Stock brokers are those who are authorised to trade securities in a stock exchange of which they are members.
Any investor interested in buying or selling a stock has to approach a stock broker.
In the initial days, stocks were traded by stock brokers by shouting the price of the stock on the floor of the stock exchange.
This method was called open outcry method of trading.
At that time, shares were in physical paper format.
This used to be a very time taking, cumbersome and risky process.
The stock market trading was largely limited to professionals, stock brokers and some enterprising individuals.
However, with the advent of electronic trading after the shares were dematerialised in 1993, the constraint of being at the same place to trade has gone.
It is during this time that a scam broke out in the country by a stock broker.
Online connectivity has helped stock brokers to trade from any part of the country.
The masses started actively participating in the securities trading since then.
Lately, the stock exchanges prefer corporate with good track record as stock brokers to individuals.
Guidelines were laid out for selection of an individual or corporate as a member broker.
Net worth, education and experience of the applicant are taken as criteria.
The selected member broker has to pay a security deposit and also an annual membership fees.
A stock broker may operate on behalf of his client for a commission or even trade in securities for his own self.
Normally shares are traded in two methods.
One is cash trading and other one is day trading.
In cash trading the shares are purchased or sold with an intention to deliver or keep the possession of the share and the value of the share has to be delivered on or before the settlement day.
Therefore they need to be delivered on or before the settlement day.
Where as in day trading method the shares are purchased and sold within the day and thereby squaring off their transaction.
Online stock brokers are mainly corporate or individuals who trade on behalf of their clients.
The online stock brokers provide their clients with lot of data, information, researched and expert opinions on which stocks to purchase and sell.
They send frequent newsletters on the happenings in the market, information about IPOs, mutual funds and NFOs.
An individual cannot go directly into any exchange and trade in securities.
Therefore he needs a stock broker for him to transact.
An individual before selecting an online stock broker should take the following factors into consideration: The track record and financial status of the broker over the years, the swiftness of the web site in responding to the queries, the rates and commissions charged by the broker in comparison with others, the services offered depending on our requirement and level of expertise and the authenticity of the website.
The advent of online stock brokers has made it easy for the retail investor to participate and invest in securities.
The online brokerage firms offer customer care branches and personalised service.
All the stock brokers are also registered with SEBI, Securities and Exchange Board of India.
SEBI acts as a watchdog for investors and ensures that the rules are followed.
These online brokers operate by using the computer terminal in their office or premises.
The online stock brokers also manage the portfolio of their clients based on their financial status, risk appetite and future goals.
However, no online stock broker takes the responsibility for any loss incurred by the client by following their advice.
There may be some stock brokers who are not qualified or not registered but still operating in the market.
They may mislead you.
Therefore it is imperative for the individual to consistently monitor the stock market, track the performance of his stocks, set some targets for the returns and set a loss control limit to complete a great portfolio.