Abroker is a person or entity that arranges transactions between abuyer and aseller. This may be done for acommission when the deal is executed. A broker who also acts as a seller or as a buyer becomes aprincipal party to the deal. Neither role should be confused with that of anagent—one who acts on behalf of a principal party in a deal.[1]
A broker is an independent party whose services are used extensively in some industries. A broker's prime responsibility is to bring sellers and buyers together and thus a broker is the third-person facilitator between a buyer and a seller. An example would be a real estate broker who facilitates the sale of a property.[1]
Brokers can furnishmarket research andmarket data. Brokers may represent either the seller or the buyer but generally not both at the same time. Brokers are expected to have the tools and resources to reach the largest possible base of buyers and sellers. They then screen these potential buyers or sellers for the perfect match. An individual producer, on the other hand, especially one new in the market, probably will not have the same access to customers as a broker. Another benefit of using a broker is cost—they might be cheaper in smaller markets, with smaller accounts, or with a limited line of products.[1]
Some brokers, known as discount brokers, charge smallercommission, sometimes in exchange for offering less advice or services than full service brokerage firms.[2]
Abroker-dealer is a broker that transacts for its own account, in addition to facilitating transactions for clients.[3]
Brokerage firms are generally subject to regulations based on the type of brokerage and jurisdictions in which they operate. Examples of brokerage firm regulatory agencies include theU.S. Securities and Exchange Commission and theFinancial Industry Regulatory Authority (FINRA), which regulatestockbrokers in the United States.
The word "broker" derives fromOld Frenchbroceur "small trader", of uncertain origin, but possibly from Old Frenchbrocheor meaning "wine retailer", which comes from the verbbrochier, or "to broach (a keg)".[4]
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