A brokerage house forms a financial institution which makes easy for the investors and traders found in the financial market to sell and purchase financial securities. For the implementation of a contract within the stock market you need two parties like buyer known as long position holder and the other is seller called short position holder. Fundamentally a broker plays the part of an agent amid seller and buyer and makes possible for them to perform trade on different financial securities.
For dispensing these services, a brokerage house gets compensation by way of fees or commission at whatever time the deal is carried out. You will find two kinds of brokers in the stock market as:
Traditional or full-service brokers
The full-service brokers or traditional brokers happen to be the oldest stockbrokers within the financial market. They generally do more than merely performing in the capacity of an agent to carry out the process of trading. In their services is as well included thorough researching regarding the stock market to proffer essential suggestions to the investors present in the stock market. Very frequently these brokerage houses as well provide margin loans besides to some customers to buy investment on credit that shall be bounded by required rules and regulations.
On-line brokers or discount brokers in India take from their customer relatively less as compared to the full-service brokers. The cause working behind cheap commission is that they allow their customers to carry out trade through a computerised system of trading or automated system in place of appointing a real broker to aid them to complete the process of trading. The trader can call the terminal operator and trade in the market as per own wish as the terminal operator is there to help out in executing the order.
The mechanism that they make use of to provide such low-priced service is that the discount brokers complete orders merely sometimes within a day. They at first collect orders which have been produced by a lot of small investors and put them into single block trades that are created at some particular times within a day.
Below are a few draws of the discount brokers in comparison to traditional brokers
- A discount broker usually does not provide advice about trading, but they make the possible process of trading for very cheap commission as compared to a full-service broker.
- The investors and the traders within the stock market who sell and purchase financial securities via discount brokers bank a considerable sum of money on commissions and deal that leave them enough capital that they can put in the investments and take home good income.
- Frequently the investors are needed to stay at their position for an extended period then it will be really needed to make up for a big commission. Sometimes the discount brokers press on some stocks merely to make big commissions.
- Several discount brokers provide education tools, besides, to aiding the traders and investors take a good decision about an investment.