Good to know each trader ► Вrokerage services
Who is a broker? This exchange broker, the protagonist exchanges. Without brokering normal economy is simply impossible. figuratively speaking, the mediator - is the circulatory system of the economy. In a normal economy, the manufacturer produces products and exchange intermediary takes away all the worries of its implementation.
The word "broker" is used in the Russian language from the beginning of the 20th century and is defined as a mediator at the conclusion of purchase and sale transactions in the commodities markets, securities and currencies.
Broker - a person or company acting as an agent in transactions on the stock, commodity and currency markets. Brokers make deals, as a rule, on behalf and at the expense of clients, and can act on its own behalf, but on behalf and at the expense of principals (buyers or sellers). For mediation between buyers and sellers of securities, commodities, precious metals, etc. Brokers receive a fee or commission by agreement or in accordance with the established exchange dachshund Committee.
In the role of a broker, individuals, firms, organizations can act. The broker does not keep inventory, does not participate in financing transactions, does not assume any risk.
Depending on the type of transaction, brokers can be the insurance, financial, customs and credit.
1. The broker does not acquire ownership of what sells and buys, though a deal on their behalf. Hence - brokerage - conducting securities transactions on behalf of their owner.
2. The broker represents the client's interests, as a rule, on a provisional basis.
3. The broker receives a fee from the client - broker commission or brokerage. It is paid in the form of "commission" - percent of the transactions concluded by him or in the form of a certain amount.
Brokerage activity - an activity to commit civil transactions with securities on behalf of and for the account of the client (including the issuer's equity securities during their placement) or on its own behalf and for the account of the client on the basis of onerous contracts with the customer.
Brokerage activity is operations with securities in the interest of the client under the contract of agency or commission agreement. By the contract of agency broker acts as an attorney, t. E. He makes a deal on the client's behalf and at his expense. In this case, the main broker task - to find on the market for client securities that it would suit the price, or sell securities on behalf of clients belonging to him in this price.
The broker on the basis of an agency contract provides customer service for the purchase of securities. Having found in the paper market, the desired client, the broker on his behalf concludes a contract with the owner of the securities, and the client from the account pays for their purchase. For their services the broker receives a commission. If the client gives instructions to sell the securities, the transaction is made in the same way. Only the client delivers the securities to the buyer, and the latter shall pay for them.
Through the transaction on a commission agreement, the broker acts as a commission agent and a deal on its own behalf, but at the expense of the client. In this case, the client, signing a contract with a broker commission, lists him money for the purchase of securities (broker delivers securities for sale) that the broker are recorded on off-balance sheet "depot" accounts.
According to the Commission the contract customer transfers money to the broker to buy securities in full or in part under the terms of the contract. The broker is obliged to keep separate records of its own funds and borrowed resources.
If a broker acts for the commission contract, the terms of the contract may stipulate that the broker has the right to keep the client's cash funds intended for the purchase of securities or from the sale of securities. These funds broker can be used to make a profit, if it is provided contract of commission. Part of the profit the broker is obliged to transfer to the client.
Brokerage is licensed in three types of licenses:
license for brokerage in operations with funds from corporate securities persons;
license for brokerage in operations with securities with funds of natural persons;
license for brokerage in operations with government securities, securities of subjects of the Russian Federation and municipalities.
Brokerage services are paid in the form of a broker's fee is charged in a fixed amount or a percentage of the transaction amount. In some cases, provides premium. Often the payment of brokerage services performed under the contracts. Transactions that are conducted on behalf of customers, in all cases subject to the execution priority. The broker must. Perform customer orders in good faith and, as a rule, in the order they are received. If the broker is not sure that the client can pay for the deal, he should refuse to accept absentee bids. In the absence of guarantee that the customer has the securities and will be able to present them within five working days from the date of the transfer order, the broker can not agree on a deal.
Immediately after the transaction or after the order expires broker must inform the client about the fact of conclusion or failure to conclude a transaction and its results. Upon receipt of the client's power of attorney to carry out a series of transactions with securities or asset management client broker must act strictly within the framework of the powers specified in the power of attorney. The period between the date of the transaction and payment security can not exceed 90 days. Prior to the execution of the contract the customer has the right to unilaterally terminate the Agreement. Performance of the contract is considered to be the transfer of the official notification to the client broker a deal.
If the purchase of securities involved borrowed funds, the client is obliged to notify the financial intermediary. Leverage ratio can not exceed 50% of the total value of the purchased securities. Credit for the purchase can be provided as a professional securities market participant, if he has the right to conduct banking operations and the bank. Prior to the full repayment of the credit intermediary may not transfer to the client securities.
The behavior of the exchange trade participants are divided into the "bears", playing on the slide, and "bulls", playing on the increase in the market value of the exchange of goods.
