A broker is an individual or firm that acts as an intermediary between an investor and a securities exchange. For example, in the case of Orient Futures Singapore, we serve as a brokerage between the institutional/retail trader and the exchange.
While it is easy to understand the functioning mechanism of a broker, there are several types of brokerage services, hence, this article will explain and state the different types of services that each brokerage offers and how to choose them.
Broker Meaning
The direct meaning of broker is any person who acts for or represents another in the buying and selling of shares in companies or protection against risk.
Types Of Brokers
Stock Broker
A stock broker is a financial broker that deals with investments in stocks through buying and selling on behalf of individuals or corporate clients. Sometimes, a stock trader, commodity broker, bond broker, or investment broker can also fall into the category of a stockbroker.
The role of a stock broker is to manage a client’s investments or transactions, this means that the managing party usually consists of professionals with relevant qualifications in business, finance, asset management, or economics, allowing them to operate within the equity markets with efficiency.
Further down, the relations of a stock broker include other affiliates that are called “introducing brokers” (IBs). Introducing brokers earn commission by referring clients to the brokerage firm and are also able to accept orders to buy or sell futures contracts, commodity options, and swaps. However, the introducing broker does not accept money or other assets from customers to support these orders.
Forex Broker
A forex broker performs a similar role as a stockbroker, however, the brokerage only deals with the buying and selling of currencies.
In comparison to other products, forex markets are accessible as an “24-hour market” due to time zone differences among countries. For example, a trader can access the forex market from another geographical location.
Through currency pairs, a trader can then use them for hedging purposes. (Refer to the example in “How Does Forex Trading Work” to understand more about the forex market.)
Types of Brokerage Services
Full-Service Broker
Full-Service Brokerages, otherwise, also called traditional brokerages offer an array of services with the addition of investment advisories and can also help clients to gain access to exotic investments.
For example, Shanghai Orient Futures offers investment banking, asset management, fund management, research services, Stock options asset securitization services, and many other financial management options.
Among the brokerage types, full-service broker is the most comprehensive, however, integral to the personalised service is the high costs and higher charges in comparison to discount brokers. Given the significant investment in both time and money, full-service brokerage is geared toward institutional traders or corporations, these services can help to build investor portfolio or scale investment strategies to greater heights.
Currently, Orient Futures Singapore offers derivatives such as futures and forex, options, swaps, bonds, and index futures. Traders that require our services are also able to avail of trading platforms or research information. To find out about the costs, contact us here.
Discount Broker
In contrast to the full-service brokerage, a discount brokerage is an online brokerage. The benefits are the low commission rates and direct trading management by the traders.
With the rapid digitalisation of the current era, discount brokers are widely available and competition among different providers has led to stiff competition, some brokers have even foregone commissions altogether for certain securities.
However, while prices are lower from discount intermediaries, they only carry out orders and do not offer any personalised services such as personal advisory, research, or exotic trade requests.
What Does a Broker Do
A broker manages the transactions of the client and the requirements of the exchange or the product providers.
For example, when entering into a futures transaction, the investor has to put up a cash amount which is the “initial margin”. If the market moves against the investor or the margin levels are increased by the broker, the investor will have to deposit additional funds at short notice to maintain his position. If the investor fails to comply with the request for additional funds within the specified time, the broker may liquidate the position and the investor will be liable for any resulting shortfall in the account.
These forms of price tracking and risk management are maintained by the team in the brokerage firms. Additionally, the margins are met in the form of collateral prescribed by relevant authority e.g the Singapore Exchange (SGX). SGX allows collaterals by brokers as margins in the form of cash, government securities, bank certificate of deposit, gold bars, or approved gold certificates and selected common stocks.
In summary, brokerages are integral to the financial market as they serve as the intermediary between buyers and sellers. When considering a broker of choice, always take into account the costs and the objective of the trades.
Start Trading With Orient Futures Singapore
Being an Overseas Intermediary of Shanghai International Energy Exchange (INE), Dalian Commodity Exchange (DCE), and Zhengzhou Commodity Exchange (ZCE), when foreign clients participate in internationalised futures contracts in these Chinese markets with us, they have direct access to trading, clearing, and settlement. Our parent company, Shanghai Orient Futures, is the largest broker in terms of aggregated volume across the five regulated exchanges in China.
Orient Futures Singapore also currently holds memberships at the Singapore Exchange (SGX), Asia Pacific Exchange (APEX), and ICE Futures Singapore (ICE SG).
We provide premium customer service at an affordable cost to all our clients. Our team will be there for you 24 hours on trading days to provide a one-stop portal for all your trades, with simple processes and an intuitive user interface that has low or near-to-zero latency.
