Most of us don’t know what a brokerage firm is and what is the purpose of hiring them? In simple words we can explain a brokerage firm as a company or an organisation that have legal permissions to be involved into trading of securities. They also provide assistance in analysing and advisory services to their clients. Let’s discuss some of the most common questions raised about brokerage firms.

What kind of professionals’ work in brokerage firms?

People working in a brokerage firm are traders and research analysts who have expertise in their fields. Traders working for these brokerage firms are authorized to sell securities on behalf of their clients and the organisation they are working for.

How do a brokerage firm make money?

When a client hires brokerage firm services, they get the best knowledge and expertise of the securities in exchange of money. All they do is acting as a intermediate between the buyer and the seller of security for a certain amount of fee. Earning through proprietary trading is another way of their earnings.

Different types of brokerage firms

Full-service brokerage firms

They offer advice in investment strategies, research and updated news. Their multiple services makes them premium and expensive services provider.

Discount brokerage firms

Discount brokerage firms charges lower fee than full-service brokerage firms and they are good for people who already have some knowledge and experience in trading.

Introducing brokerage firm

These types of organisations deal in future markets and orders on commodities exchange from other established firms.

Things to keep in mind before investing in any brokerage firm

Make sure the brokerage firm you are going to appoint for yourself do poses all the required licenses for trading in stocks and bonds. They must also have clearance certificates. One must know everything about the cost they are going to get charged and fee structure of brokerage firm. Performance bond requirements, dispute handling, minimum account size requirements and previous track record of a firm are also some of the important things that you must consider before choosing any brokerage firm.

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