Brokerage - Term Overview

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In the world of finance, brokerage is a kind of commission or fee that a stock market professional, called a broker, applies to a company or to someone interested in investing to provide a service. The brokerage is established with a special contract called a “brokerage contract”. This contract is between a professional person in finance and investment and the person interested in accessing an asset.

It's very important to differentiate brokerage from a commission, as a broker may not require payment of this fee, but will simply charge his client a commission for the work of trading assets. In a simple way, the brokerage allows access to the asset trading service and the commission is used to pay for the services that the broker executes in the stock market.

The fact that a broker brokerage ask or not will depend partly on the type of market where you want to access or the type of assets which want to operate, as each will have different requirements.

Differences between the commission contract and the brokerage contract

There are differences between the two contracts that are signed with a stock market specialist that must be known to the interested party:

  • Commission contract: you act on your own behalf. The broker will operate according to its specialized knowledge and taking the appropriate actions, always adapting to what the client wants.
  • Brokerage contract: the broker executes the actions always following the client's will. The broker will only carry out activities that facilitate access to the stock and asset markets, but will not act on its own behalf. Thus, the broker will advise at all times on the most beneficial operations that the client can obtain.

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