Starting out
Broker
The firm that holds your account and sends your orders to the market on your behalf.
How it works
A broker is an intermediary. You do not trade directly on an exchange; you instruct a broker, and the broker routes the order. What you own afterwards is usually held in the broker’s nominee account, with their records showing the shares belong to you.
Brokers differ in what they charge, which markets they reach, how they route orders, and how your assets are protected if the firm itself fails. That last question is worth answering before the first one about fees.
Where it misleads people
Zero-commission does not mean free. Where there is no explicit commission the revenue usually comes from somewhere less visible: the spread, order-flow payments, the interest on your uninvested cash, or the currency conversion rate.
Related terms
- Nominee accountAn arrangement where your broker is the registered owner of your shares and you are the beneficial owner.
- Payment for order flowA broker being paid by a trading firm for the right to execute its customers’ orders.
- Bid-ask spreadThe gap between the highest price anyone will pay and the lowest price anyone will accept.
- CustodianThe institution that physically safeguards the securities you own.
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Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.