Some investment companies provide customers the ability to use a larger amount of money (what is the client) with the purchase of securities (taking money from a broker) by providing a so-called "leverage" and make a profit while reducing the market share price (taking securities from a broker) .
When buying securities "shoulder" investor pays part of the cost of the transaction own funds, and the remainder is provided as a loan broker. Upon the sale of securities (sale of "uncoated" or "short" sale), the client takes a securities broker and sells them in the market and then repays the loan to the same securities purchased later.
The transaction of purchase and sale of securities, settlement of which is made using cash or securities ( "leverage"), provided by the broker as a loan to the client, called the margin transaction. "Leverage" - the ratio of customer funds to the amount of credit granted. When equal amounts of equity and debt - at 1 rub. own funds of the client is available 1 rub. borrowed. Margin level is 50% and the shoulder - 1: 1. If you exceed the borrowed funds on the client means 3 times the level of margin equal to 25%, and the shoulder - 1: 3.
Investor lending broker is under the guarantee of cash or securities in the account of the investor with a broker. The investor may conduct transactions with securities and funds that are pledged. But not every broker can be at the right time in the presence of a sufficient amount of cash or securities for lending. In such cases, the investor simply is not able to conduct highly profitable operation due to the broker. Therefore, if an investor in the future is going to use additional funds broker in the stock market, he at the conclusion of the contract with the brokerage company you need to know its financial capacity, ie whether the company in the presence of the required amount of money and securities to trade on credit.
The use of "leverage effect" can help the investor to further increase the efficiency of their operations. For example, the client to develop a portfolio of securities on the 10 th. USD. Enough to have $ 1,000. Since the warranty provision is equal to 10% of the contract amount, thanks to the emergence of "shoulder" 1:10 is possible to earn up to 100% of the profits, as growth and fall on market.
"Shoulders" Traditionally used more aggressively tuned online merchants. A calm investors, ie those for which the market is not the main income source of the existence, use this "shoulder" is inappropriate.
Cash clients referred by them to the broker for investment in securities, as well as the cash generated by the transactions made by the broker on the basis of contracts with customers, must be on a separate bank account (s) opened by a broker in the credit institution.
A professional securities market participant carrying out these activities on the basis of the agreement on brokerage services, concluded with the client.
Between the partners is a standard exchange contract for the provision of brokerage services. This agreement shall not be for a client or financial or any other obligations. But from that moment on, he has the right to charge brokerage firm to perform on behalf of the transaction, to provide him with information on product availability, current stock price it.
The contract describes all kinds of customer orders: to sell or buy a product at a price not below or above the set, the order of execution; The possible types of transactions, specified warranties, conditions and calculations of the broker fee (percentage depending on the complexity of the transaction). The contract is concluded usually for 2-3 years. On its basis for each individual product is a contract-order. It contains the conditions imposed by the client, which will be strictly adhered to by the broker in the transaction on the stock exchange.
On the basis of the contract of commission the broker client opens a separate account. There are several types of accounts. Depending on the form of payment of the securities are cash and margin accounts.
Cash account entitles the customer to carry out transactions with securities only within the limits of funds in his account. This minimizes the risks associated with payment of securities.
The cash account is most prevalent, as virtually minimizes the risks associated with payment of securities. Customer may give an order to the broker to buy securities only within the means that are available on his account. Sometimes brokerage firms provide services to clients buying securities, even with a lack of funds in the account. In this case the brokerage firm partly paid securities at their own expense, and the customer is obliged to seek short-term cash. For example, US law provides that the customer must, within 5 working days to transfer money to the account of a brokerage firm. Russian brokerage firms also provide similar services, working on the so-called "counter-claims", when the client has made the transfer of funds, as they are not credited to the account of a brokerage firm. In this situation, the brokerage firm pays for their own expense.
Margin account entitles the customer to obtain a loan from a brokerage firm to buy securities. Broker may provide the client with a loan in cash and / or securities to carry out the purchase and sale of securities transactions on the condition of the client software. As security for the client's obligations broker has the right to accept only securities owned by the client and / or purchased by the broker to the customer on margin transactions. Securities must be liquid and included in the quotation list of organizers of trading on the stock market securities. Securities speakers providing customer commitments to extend loans broker, subject to revaluation. The amount of collateral and interest on the loan is determined by the agreement on brokerage services. The loan amount shall not exceed 50% of the transaction amount. If the transaction for the purchase of securities with credit securities themselves are broker pledged as collateral payments due to him to repay the loan. When a customer returns full amount of the loan, the securities credited to his account. If funds or securities are not returned within the specified time, or not paid in time interest on the loan, as well as in the case to ensure the value will be less than the loan amount, the broker has the right to foreclose on the cash and / or securities, projecting software, out of court, that is. e. transfer securities on its own account or to sell them to repay the loan.
