Updated Feb 09, 2022

What do Stock Brokers Do?

Introduction

To effectively complete a stock trading transaction, you will need the assistance of an intermediary who will assist you in acquiring and selling stocks more efficiently. In this case, the intermediary might be either an individual or a business that has been approved to deal in stocks on your behalf.

Financial institutions, individual investors, and corporations may all benefit from the services of a stockbroker, who is a registered financial market representative. A registered representative or a broker are other terms for a stockbroker. A stockbroker is often involved in acquiring or selling equities on national stock markets.

In general, a stockbroker is a person who provides a service to investors, such as buying and selling stocks. The primary responsibility is to purchase and sell stocks on behalf of clients. Additionally, stockbrokers assist their clients in gaining a thorough understanding of a stock, which allows investors to make more informed judgments regarding their investments.

Role of Stock Brokers

Stockbrokers are responsible for executing transactions for both institutional and retail clients. It is the primary responsibility to collect buy and sell orders and then execute those orders. When it comes to investing in securities, many market participants rely on stockbrokers' knowledge and experience about the market's movements and dynamics. A stockbroker might operate independently or as part of a brokerage business. Broker-dealers and brokerage businesses are often referred to as stockbrokers in addition to their other titles.

The following are some of the most important functions played by brokers in the stock market.

1. Make recommendations for the best deals

A broker is primarily involved in the trading of various sorts of securities. Brokers can advise traders on the best time to purchase or sell stocks and the best way to buy or sell stocks at the right price. They are not, however, registered investment advisors.

1. Taking care of trade

Brokers take orders from traders and execute them on the stock market. As soon as an order is placed successfully, traders are alerted. A trading platform, such as one offered by full-service, low-cost, or online brokerages, allows traders to place their orders. As soon as an order is finished, it is immediately reflected in the Demat account. When a trader buys or sells a share, the trader's account will be credited with the corresponding number of shares electronically.

1. Margin Financing

Investors in the stock market now have a lot of money in their wallets. Brokers supply funds to traders interested in taking advantage of leveraged positions by lending them their money. Before a trader can join the market and take a position, the trader must pay a margin amount to the broker. In most circumstances, this margin is equivalent to 50 per cent of the entire amount.

1. Charging Brokerage

Brokers ask traders for a commission for the services they give in return for their fees. Full-service brokers often charge a percentage of the deal's value. On every order, discount brokers charge a fixed fee that is specified and agreed upon in advance. There is no need to worry about brokerage expenses if you are interested in occasional trading. Still, brokerage costs may be pretty stressful for those who frequently participate in the market. They'll need to figure out ways to save money on brokerage costs, which is a top priority.

1. Loyalty

Inherent conflicts of interest may arise when the interests of stockbrokers and those of their clients are at odds since stockbrokers earn their living via commission payments. On the other hand, the broker must always put the customer's interests first. The obligation to the consumer is of the utmost importance. For example, excessive trading might be a problem. There should be no need for brokers to propose transactions to make money for themselves. Churning is a term used to describe the unlawful activity of excessive trading to boost their commissions.

Conclusion

To be an effective stock market broker, you must do these duties. As a result, SEBI (the Securities Exchange Board of India) regulates all brokers to guarantee that none engage in unethical tactics. The Securities and Exchange Board of India requires that all brokers who want to offer brokerage services do so by the board's standards (SEBI). For traders and investors, brokers are essential since they provide services that let them place orders and trade in the stock market. They also provide traders advice on how to go about achieving their goals in the markets.