a stock broker: Beginner's Guide

A stock broker is an individual or firm that executes buy and sell orders for stocks and other securities on behalf of clients. This guide explains roles, broker types, fees, regulation, technology...

2025-12-19 16:00:00

By Ravi Clark

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Stockbroker (a stock broker)

A stock broker is an individual or firm that executes buy and sell orders for stocks and other securities on behalf of clients. This article covers their roles, business models, regulation and how the function intersects with modern online brokers and crypto trading platforms. Readers will learn the terminology, how brokers make money, how trading and execution work, account types and practical steps to evaluate and choose a broker — including how traditional brokerage services are converging with cryptocurrency custody and trading on platforms such as Bitget.

Quick note: this guide focuses primarily on U.S. equities market practice while calling out intersections with cryptocurrency markets and tokenized securities where relevant.

Terminology and scope

Before diving deeper, it helps to define common terms you will see throughout this guide. Clear definitions make it easier for new investors to understand services and regulatory responsibilities.

Broker / stock broker: A person or firm authorized to transact securities trades on behalf of clients. In this article, the phrase "a stock broker" is used repeatedly to emphasize the practical role of intermediating trades for investors.
Broker-dealer: A firm that both executes trades for clients as a broker and buys/sells for its own account as a dealer. Broker-dealers register with regulators and are subject to capital and conduct rules.
Registered representative: An individual who is licensed to sell securities and is associated with a broker-dealer (sometimes called a "rep").
Discount broker: A brokerage that focuses on trade execution with limited or no advisory services, usually at lower fees.
Full-service broker: A firm offering personalized advice, wealth management, research, and a broad product set, typically charging higher fees.

Scope: this guide centers on U.S. equities market norms (order types, execution, FINRA/SEC oversight) and highlights how traditional brokerage functions intersect with crypto markets, tokenized securities and platforms that offer both securities and digital assets (hybrid brokers). When discussing crypto custody or Web3 wallets, Bitget Wallet will be referenced as a recommended option for users of Bitget’s ecosystem.

Roles and responsibilities

A stock broker performs a range of duties that go beyond simply pushing a button to buy or sell a share. Core responsibilities include:

Order execution: Receiving client orders and executing them on exchanges or through market makers, ensuring trades are executed according to client instructions and best execution principles.
Client account servicing: Opening and maintaining accounts, handling funding and withdrawals, tax reporting, delivering confirmations and statements.
Trade recommendations (when applicable): For full-service brokers or registered reps, offering investment recommendations, portfolio construction, and periodic reviews. Note: recommendations must satisfy suitability rules and, in some contexts, Regulation Best Interest (Reg BI).
Ancillary services: Research and market analysis, margin lending (providing leverage to qualified clients), cash management (sweep accounts, money market funds), and securities lending for short sales or revenue generation.

A stock broker’s specific duties depend on the business model: discount brokers focus on fast, low-cost execution and platform reliability, while full-service brokers emphasize advisory services and client relationship management.

Types of brokers

Brokerage models vary based on services, clients served and technology. Below are the main types encountered by retail and institutional investors.

Full-service brokers

Full-service brokers provide personalized advice, financial planning, retirement and estate planning, tax-aware investing and access to proprietary research. Typical traits:

High-touch client service with dedicated advisors or wealth managers.
Broad product set: equities, fixed income, mutual funds, managed accounts, estate & trust services.
Higher fees: advisory fees, trading commissions (where applicable), account minimums.

Full-service firms are appropriate for investors who want holistic financial planning and are willing to pay for human advice. When using "a stock broker" in a full-service context, expect a relationship combining trade execution and ongoing advisory conversations.

Discount and online brokers

Discount and online brokers emphasize low costs and self-directed investing. Key features:

Low or zero commissions on U.S. equity trades (many brokers removed commissions years ago).
Robust trading platforms and mobile apps for retail investors.
Educational content, screeners and basic research tools.

For many retail investors, a discount broker or online platform provides the right balance of cost, convenience and functionality. When selecting such a platform, prioritize execution quality, app reliability and fee transparency.

