A brokerage house or firm forms a financial institution that allows investors and traders present in the stock market to sell and purchase financial securities. Though the system is most of online now where one does not need any intermediary still there are certain areas where one has to hire a broker. For the execution of a contract within the stock market, you need to have two parties in which one is a buyer called long position holder, and the other one is seller called short position holder. Fundamentally a broker plays the role of an agent amid seller and purchaser and makes it possible for them to perform trade on different securities. For imparting such services, the brokerage houses get costs in the shape of fees or commission whenever the deal is carried out. You can have two types of brokers in the financial market as:
- Traditional or full- service brokers
- Discount brokers
Full –service brokers or traditional brokers have been working in the stock market for many decades and can be said to be the oldest. They normally carry out more in addition to merely performing as an agent to complete the process of trading. In their services is included thorough research regarding the stock market to provide needed counsel to the players found in the stock market. Very frequently these brokerage houses provide margin loans additionally to some clients to pay for investment on credit that shall be done with required terms and conditions in view.
Online brokers or discount brokers usually take from their customer’s relatively less commission in comparison to full-service brokers. The reason working behind realising cheap fees is that they permit their customers to execute a trade through computerised, automated system of trading. In this system of trading, there is no need of any actual broker to facilitate the process of trading. You can get detailed information from Zerodha Kite Review about their new policies.
The method that these discount brokers utilise to provide such inexpensive services may be taken that these brokers carry out orders merely several times within a day. They, first of all, collect orders which have been produced by a big number of small traders or investors into a single block trades that tend to be created at particular times within a day.
Advantages of discount brokers
Any discount broker will not provide trading advice, but they facilitate the process of trading for very low costs as compared to a full- service broker.
Investors or traders in the market, who sell or purchase financial securities via discount brokers bank considerable money on deals and fees. It adds to their capital in a great way that may be utilised to perform trade and make more money in the market.
Frequently investors will be needed to retain their position for an extended span of time than it shall be really needed to compensate bulky commission. Sometimes discount brokers try to push some stocks only to make a large commission.