Investment brokers bring buyers and sellers together. The securities system or process does not allow for unlicensed people brokering transactions.

A investment broker sells or buys stock on behalf of a customer. The investment broker works as an agent matching up stock buyers and sellers. A transaction on a stock exchange must be made between two members of the exchange — a typical person may not walk into the New York Stock Exchange (for example), and ask to trade stock. Such an exchange must be done through a broker.

In addition to actually trading stocks for their clients, investment broker may also offer advice to their clients on which stocks, mutual funds, etc. to buy.


Some newer transaction services online in the form of a website interface. They usually offer low commissions, as low as one or two USD, and fast transaction rates, up to two seconds.


Philadelphia was the center of American finance during the first forty years of the new United States. In 1790, the country’s first stock exchange was founded there and Chestnut Street was home to the nation’s most powerful financial institutions. However, in the 1820s a shift to New York City began and for more than one hundred and fifty years Wall Street has been synonymous with the stockbrokerage business. A number of firms rose to prominence over that time with the top-ranked brokerages in the early 1950s being:

  • Merrill Lynch & Co. Inc.
  • E. F. Hutton & Co.
  • Bache & Co.
  • Paine Webber & Company
  • Francis I. DuPont & Co.
  • Dean Witter Co.
  • Goldman Sachs
  • Bear Stearns

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 from the market and executes and settles the trade.

Today, most of the once well-known corporate brand names including mid-sized firms such as Smith Barney have been swallowed up by global financial conglomerates. Discount brokers (such as E-Trade, Scottrade, and TD Ameritrade) have taken a large share of the business by offering highly discounted commissions, but the companies do not offer investment advice in return–all they do is execute orders.

First of all, most brokers require a minimum deposit in your brokerage account. It’s similar to a bank account, and the broker will withdraw money from it every time he or she needs to make a trade.

The amount a broker charges varies greatly between discount and full-service brokers. Traditionally, discount brokers don’t do anything but execute the trade. Many online brokers, therefore, are discount brokers.

Tips for Checking Out Brokers and Investment

Federal or state securities laws require brokers, investment advisers, and their firms to be licensed or registered, and to make important information public. But it’s up to you to find that information and use it to protect your investment money. The good news is that this information is easy to get, and one phone call or web search may save you from sending your money to a con artist, an unscrupulous financial professional, or a disreputable firm.

Before you invest or pay for any investment advice, make sure your brokers, investment advisers, and investment adviser representatives have not had disciplinary problems or been in trouble with regulators or other investors. You also should check to see whether they are registered or licensed.

This is very important, because if you do business with an unregistered securities broker or a firm that later goes out of business, there may be no way for you to recover your money — even if an arbitrator or a court rules in your favor.