What is a Broker?

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Definition:

A broker is a person or a brokerage firm that matches investors who want to buy or sell securities (like stocks or bonds) with the other side of their transactions.

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🤔 Understanding a broker

Brokers are the most common intermediary that investors rely on to trade various assets. To trade stocks, brokers must be licensed (i.e., registered with the US Securities Exchange Commission and the Financial Industry Regulatory Authority) to pair people who want to buy or sell a security with the other side of the transaction. Although it’s becoming less common, some brokers generate revenue by charging a fee (aka a commission), for each transaction.

Example

There are dozens of brokerage firms in the US. You’ve got Robinhood (of course) as well as others like Charles Schwab, E* Trade, and Fidelity, which vary in terms of services offered and fees charged.

Takeaway

Online brokers are like professional matchmakers...

They offer a fast and efficient way to place trades and connect with people on the other side of a transaction. They’re registered firms (and representatives) that link investors who want to buy or sell stocks, bonds, and other securities with the parties on the other side of the transactions. Some OG firms charge a commission for the service.

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This information is educational, and is not an offer to sell or a solicitation of an offer to buy any security. This information is not a recommendation to buy, hold, or sell an investment or financial product, or take any action. This information is neither individualized nor a research report, and must not serve as the basis for any investment decision. All investments involve risk, including the possible loss of capital. Past performance does not guarantee future results or returns. Before making decisions with legal, tax, or accounting effects, you should consult appropriate professionals. Information is from sources deemed reliable on the date of publication, but Robinhood does not guarantee its accuracy.

Robinhood Financial LLC (member SIPC), is a registered broker dealer. Robinhood Securities, LLC (member SIPC), provides brokerage clearing services. Robinhood Crypto, LLC provides crypto currency trading. All are subsidiaries of Robinhood Markets, Inc. (‘Robinhood’).

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