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What is an Electronic Brokerage?

Article Details
  • Originally Written By: Luke Arthur
  • Revised By: Bott
  • Edited By: C. Wilborn
  • Last Modified Date: 12 November 2016
  • Copyright Protected:
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    Conjecture Corporation
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An electronic brokerage is a type of financial brokerage that allows investors to buy and sell securities electronically; online stockbrokers are an example of electronic brokerage. This type of brokerage provides investors with an easy way to access the market and buy securities. One of the advantages of this type of brokerage is that investors do not have to rely on someone else to make purchases, but at the same time, investors may miss out on a higher level of service that they would normally receive from a traditional brokerage.

By using an electronic brokerage, investors have access to online trading software. Each broker will generally have a unique trading platform that is used by their customers where there are real-time price quotes on stocks, mutual funds, exchange-traded funds (ETFs), currencies, commodities, or any other type of investment that is supported by the broker. The investor can usually access sought-after information fairly easily in order to research investment options before making a decision.

How it Works

Most of the time, customers can access price charts and use technical indicators on the broker's website in order to aid in trading decisions. Once a trader finds a security that he wants to purchase, the process is very simple and the trader can often purchase or sell the security with the click of a button. The trade will be processed as quickly as possible; in most cases, trades are processed within a matter of seconds.

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Advantages

One of the primary advantages of working with an electronic brokerage is that customers do not have to rely on a human broker to place trades for them. In the past, traders had to call a broker in order to place a trade in the market, which slowed down the process and made traders reliant on a single individual. With an electronic brokerage, customers can avoid this delay and place trades pretty much as soon as they are needed. Since the customer does not rely on the broker as much, most electronic brokers charge less in commissions as well.

Disadvantages

Even though it is quicker and easier to use an electronic brokerage, there are a few potential drawbacks associated with this type of trading. When working with an electronic brokerage, individuals will not generally receive the same level of service that they would working with a traditional broker. By not speaking to a live person, traders may miss out on useful advice that might be provided by a securities broker or financial advisor.

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