A stock broker or stockbroker or stock brokerage is someone or a firm who performs transactions in financial instruments on a stock market as an agent of his/her/its clients who are unable or unwilling to trade for themselves.

Stockbrokers also sometimes or exclusively trade on their own behalf, as a principal, speculating that a share or other financial instrument will increase or reduce in price. In such cases the term broker makes little sense and the individuals or firms trading in a principal capacity sometimes call themselves stock traders or simply traders.

The following is the case in the UK, other jurisdictions are thought to have similar rules.

When acting as an agent, the stockbroker charges the client a flat fee and/or a percentage-based commission for undertaking the trade and the price quoted the client must be the best price available in the market.

When acting as a principal, the trade could be with another market participant or one of the stockbroker's clients. When trading in a principal capacity with a client the broker is obliged to inform the client and no commission is charged.

Since the 1980s stockbroking firms have also been allowed to be market makers as long as the appropriate Chinese walls are put in place.

With the advent of automated stockbroking systems on the Internet the client often has no personal contact with his/her stockbroking firm. The stockbroker's system performs all the stockbroking functions: it obtains the best price (http://www.sec.gov/rules/proposed/34-50870.pdf) from the market and executes and settles the trade.

Terms

Front office. This is a description of the part of the firm that is "client facing". The sales staff, brokers and traders are part of the front office. Functions of the front office include acquisiton and entry of orders, fulfillment of the orders, and all the regulatory reporting for the orders.

Back office. The back office is where the clearance processing of the trades is done. Transfer of securities and money and the tracking of "failure to deliver" is handled. Securities lending for a brokerage firm, wherein shares of a security that is being sold short are located (http://www.sec.gov/rules/final/34-50103.htm) to insure they can be deliviered, is usually included in the back office as well.

See also

• Prime brokerage
• Retail broker