A broker is a person or firm who arranges transactions between a
buyer
Procurement is the method of discovering and agreeing to terms and purchasing goods, services, or other works from an external source, often with the use of a tendering or competitive bidding process. When a government agency buys goods or serv ...
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.
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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 an important component of business strategy and a major factor in maintaining competitiveness. Mar ...
and market data. 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.broker-dealer
In financial services, a broker-dealer is a natural person, company or other organization that engages in the business of trading securities for its own account or on behalf of its customers. Broker-dealers are at the heart of the securities and ...
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) that regulates member brokerage firms and exchange markets. FINRA is the successor to the National Associa ...
(FINRA), which regulate stockbroker
A stockbroker is a regulated broker, broker-dealer, or registered investment adviser (in the United States) who may provide financial advisory and investment management services and execute transactions such as the purchase or sale of stocks a ...
s in the United States.
Etymology
The word "broker" derives from Old French
Old French (, , ; Modern French: ) was the language spoken in most of the northern half of France from approximately the 8th to the 14th centuries. Rather than a unified language, Old French was a linkage of Romance dialects, mutually intellig ...
''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
Car brokers specialise in helping car buyers source and buy cars. They typically offer services such as finding a particular used car model to fit a budget, getting the lowest price on a new car, or negotiating with a used car seller on behalf of ...
* Broker-dealer
In financial services, a broker-dealer is a natural person, company or other organization that engages in the business of trading securities for its own account or on behalf of its customers. Broker-dealers are at the heart of the securities and ...
* 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 o ...
* Shipping agency
* 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
* Corredor Público
* Customs broker Custom brokers or Customs House Brokerages are working positions that may be employed by or affiliated with freight forwarders, independent businesses, or shipping lines, importers, exporters, trade authorities, and customs brokerage firms.
North ...
* Freight broker A freight broker is an intermediary between a shipper and a freight service provider. Freight brokers can specialize in certain types of freight, such as equipment hauling on lowboys, oversize, bulk tanker, auto, or other types of freight tran ...
* Information broker
A data broker is an individual or company that specializes in collecting personal data (such as income, ethnicity, political beliefs, or geolocation data) or data about companies, mostly from public records but sometimes sourced privately, and s ...
(data broker)
* Insurance broker
An insurance broker is an intermediary who sells, solicits, or negotiates insurance on behalf of a client for compensation. An insurance broker is distinct from an insurance agent in that a broker typically acts on behalf of a client by negot ...
* Intellectual property broker
* Joint venture broker
* List broker
* Matchmaking
Matchmaking is the process of matching two or more people together, usually for the purpose of marriage, in which case the matchmaker is also known as a marriage broker. The word is also used in the context of sporting events such as boxing, in ...
* Message broker
* Mortgage broker
A mortgage broker acts as an intermediary who brokers mortgage loans on behalf of individuals or businesses.
Traditionally, banks and other lending institutions have sold their own products. As markets for mortgages have become more competitive, ...
* Pawnbroker
A pawnbroker is an individual or business (pawnshop or pawn shop) that offers secured loans to people, with items of personal property used as collateral. The items having been ''pawned'' to the broker are themselves called ''pledges'' or ...
* Power broker (term)
* Prime brokerage
Prime brokerage is the generic name for a bundled package of services offered by investment banks, wealth management firms, and securities dealers to hedge funds which need the ability to borrow securities and cash in order to be able to inves ...
* Real estate broker
* Shipbroking
Shipbroking is a financial service, which forms part of the global shipping industry. Shipbrokers are specialist intermediaries/negotiators (i.e. brokers) between shipowners and charterers who use ships to transport cargo, or between buyers and ...
* Sponsorship broker
* Stockbroker
A stockbroker is a regulated broker, broker-dealer, or registered investment adviser (in the United States) who may provide financial advisory and investment management services and execute transactions such as the purchase or sale of stocks a ...
* Office broker
* Yacht broker
References
Further reading
* Ronald S. Burt. 2004. “Structural Holes and Good Ideas.” ''American Journal of Sociology'', Vol. 110, No. 2, pp. 349-399
External links
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{{Authority control
Financial services occupations