. Savers and investors have money available ...
. Brokers may represent either the seller or the buyer but generally not both at the same time. Brokers are expected to have the tools and resources to reach the largest possible base of buyers and sellers. They then screen these potential buyers or sellers for the perfect match. An individual producer, on the other hand, especially one new in the market, probably will not have the same access to customers as a broker. Another benefit of using a broker is cost—they might be cheaper in smaller markets, with smaller accounts, or with a limited line of products. Some brokers, known as discount brokers, charge smaller
commission Commission or commissioning may refer to: Business and contracting * Commission (remuneration), a form of payment to an agent for services rendered ** Commission (art), the purchase or the creation of a piece of art most often on behalf of another ...
, sometimes in exchange for offering less advice or services than full service brokerage firms. A
broker-dealerIn financial services Financial services are the economic services provided by the finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation a ...
is a broker that transacts for its own account, in addition to facilitating transactions for clients. Brokerage firms are generally subject to regulations based on the type of brokerage and jurisdictions in which they operate. Examples of brokerage firm regulatory agencies include the
U.S. Securities and Exchange Commission The U.S. Securities and Exchange Commission (SEC) is a large independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929 The Wall Street Crash of 1929, also known as the Great Crash ...
and the
Financial Industry Regulatory Authority The Financial Industry Regulatory Authority (FINRA) is a private American corporation that acts as a self-regulatory organization A self-regulatory organization (SRO) is an organization that exercises some degree of regulatory authority over an in ...
(FINRA), which regulate
stockbroker A stockbroker is a regulated broker A broker is a person or firm who arranges transactions between a Purchasing, buyer and a sales, seller for a commission (remuneration), commission when the deal is executed. A broker who also acts as a seller ...

stockbroker
s in the United States.


Etymology

The word "broker" derives from
Old French Old French (, , ; Modern French French ( or ) is a Romance language The Romance languages, less commonly Latin or Neo-Latin languages, are the modern languages that evolved from Vulgar Latin Vulgar Latin, also known as Popular o ...
''broceur'' "small trader", of uncertain origin, but possibly from Old French ''brocheor'' meaning "wine retailer", which comes from the verb ''brochier'', or "to broach (a keg)".


Types of brokers

*Automobile broker *
Broker-dealerIn financial services Financial services are the economic services provided by the finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation a ...
*
Business broker Business brokers, also called business transfer agents, or intermediaries, assist buyers and sellers of privately held businesses in the buying and selling process. They typically estimate the value of the business; advertise it for sale with or w ...
*
Shipping agency{{Underlinked, date=February 2021 A shipping agency or shipping agent is the designated person or agency held responsible for handling shipments and cargo In economics, the word cargo refers in particular to goods or produce being conveyed ...
*
Auto transport broker An auto transport broker is a type of cargo broker that specializes in the shipping and transportation of vehicles. Most vehicles shipped in the U.S. are cars and trucks, but many brokers handle boats, RVs, motorcycles and other types of vehicles ...
*
Commodity broker A commodity broker is a firm or an individual who executes orders to buy or sell commodity contracts on behalf of the clients and charges them a commission. A firm or individual who trades for his own account is called a trader. Commodity contrac ...
*
Customs broker Custom brokers or Customs House Brokerages are working positions that may be employed by or affiliated with freight forwarder A freight forwarder, forwarder, or forwarding agent, is a person or company that organizes shipments for individuals o ...
*
Information broker An information broker (IB), also known as a data broker, is an individual or company A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal person, ...
(data broker) * Information broker or consultant *
Insurance broker An insurance broker is an intermediary An intermediary (or go-between) is a third party that offers intermediation services between two parties, which involves conveying messages between principals in a dispute, preventing direct contact a ...
*
Intellectual property broker An intellectual property broker mediates between the buyer and seller of intellectual property (IP) and may manage the many steps in the process of creating a deal with regard to the purchase, sale, license, or marketing of intellectual property ...
*
Joint venture broker A joint venture is a business entity created by two or more parties, generally characterized by shared ownership, shared returns and economic risk, risks, and shared governance. Companies typically pursue joint ventures for one of four reasons: t ...
*
List broker A list broker acts as an agent for those who wish to conduct direct marketing Direct marketing is a form of communicating an offer, where organizations communicate directly to a Target market, pre-selected customer and supply a method for a ...
*
Matchmaking Matchmaking is the process of matching two or more people together, usually for the purpose of marriage in Stockholm Marriage, also called matrimony or wedlock is a culturally and often legally recognized union between people called ...

Matchmaking
*
Message broker A message broker (also known as an integration broker or interface engine) is an intermediary computer program module that translates a message from the formal messaging protocol of the sender to the formal messaging protocol of the receiver. Messa ...
*
Mortgage broker A mortgage broker acts as an intermediary who brokers mortgage loan A mortgage loan or simply mortgage () is a loan In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individ ...
*
Pawnbroker A pawnbroker is an individual or business (pawnshop or pawn shop) that offers secured loan A secured loan is a loan In finance Finance is the study of financial institutions, financial markets and how they operate within the fi ...
*
Power broker (term) In political science, a power broker is a person who influences people to vote towards a particular client (i.e. elected official or referendum) in exchange for political and financial benefits. Power brokers can also negotiate deals with other ...
*
Prime brokerage Prime brokerage is the generic name for a bundled package of services offered by investment banks, Wealth management, wealth management firms, and Security (finance), securities dealers to hedge funds which need the ability to borrow securities an ...
*
Real estate broker A real estate broker, real estate agent or realtor is a person who represents sellers or buyers of real estate Real estate is property consisting of land and the buildings on it, along with its natural resource , Malaysia Malaysia ...
*
Shipbroking Shipbroking is a financial service, which forms part of the global Ship_transport, shipping industry. Shipbrokers are specialist intermediaries/negotiators (i.e. brokers) between shipowners and Chartering (shipping), charterers who use ships to tr ...
* Sponsorship broker *
Stockbroker A stockbroker is a regulated broker A broker is a person or firm who arranges transactions between a Purchasing, buyer and a sales, seller for a commission (remuneration), commission when the deal is executed. A broker who also acts as a sell ...

Stockbroker
* Office broker * Yacht broker


Further reading

* Ronald S. Burt. 2004. “Structural Holes and Good Ideas.” ''American Journal of Sociology'', Vol. 110, No. 2, pp. 349-399


References


External links

{{Authority control Financial services occupations