Deep Discount Broker

The term deep discount broker is a kind of discount broker who is professionally regulated and who buys and/or sells shares of stock and other securities through market makers or “agency only” firms. This type of broker operates on an even lower commission than that of a normal “discount broker”.  Discount brokers are stockbrokers who instead of working for a securities company to trade the company’s securities, work to mediate sales between the buyer and seller of a security in exchange for a commission of the sale.

Some similar roles to that of the stockbroker include an investment advisor and financial advisor. Some stockbrokers are also investment advisors, and some investment advisors are also stockbrokers.

When acting as a “principal”, the stockbrokers trade securities exclusively on their own behalf, or the behalf of a company, and in doing so must speculate that their security or other floatation must increase or decrease in value, depending on the intention of their trade or buy.  The term “broker” normally implies trading stocks for a company for which a stockbroker works, and the firms which these stockbrokers usually work for are known as dealers and traders. There are many different variations of traders within the money market, hence there are many different types of dealers.

The requirements of being a stockbroker vary from country to country, and a few examples of which are as follows:

In the USA, stockbrokers are called brokers or “reps”.  They receive their licenses to work after they pass the FINRA General Securities Representative exam, which is in every day language simply referred to as a Series 7 exam, which is actually a few securities exams grouped together.

In Hong Kong to earn this position, one must work for a licensed firm and prove their ability to work well, show proficiency and pass 3 tests.  There is an option to take a fourth test to obtain the position of specialist, which is a different licensed position.  All of those who do pass this test must also be approved by the financial regulatory agency.

The UK requires all of its brokers to pass the XII certificate of securities, which is a qualification achieved only after passing one of each two sets of exams:

Set 1: Unit 1- FBI financial regulations or Unit 10- Principles of Financial regulations for MiFID

Set 2:  Securities Unit 3 – Derivatives,   OR Unit 4 – Securities and Derivatives

Passing Unit 10 or Unit 52, however, will identify the brokers as having achieved FSA Approved Person Status.

Canada requires stockbrokers, which are known as licensed representatives or investment representatives, to be complete a course called the CSC or Canadian Securities Course and the CHP, or Conduct and Practices Handbook in order to obtain their licenses to trade stocks. If one wishes to trade derivatives and futures, they are required to obtain specific licenses for such practices.

To become a trader in Singapore, one must pass 2 exams from the Institute of Banking and Financial, called Modules 1a and Mod 6.  Then one must apply for a license through MAS and SGX.