Direct-access and institutional brokers

Direct-access brokers and institutional platforms serve active day traders, proprietary trading firms and institutional clients. Characteristics include:

Low-latency execution and co-location options for reduced network delay.
Advanced order types (direct routing, fill-or-kill, immediate-or-cancel, discretionary algorithms).
Sophisticated reporting, block trade capabilities and bespoke risk controls.

These platforms cater to professional needs; retail investors generally do not require direct-access features unless they are executing high-frequency or complex strategies.

Crypto brokers / hybrid brokers

Hybrid brokers offer both traditional securities and cryptocurrency trading or custody services. They differ from centralized crypto exchanges in important ways:

Brokerage model vs. exchange: A broker may offer crypto trading through custodial services, regulated brokerage interfaces, or via tokenized securities products (such as ETFs). Exchanges typically run order books and focus on spot crypto trading.
Regulatory posture: Hybrid brokers often pursue regulatory approvals and work with custody partners to provide a compliance framework closer to securities markets.
Custody integration: They may provide integrated custody solutions, linking brokerage accounts to Web3 wallets for on-chain transfers. For users in the Bitget ecosystem, Bitget Wallet is the recommenced Web3 custody option.

Hybrid brokers make it easier for investors to gain exposure to both stocks and crypto from a single account while subjecting certain features (e.g., custody, staking) to different legal and compliance constraints.

How brokers make money

A stock broker can generate revenue through multiple streams. Understanding these helps investors assess the total cost of using a broker beyond headline commission figures.

Commissions and trade fees: Historically the main revenue source. Many brokers now offer zero-commission equity trading, shifting revenue mixes.
Interest on uninvested cash: Brokers may earn interest on client cash balances, or sweep cash into interest-bearing funds.
Margin interest: Interest charged on borrowed funds when clients trade on margin.
Account and service fees: Inactivity fees, account maintenance, wire transfers, paper statements and other service charges.
Payment for order flow (PFOF): Brokers route retail orders to market makers who pay for the order flow. PFOF can subsidize zero-commission trading but raises questions about execution quality and conflicts of interest.
Securities lending: Brokers lend shares held in customer accounts to short sellers and keep part of the revenue.
Other revenue-sharing: Fees from third-party product providers, referral partnerships or advisory fees for managed accounts.

When evaluating a broker, consider the full revenue picture. Zero-commission trades can still involve costs (wider spreads, routing arrangements, less favorable execution), so compare execution quality and total cost rather than headline commission alone.

Trading, order execution and routing

Order execution is the technical core of brokerage services. How a broker routes and fills orders affects price, speed and the likelihood of a favorable trade.

Order types: Market orders (execute at prevailing price), limit orders (execute at or better than specified price), and stop orders (trigger a market or limit order when a price threshold is reached). Each has tradeoffs between certainty and price control.
Routing decisions: Brokers choose where to send orders — exchanges, dark pools, or market makers. Routing affects speed and price improvement opportunities.
Market makers and exchanges: Market makers provide liquidity and can offer price improvement to retail orders. Exchanges display lit liquidity and set matching rules.
Execution quality: Factors include speed, chance of partial fills, price improvement and slippage. Regulators and industry groups publish execution quality metrics; brokers provide disclosures on routing practices.
Impact of PFOF: Payment for order flow can enable free-trade models but may create incentives to route orders to entities that pay most rather than those offering the best execution. Regulation and broker disclosures seek to ensure routing decisions meet best-execution obligations.

For retail investors, practical steps to protect execution quality include using limit orders for price-sensitive trades, reviewing broker routing disclosures and comparing published execution statistics when available.

Accounts, products and services

Brokers offer a range of account types and investment products. Match account features to your goals and tax situation.

