THE CONCEPT OF DISCOUNT BROKERS

The finance sector has seen rapid growth from the past few years. The collaboration of technology and the finance has lead to huge increase of customer faith in this industry and people have started investing huge funds here. Each and every investor has faced the benefits in one or the other manners.

The role of discount brokers has also seen a rapid transformation. The main function of discount brokers India is to perform the trade at the right time and at right price but they don’t give any suggestions for trade and they do not indulge themselves in any kind of analysis of the portfolio of the client. They are only the middlemen of the whole process. They perform a large number of functions. These are:

  • Earning income in the form of brokerages: these are the main sources of income which are commissions and brokerages for a discount broker in consideration to the services they provide to people.
  • Providing best trading platform: they provide better trade platform to people in comparison to the discount brokers. They have advanced features in their platforms.
  • Increasing efficiency in technical terms: there are not much price gaps in between the transactions when they take place.

Merits of discount brokers are:

  • Low latency: the discount brokers are far more efficient than the stock brokers because of the low latency. The execution amount and the trade amount only differ by slight changes.
  • Reduction in costs: these brokers do not charge commission for equity trades. They have started to offer 0% brokerage. This helps them to reduce the overall cost of the transactions.
  • They are unbiased: these kinds of brokers are unbiased in dealings. The online website and portal is same for everyone and everyone gets the same features that every other person is getting. So they are considered as unbiased in their trading.
  • Consumer education: they help to gather a lot of information by being in constant touch with the sources like government and company websites and even the annual reports of the companies. This will help to gain investor confidence by using the information and this will also increase the efficiency of the brokers.

There are some disadvantages as well of discount brokers. These are:

  • Hidden charges: usually they play on zero fees but sometimes they may turn the tables by charging huge amounts of fees as hidden charges at the end of the time intervals.
  • No guidance: they do not provide any guidance to the investor that how they should place their trades and where they should invest. There is no management of portfolio done by discount brokers. The investor has to decide all things on his own.
  • Very low services: sometimes the services are not up to the mark and one needs to contact him again and again in case there is any issue or query.

The answer to all the questions will depend on the services offered by the broker, the commission and on the needs of the customers.

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