What Does a Stockbroker Do?
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Stocks listed on a national securities exchange — described as national market system NMS stocks — can be traded in a number of competing venues. There are more than a dozen stock exchanges in the United States, and the number is growing. But trading volume on BATS, an exchange sincenew york stock exchange brokerage firms that on the two more established exchanges.
In this context, transparent means that details on price and volume are reported in real time. Most transactions are handled electronically, often instantaneously, as a sophisticated network matches each order to buy with a corresponding offer to sell —and each order to sell with an offer to buy.
Market Makers, who provide liquidity that keeps trading going, are obligated to buy and sell a specific number of shares at the prices they post on the network, making money on the spread, or price difference, between the buy price — called the bid — and the sell price — called the ask or offer.
Together the bid and ask are known as a quotation, or quote. The NYSE, where the vast majority of transactions are matched electronically in data centers miles away from Wall Street, was originally an auction market. Floor brokers representing buyers and sellers competed for the best price at the post of the single specialist who handled transactions in a particular stock.
There are still floor brokers and specialists at the exchange, but transactions are handled by a network of hand-held computers. They function similarly to an exchange, though, in the sense that they collect, display, and execute buy and sell orders electronically.
The prices at which stocks change hands and the trading volume are transparent, as they are with exchange-based transactions. The fees are lower — often much lower — than exchange fees. And the buyers and sellers are anonymous.
Further, while most exchange-based transactions occur during normal trading hours The advantage to the firm is that it keeps the difference between the price it paid for a stock and the price it receives when it sells, increasing its profit. The profit motive similarly encourages trading platforms to increase the number of transactions they handle.
In fact, some are willing to pay brokerage firms to attract their business, a practice known as payment for order flow. Exchange-based transactions in listed securities occur in the secondary market.
But when these stocks change hands anywhere but on an exchange, the transactions — but not the stocks — are described as over-the-counter OTC or third-market trades. OTC stocks, on the other hand, are unlisted securities that trade in an OTC or third market, never on an exchange.
Now it lends its name to the financial markets in general — though lots of traders never set foot on it. The name may not say it all. But it says a lot. The alternative trading systems known as dark pools are private new york stock exchange brokerage firms facilities. As is the case with ECNs, trading is anonymous and less expensive than exchange trading. But their lack of transparency means that dark pools continue to be investigated with considerable vigor.
Thousands of new york stock exchange brokerage firms change hands every day in US secondary markets. New york stock exchange brokerage firms exchanges Exchange trading There are more than a dozen stock exchanges in the United New york stock exchange brokerage firms, and the number is growing. Language check Exchange-based transactions in listed securities occur in the secondary market.
In the dark The name may not say it all.