Brokerage Firms: The Middleman

Businesses since the Roman and Greek empires have had middlemen. Whether it was trading in commodities or dealing with weapons and soldiers, there was always someone bringing the seller and buyer together. As time went on, simple trades in markets turned into a corporate world of buying and selling shares. In today’s fast and rapidly moving economic world of the 21st century, a middleman plays a more important role than ever before. For the general population stock markets are hard to understand and quantify. In comes a brokerage firm. This entity is a financial institution or a middleman of sorts that facilitate the buying and selling of securities between two clients. A brokerage firm has a clientele of investors who trade in public and private stocks and other securities via a stock broker who works for the firm. A brokerage firm is not like any common middleman, they do a lot more than carry out a simple trade or exchange. The staffs at a brokerage firm is entrusted with the responsibility to research markets and provide appropriate recommendations, which call for action on the pension fund managers and portfolio managers’ part. Brokerage firms somewhat function like a bank, they offer margin loans to certain approved and pre-checked clients to purchase investment on credits, this subject to certain terms and conditions set by the firm.

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Brokerage Firms: The Middleman

Stockbrokers a professional middleman

Some professionals with certified degrees and training come to work as stockbrokers in brokerage firms. These professionals buy or sell stocks and other securities for a client in the stock exchange or over the counter for a brokerage fee or commission. Depending on the exams and licences they hold, they can be given different designations. Different countries have different requirements that can certify a professional as a stockbroker. Prerequisites in some countries to be a stockbroker are:

  • Canada: A stockbroker is referred to as an “investment advisor”. To be certified as one, an individual needs to have completed the Canadian Securities Course (CSC), the Conduct and Practice Handbook (CPH) and the 90 day Investment Advisor Training Program (IATP). There are further steps to complete in order to be a fully licensed stockbroker.
  • India: Top Stock brokers in India typically need a bachelor’s degree in business administration or finance. A degree of this nature allows students to learn rules and regulations, investment management and accounting methods. Training programs on-the-job also help aspiring rookies gain experience and work towards getting the required professional licences.
  • United Kingdom: Professionals in the UK are required to get a certification from the FCA’s appropriate qualification list. There are two certifications one can get, the CISI level 4 diploma in investment advice and the CISI level 7 diploma in wealth management.
  • United States: Stockbrokers in the united states are required to pass a General Securities Representative Exam (also called a series 7 exam) conducted by the FINRA and then employed by a brokerage firm certified by FINRA.
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Brokerage firms and stockbrokers play an essential role in the smooth functioning of our economy. Without them the stability and working of the stock markets would be in great peril.