What is Securities firm and stockbroker?

A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors. A broker may be employed by a brokerage firm. Securities firm - a stock broker's business; charges a fee to act as intermediary between buyer and seller. A brokerage house is a place from which a broker conducts business. The term brokerage house is often referred to as a broker, brokerage, or a brokerage firm. Working through a licensed brokerage house, your broker buys and sells shares of stock for your portfolio as per your instructions. A full service brokerage house provides a wide range of services to its clients, including advice and recommendations concerning which stocks to buy and when to sell. With your permission your brokerage house may allow your broker to buy and sell shares in your name at the broker's judgment. In exchange for these services, a full-service brokerage house often charges higher commissions than a discount brokerage house. A discount brokerage house typically provides few services other than the actual placement of buy and sell orders. A discount brokerage house typically refrains from offering recommendations or advice. As the name implies, a discount brokerage house typically has lower commission rates. Size and Types of Security Firms Brokerage firms come in all sizes, from one- or two-person offices to huge firms with offices around the world. They are sometimes differentiated as full-service or discount firms, based on pricing structure and client relationships. Some brokerage firms exist entirely online, and nearly all firms offer you the option of placing orders electronically rather than over the telephone. In most cases, trading electronically is substantially less expensive than giving buy and sell orders by phone. Types of brokerage accounts in Brokerage Houses: A firm that conducts transactions on behalf of a client. Some brokerage firms only conduct transactions, while others also offer different types of investment advisory services. Brokerage firms derive their profit from commissions on orders given. That is, they usually collect a percentage of the value of each transaction, though some charge flat fees. Clients may give orders in a variety of ways. One may meet with a broker, call on the telephone, or give orders over the Internet. Brokerage firms handle two main types of brokerage accounts: 1. Advisory accounts and 2. Discretionary accounts.

Brokers are only allowed to conduct transactions on advisory accounts on the specific orders of the account holder, or under very specific instructions. Brokerages have much more freedom over discretionary accounts, conducting transactions not prohibited by the account holder in accordance with the holder's investment goals and the prudent man rule. In practice, most brokerage firms are in fact broker-dealer firms. Most brokerage firms must register with the SEC.

Functions of securities firms writing The major business or even social functions of the securities firms in the national economy are the following: Investing: The securities firms are the mediators between the instant investors (individuals) and firms (issuers of securities) that need investments for the sustained development and growth of their business. They can execute this function by the direct trading or establishing and managing of different mutual or pension funds. That is why the segment of the securities firm, investment mediators plays a great role in the national economy. Because they direct billions of dollars from private to corporate sector. These private investments are the main source of capital on the developed markets; Trading: To execute the function, mentioned above, securities firms must sell particular securities to the customers. That is why trading is an integral part of their performance. Moreover we can say that trading is a primary function and special feature of the securities firms. Trading activities can be conducted on behalf of a customer or the firm (dealing trading with securities for their own benefit and brokerage trading as agents of their customers). Back Office Service Functions: Security firms can offer their clients and other interested persons different analytical and informational services. For example, they are able to conduct different researches and surveys, analyzing the fund market and the national economy in general. Departments and Divisions In general, a large firm typically has the following departments: sales, underwriting and financing, trading, research and portfolio, and administration. There are many small boutique firms that may serve only a single department of a business--for example, retail sales--but even in this limited operation, their activities might resemble those of the respective department of a larger firm.

Sales Sales is likely the department employing the largest number of people in the firm, and it is the area individual retail investors interact with the most. Within the retail sales force, investment advisors may focus on servicing a specific area of the investment industry, or they may provide a "one-stop-shop" for all retail investment needs. For example, an investment advisor may perform only those services that are associated with a stock broker, or offer other services as well, such as stock and mutual fund transactions, bond trading, life insurance sales, and so forth. In a small firm, the activities of the investment advisor are likely to be more diverse. A second division within the sales department is institutional sales, which is primarily involved in selling new securities issues to traders working at institutional client firms, such as pension funds and mutual funds. If a hot new securities issue generates so much interest that it quickly becomes oversubscribed, the job of institutional sales is as simple as allocating shares to the best clients--as a "reward" for their ongoing business. Because of the large dollar volume of transactions and the commissions from both new issues and existing accounts, the institutional sales department often generates a significant portion of the firm's profits (making institutional salespeople some of the best paid personnel in the entire firm). The institutional sales department works closely with the firm's trading department (discussed below) to maintain accounts in good standing. Underwriting Financing The firm's institutional sales division also works closely with the underwriting or financing department, which coordinates new securities issues and/or follow-up securities issues on the secondary market. The underwriting or finance department negotiates with the companies or governments issuing the securities, establishing their type of security, its price, an interest rate (if applicable), and other special features and protective provisions. The firm's underwriting or financing department may be split into two divisions: the first relating to matters of corporate finance and the second to those of government finance. In a fully-integrated firm, these departments would be quite distinct, as the needs of corporations and governments vary widely. For example, the corporate finance department would require familiarity with stocks, bonds, and other securities, while the government department might be more geared toward bond and Treasury bill issues. Trading The firm's trading department also has separate divisions, most likely according to the type of securities being traded: bonds, stocks, and various other specialized financial instruments. Traders in the bond division may have sub-specializations, such as government or corporate money market instruments or bonds, or even such instruments as debentures. The stock trading department executes orders from retail and institutional sales staff. Stock traders maintain close links with traders on the floor of stock exchanges; although,

with the rise of electronic trading, the interaction may be with a trading computer instead of a human being. The firm's trading department may also include a division geared toward various other specialized instruments, perhaps mutual funds or exchange-traded options, or commodity and financial futures contracts. Research and Portfolio The research department supports all other departments. Its securities analysts provide vital analysis and data to aid traders, salespeople, and underwriters. This data is necessary for the selling and pricing of existing securities trades and new issues. The firm's research department may consist of economists, technical analysts, and research analysts who specialize in specific types of securities or specific industries (within the equities specialization). The research department may further be divided into retail and institutional divisions; although, if the firm has only one research department, research reports geared to institutional clients may also be made available to retail investors. If the firm hosts a single institutional research department, it would be geared toward analyzing potential new issues, takeovers, and mergers, in addition to providing ongoing coverage of securities held by institutional clients. Together with the retail department, analysts may be further involved in structuring portfolios for individual and small business accounts. Administration The administration department is a vital component of the firm's organization. It not only maintains proper paperwork and accounting for all trades and transactions, but also ensures compliance with securities legislation and oversees internal human resources matters. All trades made by the firm must be accounted for, and all incoming and outgoing funds and securities must be continually balanced. Securities must be checked for registration and delivery requirements, and dividend payments must be credited to accounts as received. In the credit and compliance division, client accounts are constantly monitored for industry and firm compliance, ensuring that payments and securities are received by their due dates, and that margin accounts fulfill applicable margin requirements. The financial division oversees accounting matters such as payroll, budgeting, and financial reports and statements. Minimum capital levels are maintained according to industry requirements, ensuring that the various departments within the firm hold sufficient funds to accommodate changes in the firm's business.