Significance Of Discount Brokers

The major benefit of discount brokers is that they are unbiased. As no advice is provided they are not going to make you buy or sell a stock. These brokers are a timely intervention to high transaction costs emerging in financial sector. You cannot rate them to be a no frill broker. They just provide you with a platform to conduct a transaction along with other essential services. In a way it can be compared to a low cost airline whose prime motto is to make you reach a destination. The descaling costs of brokerages ensure a hell lot of difference for a client. Stock calls are available in plenty on the internet or via newspapers or journals. Apart from these there are paid materials to provide valuable inputs on trading. All of them have a fixed fee.

A comparison between a full time broker and a discount broker stems from transaction costs. Brokerages are levied as a minimum amount below a certain level of stock. In case of options trading there is a flat rate of brokerage on each deal. This method of calculation has considerable impact on the profitability ratio.

The major benefit of a discount broker is that they prove to be unbiased. No form of advice is given out by them. They are not going to bother you with research calls or any trade calls without any clear set recommendations.

In the last few years Indian market has witnessed considerable change for the good. Electronic trading has not only provided a degree of transparency that was opaque at a certain point of time, it reduces cost. Because of the internet cost parameters and transparency have touched new levels. It has also lead to the discovery of brokers who charge significantly lower rate of commission. In industry parlance they are termed as discount brokers.

A brokerage firm levies a fee for transacting on their platform. Traditional brokers charge a high rate of commission as they provide valuable inputs via research. They can even go on to claim that the research inputs are team work of experts whose prime objective is to increase wealth of an investor. But reality presents a different story. If a client transacts then only a broker makes money. More the transactions undertaken by a client more brokerage adds to the kitty. Considering quantum of trading and client needs brokerage rates are known to vary. For a high end client who trades in an aggressive manner brokerage rates are expected to be lower.

Before proceeding to open a brokerage account it is necessary to figure out whether they are hidden costs in an advertisement. Do have an infrastructure of the discount broker. Check out the internet connection and if there is any stand by mechanism in the event of them losing their internet connection.

Each and every transaction that you place in the stock market, be it commodities, equities or foreign exchange there is a cost involved. Some are regulatory costs whereas others are statutory costs.