Diff between trader and broker


Say you want 1, shares of stock in XYZ Corp. You place your order through a brokerage, which then acts as your agent in locating a seller and obtaining the shares. You then typically pay a commission for the broker's services.

The commission may be a percentage of the price you paid for the stock, or, as is common with online and discount brokerages, it could be a flat fee per trade, regardless of the size of your order.

When you place your order for 1, shares of XYZ Corp. Instead, he can simply go to a market maker, who keeps an inventory of XYZ stock, and buy the shares there. Likewise, if you decide you want to sell those 1, shares, your broker can sell them to the market maker.

Jobbers typically post two prices for a stock: The sell price will be slightly higher, which is how jobbers make their money. Generally, if you hear the terms "broker" and "jobber" used together, it's in reference to the London Stock Exchange.

Over time, a custom developed on the exchange in which a firm could be either a broker or a jobber but could not be both.

Instead, he can simply go to a market maker, who keeps an inventory of XYZ stock, and buy the shares there. Likewise, if you decide you want to sell those 1, shares, your broker can sell them to the market maker.

Jobbers typically post two prices for a stock: The sell price will be slightly higher, which is how jobbers make their money. Generally, if you hear the terms "broker" and "jobber" used together, it's in reference to the London Stock Exchange. Over time, a custom developed on the exchange in which a firm could be either a broker or a jobber but could not be both. This "single capacity" system became a formal rule in Further, brokers in the system acted only as intermediaries between buyers and sellers; they set up trades for a commission, but they weren't actually allowed to buy and sell shares on clients' behalf.

The single capacity system was eliminated in as part of sweeping financial reforms enacted by the British government. Known as the "Big Bang," the reforms allowed firms to act as both brokers and market makers. American stock exchanges never had the kind of rigid legal separation between brokers and market makers that existed in London prior to the Big Bang.