Welcome to our short course on Understanding Brokers, to get started please play the video.
What are brokers?
We talk about brokers a lot in our courses but what are they?
Traders access the markets through brokers, you won’t be able to place a trade on any financial market if you don’t use a broker. Brokers are financial services businesses, normally limited companies, providing services to their clients. Individual traders will engage and transact their trades with their broker.
Brokers can take many shapes and forms. Private traders making their own trading decisions typically use an execution-only broker.
A matched principal broker is one that passes the risk it assumes from traders trading with it onto the wholesale market. Market markers are brokers that accept a trader’s risk directly and manage it by building large risk books for each market – they ‘make the market’.
- All traders need a broker to access the financial markets.
- Execution only brokers are not allowed to advise traders on which trades to place, just provide the tools to do it.
- Private traders making their own trading decisions typically use an execution-only broker.
- A broker will almost always be the counterparty to a trader’s trades but can be a matched principal broker or a market maker.
This was a quick introductory lesson so please click ‘Mark Complete’ to move on.