Common account types:
- Taxable brokerage account: Standard account for buying and selling securities; capital gains are taxable.
- Individual Retirement Accounts (IRAs): Tax-advantaged retirement accounts (Traditional, Roth) with contribution limits and tax rules.
- Margin accounts: Allow borrowing against securities for leverage; subject to margin interest and maintenance requirements.
- Custodial accounts: Accounts for minors (UGMA/UTMA) where an adult manages assets for a child.
- Trust and institutional accounts: Specialized custody and reporting for trusts, foundations or businesses.
Typical product availability:
- Stocks, ETFs and bonds
- Options and derivatives
- Mutual funds and managed portfolios
- Fractional shares (allows investing in partial shares)
- Cryptocurrency trading and custody (where brokers offer it)
- Staking or yield products for some crypto assets (subject to additional terms and legal risks)

If you need crypto exposure but prefer brokerage custody or ETF access, the spot Ethereum ETF flows in early 2025 show institutional pathways for crypto exposure through regulated securities. As of Jan 16, 2025, according to industry tracker TraderT, U.S. spot Ethereum ETFs recorded four consecutive days of net inflows totaling $164.32 million on January 15th, demonstrating growing institutional adoption of regulated crypto investment vehicles. That development underscores the range of ways investors now access crypto — directly via custodial crypto trading or indirectly via broker-traded ETFs.

Regulation, licensing and consumer protections

Regulation underpins investor protection in brokerage services. In the U.S., several agencies and rules govern broker conduct and consumer safeguards.

U.S. regulatory framework

SEC (Securities and Exchange Commission): Oversees securities markets, enforces securities laws and reviews broker-dealer registration and disclosures.
FINRA (Financial Industry Regulatory Authority): Self-regulatory organization that writes and enforces rules for broker-dealers and registered representatives.

Brokers and broker-dealers must register with the SEC and FINRA and comply with capital, recordkeeping and conduct obligations. Regulation Best Interest (Reg BI) requires broker-dealers to act in a retail customer’s best interest when making recommendations.

Disclosure and background checks

FINRA BrokerCheck: Public tool to view the professional background, licensing history and disciplinary records of brokers and brokerage firms.
SIPC protection: The Securities Investor Protection Corporation protects customers if a member broker-dealer fails financially, covering missing assets (subject to limits). SIPC does not protect against market losses or fraud unrelated to missing assets.

When vetting "a stock broker", check BrokerCheck for disciplinary records and read account agreements for details on custody, insolvency protection and dispute resolution.

Licensing and exams

Common U.S. licensing exams and registrations include:

Series 7 (General Securities Representative): Broad qualification to sell most securities products.
Series 63 or 66 (Uniform Securities Agent State Law/Combined State Law): State law exams required for securities sales in many states.
Series 3, 4, 24, 27, 79 and others: Specialty exams for futures, options, supervision, research or investment banking roles.

Most exams require employer sponsorship (a registered broker-dealer) and continuing education requirements apply. Registered representatives must adhere to ongoing training and compliance programs.

Fees, costs and pricing transparency

Understanding broker fees requires looking beyond per-trade commissions. Consider categories and how "zero-commission" models are funded.

Typical fee categories:
- Commissions (if charged)
- Spreads (difference between bid and ask, especially relevant for less liquid securities or crypto)
- Account fees (maintenance, inactivity, custodial fees)
- Margin interest rates
- Transfer and wire fees
- Fees for optional services (broker-assisted trades, premium research)
Zero-commission models: Often funded by alternative revenue sources such as PFOF, interest on client cash, or securities lending. While cost per trade may be zero, execution quality and the broker’s routing practices matter.
Importance of total cost: Compare effective cost, factoring in spreads, typical execution price improvement, margin rates and non-trade fees. Some brokers publish execution quality reports and best-execution disclosures; use these to compare providers.

Conflicts of interest and risk considerations

Brokers may face conflicts that can influence behavior. Investors should be aware and ask questions.

Payment for order flow (PFOF): Can create incentives to route orders to firms that pay more rather than those that offer the best execution.
Proprietary trading: Brokers with proprietary desks can trade against client interests if controls are weak; rules require separation and disclosure.
Product-sales incentives: Commission structures or bonuses may bias recommendations toward in-house products.
Custody and counterparty risk: When brokers custody assets, those assets may be subject to bankruptcy risk of the custodian or broker-dealer; SIPC and custody procedures reduce but do not eliminate risk.
Operational and cybersecurity risk: Platform outages, execution failures, or hacks in crypto custody are real risks. Choose brokers with strong operational controls and clear incident-response procedures.

