The word broker comes from English. A good Dutch translation of broker would be: stockbroker. Okay, but what does a ‘stock broker’ do now? Which broker suits me and what should I pay attention to?
Broker fulfills two roles
A broker can be either a person or a company. A broker can therefore fulfill two different roles. A broker as a company is a member of the stock exchange and accepts orders from both private individuals and institutional investors. The broker acts as a broker by bringing buyers and sellers together. These can be shares, bonds or derivatives such as options and sprinters. The broker earns from the commissions paid on these transactions. The broker therefore has no interest in the direction of the stock market and is therefore not allowed to trade on its own account. There are various ways in which the broker can link buyers and sell orders (brokerage). At most investment banks this is done electronically on an online platform. Larger transactions can also be communicated to the market makers by telephone. Finally, there are the so-called dark pools where large orders can be placed anonymously.
Broker as a person
A broker as an individual trades for the company’s own account. The company, usually a (investment) bank, tries to make a profit on the financial markets by deploying capital. There are banks that, in addition to trading for their own account, are also brokers for private individuals and institutional investors. These are called broker-dealers. Examples include: Saxobank, RBS and Ageas . These brokers must meet strict requirements because otherwise they can benefit from insider information through insight into the buy or sell orders of their customers. The internal separation of these two activities works via Chinese Walls. Both departments must be kept strictly separate.
Broker for private individuals
The broker market has changed significantly in the last ten years. This is partly due to the enormous rise of the internet. The Internet has made markets and stock exchanges more accessible to private investors. There are many different (online) investment banks from which consumers can choose. For example, professional brokers are available to consumers such as Lynx, deGiro, Todays Brokers and Interactive Brokers . They are mainly known for their extensive trading platform and low transaction costs. On the other hand, you will have to put more effort into getting to know the platform and you may therefore become discouraged. Some US brokers require deposits to be made via offshore accounts. Other well-known investment banks are Binckbank and Alex . They focus more on a user-friendly online trading platform. They are generally cheaper than traditional banks, but it is difficult to compete with Lynx on, for example, transaction costs and options. It is also important to look at the streaming costs. These are costs you pay for the subscription to watch the prices move ‘live’. Prices on the stock exchange can fluctuate greatly and that is why streaming prices are highly recommended. However, if you want streaming prices from multiple exchanges, this can add up quite a bit.
Which broker suits me?
The Association of Securities Owners (VEB) regularly conducts research into brokers and assesses them on a large number of points. It is smart to see what assessment this objective association gives. Should you consider investing yourself? First carefully investigate the advantages and disadvantages of the different providers. You can of course find the necessary information on the websites of these brokers. Also think in advance what exactly you want. Do you want to invest actively or passively? Do you want to start day trading or are you looking for solid capital accumulation? It is also important to look at which instruments you want to work with. Are these bonds, shares or is that currency trading, also called Forex. These are important questions you need to ask yourself in order to make a decision.
Become a broker
The requirements placed on brokers are increasingly strict. The financial world has become highly advanced. Partly for this reason, brokers often ask university-educated people who are still following an internal training program. The salary of a broker varies widely but is often made dependent on performance. A well-known broker, for example, is Optiver.