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.
Sathish Emmadi
Sathish Emmadi is a co-founder & editor at Lastbull.com. He is presently working in IT for one of the world’s top mutual fund companies. Handled multiple projects in BFSI (Banking,Financial Services and Insurance) domain. An Engineering Graduate from NITW.
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{ 5 comments… read them below or add one }
give me a details about low brokerage
I had an account with Motilal now with Kotak. Brokerage charges are same with both of these firms. If I remember it correctly it’s 0.4% for delivery per transaction. I think ICICI direct charges a little extra. I request readers to put in here their experiences with the brokerage firms.
My reply to an email from one of our freinds.
Brokerage companies don’t spend much on providing good trading terminal. Really it’s not the problem with the software of exchanges. NSE is one of the best in the world as far as the settlement time,speed and accuracy are concerned. We can see T +1 settlement/same day settlements in the future. Brokerage companies are not catching up with the exchanges.
Why brokerage companies not providing the world class trading terminals? Frankly, most of the people are not asking for it !!! In India when an investor wants to open a trading account with a brokerage firm, the first thing he looks at is the cost of brokerage; next research mails, service, leverage and then trading terminal. Of course it’s my guess. Obviously they have also started spending much on research and giving junk emails
My view is: an investor should try to gain the knowledge and invest on his own.
I had to wait in the room of a technical guy in a brokerage firm for 3 hours. He was so busy with so many number of calls and the people who directly approached him. Believe me there was no single question on the trading terminal.
Of course reg broadband speed in India still it’s a long way to go. Yes still there is offline trading!!. Most of the brokerages(service segment, not order routing ) are not 100% computerised!.I feel Customer service is also pathetic. Your opinions please?
Question from one of our readers
I have a question which no one yet has been able to answer. So here goes:
I am in the US and I use scottrade.com and etrade.com for my online investing needs. I look at the websites and trading platforms being provided by them to me currently, and compare them to platforms being provided in India by sharekhan and indiabulls. Why are they still not at international standards. Is it because it is not considered a key due to stil low online trade volumes, lack on bandwidth. What do you think is the reason?
My reply to that question:
Brokerage companies don’t spend much on providing good trading terminal. Really it’s not the problem with the software of exchanges. NSE is one of the best in the world as far as the settlement time,speed and accuracy are concerned. We can see T +1 settlement/same day settlements in the future. Brokerage companies are not catching up with the exchanges.
Why brokerage companies not providing the world class trading terminals? Frankly, most of the people are not asking for it !!! In India when an investor wants to open a trading account with a brokerage firm, the first thing he looks at is the cost of brokerage; next research mails, service, leverage and then trading terminal. Of course it’s my guess. Obviously they have also started spending much on research and giving junk emails
My view is: an investor should try to gain the knowledge and invest on his own.
I had to wait in the room of a technical guy in a brokerage firm for 3 hours. He was so busy with so many number of calls and the people who directly approached him. Believe me there was no single question on the trading terminal.
Of course reg broadband speed in India still it’s a long way to go. Yes still there is offline trading!!. Most of the brokerages(service segment, not order routing ) are not 100% computerised!.I feel Customer service is also pathetic.
Your opinions please?