Stock broker

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(Redirected from Stockbroker)

A stock broker or stockbroker or stock brokerage is someone or a firm who performs transactions in financial instruments on a stock market as an agent of his/her/its clients who are unable or unwilling to trade for themselves.

Stockbrokers also sometimes or exclusively trade on their own behalf, as a principal, speculating that a share or other financial instrument will increase or reduce in price. In such cases the term broker makes little sense and the individuals or firms trading in a principal capacity sometimes call themselves stock traders or simply traders.

The following is the case in the UK: When acting as an agent, the stockbroker 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 is obliged to inform the client and no commission is charged.

The following is the case 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 a charges the client a markup or markdown from the prevailing market price.

Other jurisdictions are thought to have similar rules.

Since the 1980s stockbroking firms have also been allowed to be market makers as long as the appropriate Chinese walls are put in place.

With the advent of automated stockbroking systems on the Internet the client often has no personal contact with his/her stockbroking firm. The stockbroker's system performs all the stockbroking functions: it obtains the best price (http://www.sec.gov/rules/proposed/34-50870.pdf) from the market and executes and settles the trade.

Contents

Terms

Front office. This is a description of the part of the firm that is "client facing". The sales staff, brokers and traders are part of the front office. Functions of the front office include acquisiton 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 (http://www.sec.gov/rules/final/34-50103.htm) to insure they can be deliviered, is usually included in the back office as well.

Earnings

In August of 1994, Investor's Business Daily reported that "retail stockbrokers earned a record $128,553 on average" in 1993, according to the Securities Industry Association. IBD further stated that: "Institutional brokers earned a record $304,716 on average. Median earnings rose 15% for retail brokers to $90,000 and 17.5% for institutional brokers to $183,236."

Famous Stockbrokers and Their Spouses

Former Brokers:

  • Michael Milken -- The notorious financier came to fame at Drexel Burnham and Co. in the 80s. The Wharton School graduate was later convicted of fraud involving dubious junk bond issues and served time in prison. Today, he and his brother Lowell oversee countless charitable endeavors and Milken has a posh Jewish-based high school named after him in Bel Air, CA.
  • Martha Stewart -- After she gave up modeling in the late 60s, Stewart worked as a broker on Wall Street for 7-8 years before marrying Andy Stewart and launching her lifestyle empire from her farm, Turkey Hill, in Connecticut. Ironically, it was over a dispute of a stop loss order on her personal ImClone Systems shares that landed her in prison. Though Stewart insisted otherwise, a stop loss order had never been placed by her broker, society darling Peter Bacanovic, and the stock sale for Stewart was deemed insider trading. Stewart was released from prison after serving 6 months at "Camp Cupcake" in the Spring of 2005.
  • Brian Dennehy -- Actor Donehey worked as a broker for a time at the same firm as Stewart.
  • Jimmy Wales -- Creator of Wikipedia, worked as an options trader for many years while building his personal fortune.

Latter Brokers:

  • Larry Buster Crabbe -- Actor and former Olympic Swimmer Crabbe became a stockbroker and businessman after his career as Tarzan and Flash Gordon passed him by. He even owned a Southern California Swimming Pool building company in later years.

Famous Spouses and Children of Brokers:

  • Anne Baxter -- Actress Baxter's third and last husband, David Klee, was a stockbroker.
  • Colleen Moore -- Actress Moore's second of her four husbands, Albert Parker Scott, was a broker as well.
  • Emily Post -- The maven of manners, formerly Emily Price, was married to a Mr. Post, a broker on Wall Street at the turn of the century. She divorced him over infidelity and started writing to support her boys, which was quite unfashionable and rather scandalous at the time. She pressed on and became a household name with her syndicated column on etiquette and radio appearances.
  • Preston Sturges -- The famed director of such classic screwball comedies as The Palm Beach Story was adopted by his stepfather, Solomon Sturges, a successful broker based in Chicago in the 20s.
  • James Dunn -- Irish-American 30s matinee idol, Dunn was the son of a broker, "who either had nothing or a million."

See also

fr:Agent de change id:Pialang saham lt:Brokeris nl:Broker pl:Makler ru:Брокер (рынок ценных бумаг) zh:证券经纪人

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