Broker definition

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A broker is an individual or company that places trades on behalf of a trader. They can do so in a number of different asset classes, with the most well-known being share trading.

Types of broker

If your broker operates in an execution-only capacity, it means that they only act as a platform to allow trades on an exchange or over the counter – they do not give investment advice. These brokers charge commission on the trades they place for you. For instance, IG offers an execution-only service.

Alternatively, brokers can offer an advisory service. This is where a broker offers advice on what to invest in, as well as executing the trades. They will only execute trades on your behalf once you have given the go-ahead.

Finally, discretionary brokers trade fully on your behalf, making trades without consulting you. This allows them to make trades much faster. Both advisory and discretionary brokers will charge fees for advising on or managing your shares for you.

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