A share broker is an investment professional who charges fees on each share that is traded on behalf of his or her client. This is in contrast to the method of charging a percentage of the value of the investment being traded. Many investors prefer this share trade method, since it can lead to smaller fees, depending on the exact nature of the transaction.
With a share broker, the fee is based on the number of shares involved in the trade, with many brokers of this type offering a reduction in the per unit charge as the number of shares increases. For example, the broker may charge a specific rate per share if the number of shares is under ten thousand. A different rate may apply if the number of shares is somewhere between ten and twenty thousand, with an even lower rate per share assessed if the investor wishes to execute a trade involving thirty thousand or more shares. Since the tiered pricing on the share trading strategy will vary somewhat from one broker to another, it is always a good ideal to get an idea of what levels the brokerage will offer additional discounts on the rate per share.
There is more than one type of share broker. The discount broker is the most common, offering basic investment services at highly competitive rates. A floor broker places orders for clients on the actual floor of the exchange, rather than using electronic means to do so. Upstairs brokers actively look for investors to match their clients with, negotiate terms that are agreeable to both parties while still below market rates, and execute the transaction is a very short time frame. Value brokers are essentially discount brokers who specialize in the sale of smaller lots of securities that carry a low price per share.
Like all brokers, a share broker should be registered as an agent with the stock exchanges where the securities in question are actively traded. This makes the process of connecting buyers and sellers much easier. In addition, it also offers investors a degree of security with the transaction, since the broker must abide by the regulations put in place by the stock exchange, or run the risk of losing his or her registration.
Along with handling transactions on behalf of clients, a share broker typically offers other value-added services. This will include offering clients suggestions on how to structure the investment portfolio, based on the goals and investment style of each individual client. The broker is also likely to offer counsel on when to buy a particular investment, how long to hold on to that investment, and when to sell it in order to earn the highest return possible.