Mitigation steps:

Use limit orders for price-sensitive trades.
Read and compare routing & execution disclosures.
Check broker regulatory history via BrokerCheck and review SIPC coverage and custody practices.
For crypto custody, prefer regulated custodians or brokers with insured custody arrangements and consider self-custody using Bitget Wallet for supported assets if you require on-chain control.

Technology and platforms

Modern trading is software-driven. Brokers differentiate on platform features and technical capabilities.

Trading platforms and mobile apps: User experience, market data, order types and reliability are key. Mobile-first apps democratized access but verify uptime and support.
APIs for algorithmic trading: Many brokers provide APIs for automated strategies, backtesting and direct market access for advanced users.
Research and charting tools: Integrated screeners, technical analysis and news feeds help investors make informed decisions.
Automation and robo-advisors: Robo-advisors offer automated portfolio construction and rebalancing using algorithms, reducing the need for human brokers for simple, long-term investing.

Emerging technology: tokenized securities and on-chain settlement platforms (e.g., networks launched for on-chain stock trading) could change settlement speed and custody models. As of March 2025, per industry coverage of Figure Technology Solutions’ OPEN network, initiatives to enable on-chain trading of tokenized public stocks represent a significant innovation in market infrastructure and may reshape broker roles over time.

Choosing a broker — due diligence

Selecting a broker is a practical decision tied to your investing goals. Consider:

Costs: Commissions, spreads, margin rates, account fees and the hidden costs of routing.
Product access: Do you need options, bonds, international equities, or crypto custody / ETFs?
Execution quality: Review disclosed routing practices and published execution statistics.
Platform/usability: Mobile app stability, research tools and customer experience.
Customer service: Support channels, responsiveness and availability during market hours.
Regulatory history: Check FINRA BrokerCheck and SEC disciplinary records.
Account protections and custody: SIPC coverage, segregation of client assets and policies for crypto custody.
Crypto policies: If you want crypto exposure, check whether the broker offers direct custody, ETF access or integration with wallets. For users preferring an integrated solution, Bitget and Bitget Wallet provide combined services for spot trading and custody within a regulated product framework.

Match the broker to your use case: low-cost, self-directed investing typically favors discount brokers; complex financial planning favors full-service firms; active traders may require direct-access platforms.

Stockbroker vs. financial advisor vs. investment adviser

These roles overlap but have distinct regulatory and compensation characteristics.

Stockbroker (broker-dealer / registered representative): Often transactional and regulated by FINRA. Historically paid by commissions; now many operate on fee-based or zero-commission models. Reg BI applies to recommendations to retail clients.
Financial advisor / financial planner: Broad, often holistic financial planning services (budgeting, insurance, retirement planning). Can be paid by fees, commissions or a combination.
Investment adviser (RIA, Registered Investment Adviser): Fiduciary duty to clients, typically fee-based (AUM) and regulated under the Investment Advisers Act. Advisers must act in clients’ best interests.

Understanding the relationship and standard of care matters: advisors with fiduciary duties may be best for comprehensive, ongoing wealth management, while a stock broker may be sufficient for trade execution or episodic advice.

Stockbrokers and cryptocurrency markets

Integration between traditional brokers and cryptocurrency markets has accelerated but remains uneven.

Broker integration: Some broker-dealers now offer spot crypto trading or access to crypto ETFs, allowing investors exposure through familiar brokerage accounts.
Crypto exchanges vs. brokers: Crypto exchanges run order books and custody for on-chain assets; brokers may offer custody and trading through brokerage interfaces or provide access to regulated ETFs. Brokers often add compliance and reporting features that exchanges may not.
Custody and legal status: Crypto custody raises additional legal and operational considerations. Brokers offering crypto custody must navigate custody rules, insurance, and AML/KYC obligations. Bitget Wallet is recommended within the Bitget ecosystem for users wanting direct custody and on-chain interactions.
Regulatory uncertainty: Rules differ by jurisdiction and asset type. Institutional adoption (for example, inflows into spot Ethereum ETFs) often depends on clearer regulatory frameworks and regulated products that bridge crypto and securities markets.

