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A broker is a person or firm who arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Neither role should be confused with that of an agent—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 and customers: know about them, starting with who they are. It is a very important component of business strategy and a major factor in maintaining competitiveness ...
and
market data Example of a stock chart, the stock shown is SourceForge, Inc. In finance, market data is price and Trader (finance), trade-related data for a financial instrument reported by a trading venue such as a stock exchange. Market data allows traders a ...
. 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, sometimes in exchange for offering less advice or services than full service brokerage firms. A
broker-dealerIn financial services, a broker-dealer is a natural person, company (law), company or other organization that engages in the business of trading security (finance), securities for its own account or on behalf of its customers. Broker-dealers are at ...
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 and the
Financial Industry Regulatory Authority The Financial Industry Regulatory Authority (FINRA) is a private American corporation that acts as a self-regulatory organization (SRO) which financial regulation, regulates member brokerage firms and exchange (organized market), exchange markets. ...
(FINRA), which regulate
stockbroker A stockbroker, share holder registered representative (in the United States and Canada), trading representative (in Singapore), or more broadly, an investment broker, investment adviser, financial adviser, wealth manager, or investment professiona ...

stockbroker
s in the United States.


Etymology

The word "broker" derives from
Old French Old French (, , ; French language, Modern French: ) was the language spoken in Northern France from the 8th century to the 14th century. Rather than a unified Dialect#Dialect or language, language, Old French was really a Linkage (linguistics), ...
''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, a broker-dealer is a natural person, company (law), company or other organization that engages in the business of trading security (finance), securities for its own account or on behalf of its customers. Broker-dealers are at ...
* Business broker * Shipping agency * Auto transport broker * Commodity broker * Customs broker * Information broker (data broker) * Information consultant, Information broker or consultant * Insurance broker * Intellectual property broker * Joint venture broker * List broker * Matchmaking * Message broker * Mortgage broker * Pawnbroker * Power broker (term) * Prime brokerage * Real estate broker * Shipbroking * Sponsorship broker * 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