What is a stockbroker

Stock broker

Until the beginning of the 2000s, stock brokers were trading brokers who brokered commercial stock exchange transactions between stock exchange traders on the German stock exchange. Since the Fourth Financial Market Promotion Act 2002, stockbrokers are no longer legally referred to as brokers, but rather as lead brokers. Due to its familiarity, the term `` stockbroker '' only exists as a professional title, which stands for sworn official price brokers or free brokers who are appointed to the stock exchange.

What do you do as a stockbroker?

The task of a stockbroker (or lead broker) is to work towards an orderly market development since July 2002 according to § 28 BörsG and to carry out lead brokerage neutrally. He must take appropriate organizational measures to ensure compliance with his obligations. He has to act free of instructions when determining the price. Duties must be carried out in such a way that effective monitoring of compliance with duties is guaranteed. The stockbroker must treat all orders available at the time of price determination equally when executing them, taking into account the special regulations existing on the stock exchange.

 

The stockbrokers determine the official price quotation for the securities they deal with in official trading on the basis of the securities orders that are placed on the stock exchange via the banks as the standard price. Since stockbrokers are also allowed to conduct limited proprietary trades in accordance with Section 36 BörsO, Section 6 BörsG regulates possible conflicts of interest when acquiring significant holdings (Section 1 Paragraph 9 KWG; 10% or more) which, like insider trading (front running), are carried out by the trading surveillance office (Section 7 BörsG) are to be monitored.

 

A stockbroker accepts buy and sell orders and executes them on the stock exchange. In the meantime, this is happening more and more often by computer instead of on the floor, because business deals are concluded on computer exchanges through the electronically controlled merging of buy and sell orders (automated trading).

What types of stockbrokers are there?

  • Dealing desk.
  • Market maker.
  • Electronic Communication Network (ECN)
  • Straight Through Processing (STP)
  • No Dealing Desk (NDD)
  • Introducing Broker.

What is the difference between a stockbroker and a broker?

The broker is instructed by an investor to invest sensibly in stocks or binary options and to sell them at a profit if a loss is expected.

The stockbroker acts on his own behalf.

What is the difference between a freelance stockbroker and an official stockbroker / lead broker?

Nowadays a distinction has to be made between the independent broker and the official broker (also called lead broker).

 

Independent brokers are not sworn in and are allowed to mediate in all types of securities. You can also be active on several exchanges at the same time. Independent brokers are not subject to the strict regulations of course brokers. Since the 3rd Financial Market Promotion Act, a distinction is no longer made between official and independent stockbrokers, but it is still useful to know the previous differences between these two types of broker.

 

The free broker is approved by the exchange board. The independent brokers only determine the prices of the securities traded over the counter. Independent brokers are allowed to trade in all securities on the official market, but the focus is on the regulated market and on the open market. The stockbroker who carries out trades on the stock exchange can also be seen as a kind of intermediary.

 

The official broker is a person who has been appointed and sworn in by the respective authority of a country that is responsible for stock exchange supervision. An official broker mediates the country's own securities, but also foreign securities, and thereby determines the price.

How can I become a broker?

The path to a job in the world of finance usually leads through an apprenticeship in banking, appropriate further training and additional qualifications, or a degree. Dual training is also possible. Here, work and training in a bank is combined with a course of study that can optionally be completed in the subjects of banking, business administration or business informatics.

Lateral entrants also come from other areas, such as sociology studies. In English-speaking countries there are stock exchange traders who come from the so-called “humanities”, that is, who have studied literature or history. Not really surprising, because in addition to technical and professional qualifications, working on the stock exchange or as a broker also requires so-called "soft skills" in dealing with people.

In principle, every investor can trade himself if he has access via a trading platform or a professional broker. If you want to act as a professional broker, you need a license from Deutsche Börse (trading in Germany) and must complete a training course lasting several days with an examination.

Stock broker: what requirements do you have to meet?

In contrast to the professions described above, traders are also traders in the literal sense - in contrast to institutional traders, the stock market traders, they are often referred to as "retail traders". So you act as private individuals and for your own account. No training in the true sense of the word is required here, because many of them get started gradually, through initial interests and activities in their free time to full-time trading (what is trading?).

The situation is different with lead brokers who are ordered directly from the stock exchange, and with stock market traders for institutional customers such as banks or funds. For the latter in particular, there is no clearly defined job profile with a training regulation, but the applicants should meet certain requirements. An apprenticeship as a banker or a degree in business administration - ideally a combination of both - is one of the conditions for becoming a stockbroker.

How much do you earn as a broker?

Stock brokers earn from the agreed commission that they charge the customer for each transaction.

On average, these are EUR 4,090 to EUR 4,603 per month. For beginners, annual salaries between 50,000 euros and 100,000 euros are realistic. It depends on where you are employed as a broker.