In addition to transactions with securities brokerages provide information and consulting services. They can provide information on the securities market conditions, supply and demand of individual species, to consult on individual stock transactions, as well as on the conclusion of treaties and agreements. The brokerage firm may have a different organizational and legal form. Broker can work as an individual entrepreneur without a legal entity. Brokerage houses may have a different structure. Usually composed of brokerage work brokers, experts, analysts, lawyers, accountants, managers at the conclusion of contracts, computer operators, technical staff.
Selecting brokerage for trading is a difficult and responsible task. Usually when choosing a broker taking into account the terms of trade, reputation, availability of specialized software for online trading, etc.
As trading conditions brokerage company size provided by the shoulder are usually treated, the minimum initial deposit, spread value the presence of commissions and other mandatory payments.
Types of brokers
Among the many species of these intermediaries are most common commodity, freight, insurance, mortgage and customs brokers.
Exchange brokers - operate in the financial markets and cooperate with both sellers and buyers with the securities, commodities and different currencies. Determination stockbroker concepts indicated in various normative legal acts, which allows you to learn the essence of the sales representative and the professional securities market participant.
The next type of brokers - is freight, which cooperate with charterers and ship owners at the conclusion of such an agreement, as the freight. This agreement involves the obligation in a timely manner and for a fee a particular implementation of the delivery of the goods or the goods on the ship or other marine vehicles.
The essence of the activities of insurance brokers is that they work between the insurance company and the clients that are registered in it. He is an entrepreneur who can take out insurance on its behalf, the basis for which it is the order of the reinsurer or insurer.
In the market of mortgage crediting, too, there is a broker. His appearance in this market due to the fact that in recent times there are many who want to buy real estate loans. It helps determine a potential borrower with the best offer and the most convenient condition for crediting.
This specialist not only has a certain practical knowledge about mortgage crediting, but also personal contacts with various banks or other financial institutions. Of course, these services have a fee, which is of two types: fixed or a percentage of the principal loan amount.
Through the delivery of goods or the goods abroad also need to use the services of a broker. In this case, will help solve all the problems of customs brokers. They help to arrange the delivery of the goods according to the requirements legislation.
Let us consider in more detail about each of them:
Thus, according to the spheres of activity distinguishes these types of brokers
Insurance brokers act as intermediaries between insurance companies and their clients. The activity of an insurance broker in the same regulated title documents, as well as insurance and reinsurance contracts assignments. Ideally, the broker involved to the maximum to reduce the financial and time costs of his client on the choice of an insurance company, favorable tariffs and the conclusion of the contract. But more often than if you purchased insurance from an insurance broker and pay them the insurance premium - it does not mean that it will help you to get payment or to collect the necessary documents for the insurer in the case of an insured event. So I believe that in the insurance industry need to think twice before resorting to the services of a broker.
Agreement on delivery of cargoes by sea are, as a rule, with the help of freight brokers. That, in turn, are the intermediaries between the charterer (the cargo owner) and the owner of the vessel. Today, owners of vessels involved in the technical side of greater traffic and attract customers to find brokers who follow the current state of freight rates, supply and demand, the presence or absence of the goods, that is, have full picture of the market.
Basically, to customs brokers are turning if necessary paperwork for imports or exports of goods (freight), resolve issues with the state customs authorities. You must know that the legal entities engaged in activities in the field of customs (the owners of warehouses, carriers, as well as brokers) in accordance with the provisions of the Customs Code must be included in the registers of persons carrying out customs related activities business. Broker shall submit an application to the relevant authority with a request to include it in the register. With a positive result, the inclusion of a legal entity in the register of persons carrying out activities in the field of customs is given a certificate. It is not transferable to another person. Here is another document, which is required to be checked by a customs broker when referring to him for the service.
In order to conclude contracts in the commodity and stock exchanges as intermediaries involved stockbrokers. In accordance with the Federal Law of 22.04.1996 number 39-FZ "On the Securities Market" (as amended by Federal Law of 25.11.2009 N 281-FZ.) "Broker - a professional participant of the securities market." This broker is obliged to act with the interests of his client, or speaking on his own behalf or on the client. The most common brokers who work in the international Forex market. They also engaged in contracts in currencies, precious metals and securities. Individuals as a buyer access to the exchange is prohibited all transactions in the stock market and the stock market is only available for the broker. Therefore, you somehow have to conclude a contract with him.
