What Does a Broker Do?

A broker provides access to financial markets and trading products.

For most individual traders, the broker provides the technology and infrastructure through which trading activity takes place.

What services can a broker provide?

Depending on its business model and services, a broker may provide:

• Trading platforms

• Market prices

• Order entry

• Account management

• Financial instruments

• Transaction reporting

• Trading history

• Risk and margin information

• Educational resources

The trading platform

A trading platform allows clients to interact with their trading account.

Through the platform, traders may be able to:

• View prices

• Analyse charts

• Select instruments

• Place orders

• Monitor positions

• View profit and loss

• Review account information

What happens behind the platform?

A trading platform is the interface seen by the client.

Behind it may be a more complex trading infrastructure involving:

• Pricing systems

• Order-management systems

• Risk systems

• Liquidity providers

• Market venues

• Execution systems

The exact structure depends on the financial product and the broker's execution model.

Execution models can differ

Not every broker processes transactions in exactly the same way.

Depending on the instrument, provider and execution model, orders may be:

• Routed to external liquidity

• Executed against available market pricing

• Matched internally

• Managed through a combination of methods

Traders should therefore understand the execution terms that apply to their account and financial instruments.

Regulation and documentation

Financial-service providers operate under different regulatory frameworks depending on their legal entity and jurisdiction.

Before using any financial service, clients should review the relevant:

• Legal documentation

• Product specifications

• Risk disclosures

• Trading conditions

• Applicable regulatory information

Lesson summary

• Brokers provide access to trading products and infrastructure.

• Trading platforms are the client's main interface with the market.

• Significant technology operates behind a trading platform.

• Execution models can differ between brokers and products.

• Traders should understand the terms applying to their account.