What is a Broker?

What is a broker?

Brokers execute buy and sell orders for their clients in exchange for a commission. Most investors and traders send their orders to a broker, who sends them to the exchange.

On Nadex, you don’t go through a broker. Instead, you become a direct member of the exchange and execute your own orders.

Discount & Full Service Brokers

What is a Broker?Brokers are middlemen who take buy and sell orders from the client and pass them on to the trading venue to be executed. That venue may be a regulated exchange or a less secure venue.

Traditionally, investors traded through brokers who offered a range of services including market research, advice, and long-term planning. Such brokers are called full service brokers. Some may even have power of attorney or discretion to adjust orders or trade on the client’s behalf. Typically, full service brokers will take extra measures to ensure that client orders are filled as well as possible.

Discount brokers simply place the client’s orders into the market place and report on whether it was filled and what price it is trading at. This is usually done on an online trading platform. Because the order placement is automated, discount brokers can charge lower commissions. They typically don’t offer advice or personal services.

Broker vs Fiduciary

Brokers in the United States are registered with the Financial Industry Regulatory Authority (FINRA), which holds them to certain standards of conduct, including having reasonable grounds for making investment or trade recommendations to a client.

A higher standard of conduct is required of Registered Investment Advisors (RIAs) or fiduciaries, who are registered with the Securities and Exchange Commission (SEC). Fiduciaries must follow strict rules about always acting in the client’s best interest. They cannot recommend or compel investments or trades in which they have an interest but which might not be suitable for the client.

Trade without a broker on Nadex

On Nadex, you don’t need to go through a broker.  All trading is fully self-directed, meaning not only do you not have a broker telling you what and how to trade, but you send your orders directly to the exchange with no intermediary. As a CFTC-regulated exchange, Nadex does not give trading recommendations or engage in trading.

See all glossary trading terms

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