A broker is a licensed intermediary that facilitates the buying and selling of financial instruments between clients and the broader market. In most cases, brokers do not trade on their own behalf but act on behalf of clients, executing orders across various financial markets such as equities, currencies, commodities, and derivatives.

Brokers exist to provide access. Most individual investors and traders do not have direct connections to stock exchanges, forex liquidity providers, or futures markets. Brokers bridge this gap by maintaining the technology, regulatory permissions, and institutional connections required to process transactions. The services offered by brokers vary depending on their business model and the market segment they serve.

For anyone researching or comparing financial brokers, brokerlistings.com is a practical resource that offers a curated overview of brokers by asset class, platform, location, and regulatory status.

Core Functions of a Broker

The primary function of a broker is order execution. When a client places a buy or sell order, the broker processes that order and either matches it internally or routes it to an external market. The execution speed, reliability, and transparency of this process are fundamental to the quality of service a broker provides.

In addition to execution, brokers often offer:

• Access to trading platforms or software
• Market research and data feeds
• Account management tools
• Client onboarding and KYC (Know Your Customer) verification
• Technical support and account funding mechanisms

Some brokers operate as introducing brokers, passing clients to a larger dealer or market maker. Others run proprietary platforms or act as counterparty to trades, depending on the market structure and business model in use.

Types of Brokers by Market

In equity markets, brokers act as intermediaries between retail or institutional clients and stock exchanges. In forex, brokers may provide access through models such as ECN (Electronic Communication Network), STP (Straight Through Processing), or as a market maker. In derivatives and commodities, brokers often facilitate margin trading and access to centralised clearinghouses.

The type of broker and the services offered will depend on what the client is trading. For example, a futures trader will require margin facilities and access to regulated exchanges, while a CFD trader might trade entirely through an over-the-counter (OTC) broker platform without direct market access.

Broker Compensation Models

Brokers earn revenue through various means: spreads, commissions, markups, or platform fees. Some charge per trade, while others bundle costs into wider spreads. Brokers that act as market makers may also profit from client losses, though this model has declined in popularity due to concerns around conflict of interest and transparency.

The fee structure influences the overall trading cost and can impact profitability, especially for high-frequency traders or those trading with high leverage. Transparency in pricing is a key factor when evaluating broker quality.

Licensing and Oversight

Legitimate brokers are licensed and regulated by national or regional financial authorities. These regulators impose rules to protect clients, including segregation of funds, risk disclosures, reporting obligations, and fair dealing requirements.

In most jurisdictions, trading with an unregulated broker offers little or no legal protection. Regulators such as the FCA (UK), ASIC (Australia), CySEC (Cyprus), and CMA (Kenya) supervise brokers operating within their jurisdictions. Their licensing processes help ensure that brokers meet minimum capital standards and operational guidelines.

Take away

Brokers play a vital role in the global financial system by enabling access to markets, providing liquidity, and supporting both retail and institutional clients in managing their portfolios or executing trades. While their roles vary depending on the asset class and model, their core purpose remains consistent: to connect traders and investors to markets they cannot access directly.

This article was last updated on: June 4, 2025