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A stock broker is a qualified and regulated professional who buys and sells shares and other securities through market makers on behalf of investors. REQUIREMENTS In order to become a stockbroker, a person must pass the General Securities Representative Exam (also known as the "series 7 exam"). SERVICES PROVIDED A transaction on a Stock Exchange must be made between two members of the exchange — a typical person may not walk into the New York Stock Exchange (for example), and ask to trade stock. Such an exchange must be done through a broker. There are three types of stockbroking service.
In addition to actually trading stocks for their clients, stock brokers may also offer advice to their clients on which stocks, mutual funds, etc. to buy. HISTORY Philadelphia was the center of American finance during the first forty years of the new United States. In 1790, the country's first Stock Exchange was founded there and Chestnut Street was home to the nation's most powerful financial institutions. However, in the 1820s a shift to New York City began and for more than one hundred and fifty years Wall Street has been synonymous with the stock brokerage business. Historical top level brokers like Goldman Sachs and a number of firms rose to prominence over that time with the top-ranked brokerages in the early 1950s being: # Merrill Lynch & Co. Inc. # E. F. Hutton & Co. # Bache & Co. # Paine Webber & Company # Francis I. DuPont & Co. # Dean Witter Co. # Goldman Sachs # Bear Stearns Since the 1980s stockbroking firms have also been allowed to be Market Maker s as long as the appropriate Chinese Wall s are put in place. With the advent of automated stockbroking systems on the the trade. Today, most of the once well-known corporate Brand Name s including mid-sized firms such as Smith Barney have been swallowed up by global financial conglomerates. Only a few firms remain independent, such as Edward Jones Investments , Stifel Nicolaus , and Raymond James. Discount brokers (such as E-Trade , Scottrade , TD Ameritrade , and Charles Schwab ) have taken a large share of the business by offering highly discounted commissions. Discount brokers may offer limited advisory services, but their primary focus tends to servicing self directed retail accounts. SIMILAR ROLES Roles similar to that of a stock broker include Investment Advisor , and Financial Advisor . A stockbroker may or may not be also an investment advisor, and vice versa. The Certified Financial Planner designation initially offered by the American College in Pennsylvania is considered by many to be the next educational step a stock broker can take in order to be considered a legitimate and ethical financial consultant. ACTING AS A PRINCIPAL Stockbrokers also sometimes or exclusively trade on their own behalf, as a , speculating that a Share or other Financial Instrument will increase or decline in price. In such cases the term ''broker'' makes little sense and the individuals or firms trading in a principal capacity sometimes call themselves dealers, Stock Trader s or simply ''traders''. TRANSACTIONS BY STOCK BROKERS IN THE US AND UK In the US: When acting as an agent, the stockbroker typically charges the client a flat fee and/or a percentage-based Commission for undertaking the trade, and the price quoted the client must be the best price available in the market. When acting as a principal, the trade could be with another market participant or one of the stockbroker's clients. When trading in a principal capacity with a client, the broker informs the client and charges the client a markup or markdown from the prevailing market price. In the UK: Stock brokers act the same in the UK as in the US, except that when trading in a principal capacity with a client, the broker is obliged to inform the client and no commission is charged. Other jurisdictions are thought to have similar rules. BROKERAGE TERMS Front Office : This is a description of the part of a brokerage firm that is "client facing". The sales staff, brokers and traders are part of the front office. Functions of the front office include acquisition and entry of orders, fulfillment of the orders, and all the regulatory reporting for the orders. Back Office : The back office is where the clearance processing of the trades is done. Transfer of securities and money and the tracking of "failure to deliver" is handled. Securities lending for a brokerage firm, wherein shares of a security that is being sold short are located to ensure they can be delivered, is usually included in the back office as well. FAMOUS STOCK BROKERS
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