I must say to you that in the Russian Federation, this institution is only in its infancy. Currently, mortgage broker activities are not licensed and regulated by the civil legislation. Let us refer to him as a mediator between the property owners, buyers, and banks provide mortgages. Mediator in the field of mortgage is designed to minimize the time spent on preparation of contracts, collection and delivery of documents, the selection of the bank is ready to provide mortgages on the most favorable terms for the client. Many customers do not want or afraid of their own to communicate with such expensive purchases like property, as in the case of improper paperwork transaction may be declared invalid and the client will incur financial losses. Property prices are rising, so the mortgage broker services are not very cheap. But on the other hand, to get all the information on their own for the best mortgage for you options to determine the most favorable terms will have to spend a lot of time and money.
Forex Brokers working through dealing centers, earn spreads and by trading against their clients. Dealing brokers really "create the market" and offer customers "artificial" currency exchange rates. There is no conflict of interest. Dealing centers provide traders and purchase rate and selling rate and the decision of the trader is indifferent to them.
Dealing centers control the prices, so they can without much risk to assign a fixed spread. Clients dealing centers do not see the real interbank quotes. Do not be afraid: the competition between brokers so great that the difference between these quotes and quotations dealing centers almost none.
Say you, with the mediation of dealing center, placed an order to buy EUR / USD for 100 000 units. To complete your order, the broker must first be found among the other client orders the appropriate order to sell or transfer your transaction provider of liquidity, ie, a large structure that readily buys or sells financial assets.
Thus, brokers can earn a spread not trading against you and especially not at the risk. However, if they do not pick up the appropriate order to sell, they will be forced to trade against you. Keep in mind that different brokers have different rules for risk management, and you should know them in advance.
Forms for the trading system of brokers in the Forex / Forex
Currently, there are a huge number of companies offering intermediary services for trading in the Forex market. In order to make more informed and deliberate choice, it makes sense to start to understand the various types of brokerage firms and the services they provide.
At the functional level, all brokerage system can be divided into two broad classes: Dealing centers (Dealing Desk, DD) and direct market access system without dealing center (No Dealing Desk, NDD). The first are also called market makers, from the English. market maker, which literally means "the one who makes the market". Such brokers at any one time as the offer price to sell (ask) and the price to buy (bid) for each currency pair, pledging to become the second party in any transaction entered into by the customer. In other words, if a trader wants to buy EUR-USD, the market maker is obliged to sell the right amount at the current price - and vice versa. In essence, this means that the broker earns when you lose, because always in the opposite position. However, a trader should not disturb this fact until the broker is not manipulated quotes to "persuade" them to its own advantage the side - that is unprofitable for you. That is why when choosing among the DD-brokers primary criterion is the reputation - the company with a good reputation will not deceive customers so, for "own peril" - the loss of confidence will result in much greater losses.
The main types of brokers in the trading system in the Forex
Dealing Desk (DD) - trade in this case is conducted in an artificial exchange platform, it does not mean that the company will continue to play against you. Trouble can happen if you decide to dig a big deal a few hundred items and begin to make a profit. Once the customer losses over the counter transactions will no longer cover your profit, the transaction closes artificially.
Therefore, trade brokers with Dealing Desk (DD) nor does the risk is possible only on cent accounts or with small amounts.
No Dealing Desk (NDD) - these types of brokers in the forex transactions carried out outside the company, and it does not mean that they are required to transmit your orders on currency exchange. An alternative would be the conclusion of agreements with major banks, which will shape the market.
No Dealing Desk (NDD) broker - a company with direct access to the foreign exchange market and providing it to their customers (traders) is one of the best embodiment of the transactions. Profit, the company receives from the fixed commission or spread, it does not deal with the nomination opposite transactions. This is the most reliable forex brokers on the foreign exchange market. Therefore it is not always a high spread is a poor indicator Work a brokerage company. No Dealing Desk brokers divided into types - NDD or ECN + STP.
Electronic Communications Network ECN broker, create your own trading system, in which all participants are involved in transactions between themselves, by issuing orders. For transactions taken Commission, which is the main income ECN broker. Spreads, floating in the system, depending on the proposals for the purchase or sale coming from market participants.
Electronic Communications Network (ECN) - fully automated signaling system that virtually eliminates interference from trading in the process. At the moment it is the best trading system, as it guarantees fast order execution, not a high commission and fair trade.
Straight Through Processing (STP) broker - as an intermediary for trading in the forex market uses large financial companies and banks having accreditation on Forex. And so the broker can not cooperate with one bank, but several, it ensures a more complete sales order processing.
Types of brokers may have a different classification according to any of the financial markets they trade and they work with any financial instruments. This may be brokers who trade on the stock, currency or commodity markets.
Action in the securities market - it issued security that fixes the right of its holder to receive part of the profits of the company and a portion of his property at his disposal. It is perpetual ie drawn on the market until there is a release her corporation…