Case in point: institutional flows into spot Ethereum ETFs in January 2025 (as of Jan 16, 2025, according to industry tracker TraderT) showed a growing institutional channel for crypto exposure through broker-traded products. That trend highlights how brokers and asset managers can provide regulated pathways to crypto without direct exchange custody.

Industry evolution and history

Brokerage services evolved from high-commission, relationship-driven models to low-cost, platform-driven models. Key shifts include:

Commission compression: The industry-wide move to zero-commission trading for U.S. equities shifted revenue models and widened retail participation.
Rise of online brokers and mobile apps: Retail access increased with intuitive apps, fractional shares and micro-investing.
Algorithmic trading and automation: Execution algorithms and APIs changed how orders are placed and routed.
Tokenization and on-chain settlement: Emerging projects—such as on-chain tokenized securities networks—promise faster settlement and new custody models. These could reduce back-office friction and open new product forms, but regulatory and adoption hurdles remain.

The brokerage industry continues to adapt as institutional flows into digital assets and tokenized products grow, highlighted by recent ETF inflow trends and pilot networks for on-chain trading.

Careers, training and compensation

Working as a stock broker or within brokerage firms involves formal education, licensing and ongoing compliance.

Typical career path: Start as an analyst or junior rep, obtain required securities licenses, progress into client-facing roles or specialist desks (options, fixed income, institutional sales).
Educational background: Degrees in finance, economics or related fields are common; professional certifications (CFA, CFP) add credibility.
Licensing process: Passing exams like Series 7 and Series 63/66 with employer sponsorship, plus continuing education.
Compensation models: Salary, commissions, bonuses and incentive programs. Full-service brokers often receive advisory fees or AUM-based compensation; sales roles may have commission-heavy pay.

Careers in hybrid brokerages (integrating crypto) increasingly require familiarity with blockchain fundamentals, custody mechanics and digital asset compliance.

Notable firms and platforms (examples)

Below are examples illustrating the types discussed. This is non-exhaustive and chosen for educational clarity:

Full-service firms: Large wealth managers and wirehouses that provide advisory and custody services.
Discount/online brokers: Platforms offering low-cost trading, fractional shares and robust apps.
Direct-access platforms: Providers offering low-latency execution, algorithmic APIs and advanced order types.
Crypto-capable brokers/hybrids: Firms that offer cryptocurrency trading, custody or regulated crypto products; within the Bitget ecosystem, Bitget provides exchange and custody services while Bitget Wallet supports Web3 interactions.

(Names above are representative categories; choose providers carefully and verify regulatory status.)

References and further reading

U.S. Securities and Exchange Commission (SEC) — investor education and broker-dealer rules (search SEC resources for official guidance).
FINRA — BrokerCheck and rulebook (consult FINRA for registration and disciplinary history tools).
Investopedia — entries on broker, broker-dealer, and order types for accessible explanations.
NerdWallet / StockBrokers.com — comparative broker reviews (use them for platform comparisons and execution statistics).
CFA Institute — research on market structure and best practices for investors.
As of Jan 16, 2025, industry tracker TraderT reported that U.S. spot Ethereum ETFs recorded four consecutive days of net inflows, totaling $164.32 million on January 15th (reported Jan 16, 2025).
As of March 2025, industry coverage noted the launch of the OPEN network by Figure Technology Solutions to enable on-chain trading of tokenized public stocks (source: industry reports).
Early 2026 reports from major financial institutions indicated growing institutional interest in digital assets and evolving fund flows into crypto ETFs.

All references above are provided to guide further reading. For regulatory or legal questions, consult primary regulator websites and official firm disclosures.

Further exploration: If you want to compare broker features, execution quality and custody options, start by checking FINRA BrokerCheck for any firm or representative, review a broker’s routing disclosures and test the platform demo. For crypto custody or integrated crypto trading with broker-like protections, consider Bitget and Bitget Wallet as part of your due diligence.

Ready to explore trading today? Discover Bitget’s platform features and Bitget Wallet for integrated crypto custody and trading.

The content above has been sourced from the internet and generated using AI. For high-quality content, please visit Bitget Academy.