Stockbroker

What is a Stockbroker?

Stockbroker are individuals who buy and sell stocks and other securities for retail and institutional clients, through a stock exchange or over the counter, in return for a fee or a commission. Institutional stockbrokers work with fund managers and other financial institutions, but there are also retail investors.

Financial Analyst Working on a Computer with Multi-Monitor Workstation with Real-Time Stocks, Commodities and Exchange Market Charts. Businessman Works in Investment Bank Downtown Office at Night.

 

How are they regulated?

Stockbrokers are governed under the Securities and Exchange Board of India Act 1992, Securities Contract Regulations Act, 1956, and also the Securities and Exchange Board of India (Stockbrokers and sub-brokers Regulations), 1992. Stockbrokers are also regulated under other rules, regulations and bylaws that SEBI may issue from time to time. Every stockbroker in India needs to be a member of stock exchanges and also requires to be registered with SEBI. Stockbrokers display their registration details on their websites and even on official documents. One can also visit the Sebi website and find details of registered stockbrokers.

What skills does a Stockbroker need?

  • The ability to work in a fast-paced environment
  • Excellent communication and interpersonal skills, including strong negotiating and presentation skills
  • The ability to use your initiative
  • Ambition and determination
  • The ability to accept criticism and work well lots of under pressure
  • A natural sales ability
  • Customer service skills
  • Strong numeracy skills
  • Analytical and research skills, as well as the ability to process and retain information quickly
  • Time management skills
  • Knowledge of economics and accounting
  • The ability to build lasting relationships
  • A disposition for taking risks
  • The ability to persuade people and strong negotiation skills
  • Decisiveness and the ability to solve problems.

How to Become a Stockbroker

While there are no specific schooling requirements for becoming a stockbroker, certain degrees or coursework can give you an advantage in the job.

Education

You might want to consider a bachelor’s degree in business. Many stockbrokers also have a master’s in business administration (MBA) or a master’s in finance. It also helps if you have some education in math, statistics, and analysis.

Experience

Stockbrokers often start working for a firm or bank in a role other than broker. Some even begin as college interns. That is where they gain know-how while they are on the job. To become a broker, they must show a deep understanding of money markets, laws, rules, and accounting practices.

Exams

Brokers need to pass the General Securities Representative Exam, commonly known as the “Series 7” exam, administered by the Financial Industry Regulatory Authority (FINRA). To take the exam, a person must be sponsored by a FINRA member firm or a member of a similar self-regulatory organization (SRO).

The Series 7 exam is hard and consists of 125 multiple-choice questions in 225 minutes. It combined with a separate Securities Industry Essentials Exam, which consists of 75 questions and lasts 105 minutes.

These exams will permit a broker to buy and sell most securities, but there may be other exams required to trade certain things. For example, someone who wants to buy and sell municipal bonds may have to take the Series 53 exam.9 There are also other required exams, including the Series 66 and Series 63 exams, to be registered in various states.

Stockbroker Types

Broker

Define

Full-Service Brokers

  • These firms charge higher commissions or a percentage of assets. They offer the largest assortment of diversified financial services and usually assign a licensed individual broker to each client. These firms tend to have their own investment banking and research departments that provide their own analyst recommendations, products and access to initial public offerings (IPOs)

  • Clients have the option of calling their personal broker directly to place trades or use various other platforms including online and mobile. Full-service brokers have physical offices and locations.

Discount Brokers
  • Discount brokers have narrowed the gap with full-service brokers in terms of financial products and services by providing independent research, mutual fund access, and basic banking products. As the name says, discount brokers became popular by offering smaller commissions for trades. Usually, the commissions would range from $4.99 to $9.99 per trade ticket. As of 2019, most of the discount brokers started offering zero-commission trading.
  • The platforms tend to have more trading and research tools than full-service brokers since they cater to active investors and day traders. Many of the larger discount brokers provide their own direct-access trading platforms and physical office locations throughout the country.
Day Trading Brokers
  • Day trading brokers, or direct-access brokers, cater to active day trading clients with the smallest commissions often priced on a per-share basis, which is needed when scaling in and out of positions. These firms provide direct-access platforms with charting and routing capabilities with access to electronic communication networks (ECN), market makers, specialists, dark pools, and multiple exchanges.
  • Speed and access are the top benefits of direct-access brokers, often allowing for point-and-click executions and programmable hot-keys. The heavy-duty platforms often carry a monthly fee composed of software fees and exchange fees.
App-Based Brokers
  • App-based brokers are brokers that are focused on simplicity. While these brokers may also offer web-based trading (or even desktop platforms), they are primarily designed for casual investors who want a simple way to buy and sell stocks from their mobile devices.
  • These brokers generally offer commission-free trading and easy-to-use mobile apps. They do not offer many advanced features, such as desktop trading platforms, research reports, etc.