Brokerage house/Trading member & Clearing member

Brokerage firm

It’s a financial intermediary which interfaces with the investors to buy or sell securities on behalf of them and charges some percentage of the settlement amount for doing so. A brokerage firm can also buy/sell securities for their own firm.

As per the definition  trading member is a firm which is a member of BSE or NSE and is authorized to place orders in the capital market system. So the word brokerage house gives the same meaning of trading member.

Clearing member is a firm which is a member of an exchange’s clearing corporation and involves in clearing of trades. Most of the brokerage houses are clearing members. If a brokerage firm doesn’t have the authority to clear the trades they have to register their trades with a clearing member to get them settled.

All retail investors should open an account with a brokerage firm to buy/sell securities. It accepts orders from the investors who registered with the firm, validates the orders (with the help of their own software) and routes them to the exchange.
Once the orders have been traded, it sends back the order confirmation to the investors. A brokerage firm is also responsible for delivering funds/securities to the investors once the trade has been settled.

Brokerage firms provide trading terminals/web based trading service to their clients along with username and passwords. During trading hours the investors can see the quotes as soon as they log into their online trading account. The investor can monitor the stock prices and other additional information like year high, year low and percentage change etc. The additional information varies from broker to broker and some of them provide facility to the investor to customize it.

A bid quote is a buy order where as Offer quote is a sell order. Different investors from different brokerage trading terminals give quotes to buy/sell securities. Exchange trading system is essentially an order driven market.
 

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August 3, 2008 | Filed Under Stocks 

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