1: stock broker definition
2: stock broker works
3: stock broker vs stock dealer
4: coverage for stock broker
Opening information:
Stock brokers are commission makers using any of the materials or matter.
The materials or matter would be anything that is completely based on a stock to make a commission.
This article contains information about what is stock broker in the stock market, how stock brokers work, and what is the difference between a stock broker vs a stock dealer, finally dive into one example of a stock broker.
1: stock broker definition
By selling and buying anything based on the activities of the commission, not all the subject categories need a strong license.
When a public industry issues multiple billions of shares to raise the capital of their business to the general public.
Simply they won’t sell all the shares to one Investor or find hundreds and thousands of Investors for the billions of shares outstanding.
This is huge work, that’s where the stock brokers came from. They help the
Millions of Investors around the world access certain stocks within seconds by using their accounts.
The shares are the real ownership of the business. the accumulation of shares of pieces is called stock.
So when one person uses the stock to make a commission is called a stock broker.
But to become a stockbroker, the person had to write an exam of security industry essential SIE, after passing the SIE exam. The person had to take the series 7 exam to get a license to trade stocks and bonds, which is required by the financial industry regulator authority FINRA.
Unlike other brokers, the stockbroker had to know all the strong rules and regulations, and different levels involving securities exams to approve the license to trade with the commission.
So anyone selling public stock securities without any license would be strictly punishable. next, let’s see how stock brokers work.
2: stock broker works
Once the person is qualified as a stockbroker after passing a series 7 exam, he has the authority to register with FINRA, once they check and approve the license as a FINRA member.
He would have the authority to trade the Securities for commission. So any stock broker would have two choices, which are to start their own stock brokerage business or to work under any of the stock brokers’ firms as an employee.
The person who started their own business with his license, must register their stock broker business with Security and Exchange Commission (SEC), and also with the stock exchange.
he would only be able to trade on stocks and bonds because each type of Securities had different exams to trade on commodities, derivatives, currencies extra….
So the specific stock broker had to finish the required exams to trade on all types of Securities or hire a stock broker who held a license or rights for trading such types of securities.
On the other hand, if the person works under any brokerage employer, then he would sell any type of security if his employer holds a full license to trade on any type of security.
He won’t have to register with the SEC and stock exchange as a broker business because he is working as an employee under some employer.
Any person who works as a broker under the licensed broker does not need any license to sell Securities. Because he or she is using the other person’s license to trade public stock and bonds.
Most of them confuse stock brokers and stock dealers so now let’s dig into the difference between them.
3: stock broker vs stock dealer
Stockbrokers and dealers must register with FINRA, SEC, and also with the stock exchange. However, the stockbrokers and dealers had different purposes and uses.
The stock broker is the commission maker which makes commissions based on the Investor’s buying and selling activities.
However, the stock dealer is the liquidity giver to the market for the specific pairs of stock or bonds. They make money on the spread. The stock dealers are also called market makers.
So the key difference between the broker and dealers is the purpose, in which brokers work on making commission, and dealers work on creating a spread.
What if the stockbroker of the brokerage business gets into bankruptcy, now let’s jump to learn, how to protect clients’ or Investors’ money while in bankruptcy period.
4: coverage for stock broker
SIPC is a security Investor production corporation. This helps the investor to profit from the loss of bankruptcy with the business of brokers.
But not protect from the loss on the stock market securities, instead protection of SIPC to investor money on the brokerage account.
To secure the Investor holding stocks bonds, and other balances on the brokerage account up to $500,000 per person.
So the SIPC-covered broker investor had a great advantage in the protection of their money.
Market rule: #100102
A stock broker is one of the market participants who works to sell a larger amount of public corporation securities. Taking any action or activities based on what the stockbroker recommended is completely responsible from your side.
If your investors and not comfortable or align investing with based on market rules please learn about how to regulate your investments under your control with the use of Rule investing.