02 What is a broker?

Most financial products you invest in are traded on a stock exchange. Since most exchanges only deal directly with professional licensed entities, you need a broker to facilitate orders on your behalf. Then comes the question: how do I choose the right broker? This lesson covers what you need to know.

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The role of a stock broker

Let’s say you want to purchase your first stock. Then this order will typically go through a stock exchange. But how exactly does an exchange work? And how do you, as an individual investor, get access to it?

The stock-exchange

An exchange is a place where buyers and sellers come together to trade financial instruments, such as shares and bonds. There are many stock exchanges, located around the world. Famous examples are the London Stock Exchange in the UK, Euronext Amsterdam in the Netherlands, and perhaps most famous of all, the New York Stock Exchange in the USA. Many exchanges have specialized listings, based on location, company size, or sector. The NASDAQ exchange for instance, primarily lists tech shares.

Trading used to be carried out on the trading room floor, by people who were present in the building at the time of the trade. And while many people still have the picture of a stock exchange filled with people yelling and computers flashing numbers, the scene inside is much quieter now. These days, you are more likely to find a number of computers on the trading room floor.

Awarded stock broker on both computer and app.

The stockbroker

For individual investors, it is easier than ever to access global markets from the comfort of your own home. You do this with the help of a broker, because exchanges only deal directly with professional, licensed entities. This is where a stock-broker comes in, acting as an intermediary. By opening an account with DEGIRO, you gain access to a trading-platform connecting you to more than 60 global marketplaces.

The primary role of a broker is to facilitate orders on your behalf. DEGIRO does this by using our in-house developed infrastructure and trading platform. With this, you can view markets from across the world and use different analytical tools to make your investment decisions. You’ll also see an overview of news reports and price-charts. The platform is available on your computer or mobile-device, so you can access your account anytime, anywhere.

The fees

While most brokers are now similar in terms of the services provided, the fees you pay to trade are still very different. And as these fees have a substantial impact on your returns, it is important to carefully weigh your options when choosing a broker. DEGIRO currently operates in 16 European countries and is therefore able to offer incredibly competitive rates. On our fee page, you will find a full breakdown of the fees, and see how these compares to other brokers.

Coming up

The next lesson will explain different financial products you can choose from, once you want to make a trade.