Broker: A profession or financial service. How to choose the right one

If you are just starting to enter the world of investing, choosing the broker that suits you is the first and most important step. This broker will serve as a key intermediary connecting you to the global financial markets. However, with many options available today, making a decision that fits your investment style can be challenging. This article will help you understand the role of brokers in depth and learn the key criteria for selecting the right service provider, so your investment experience is confident and highly efficient.

What is a broker? Roles and responsibilities in the financial markets

A broker or securities dealer is an individual or company that acts as an intermediary in buying and selling financial assets such as stocks, bonds, futures contracts, options (CFD), currency exchange rates (FOREX), and cryptocurrencies.

Simply put, a broker is like a “middleman” in a fresh market, helping you buy and sell goods without directly contacting the producer or seller. Brokers perform the same function, enabling investors to access tightly regulated stock markets.

Brokers not only provide trading services but also offer trading platforms, analytical tools, customer support, and financial information to help investors make effective decisions.

How brokers generate income

To better understand the service system of brokers, it is important to know where they make money. Brokers have several revenue streams:

1. Commissions from trades
This is the main income, calculated as a percentage of each transaction’s value. For example, some brokers charge a trading fee of 1,500 THB per million baht traded or a spread (price split), such as $35-40 per Lot of the reference product.

2. Other fees

• Deposit and withdrawal fees
• Annual account maintenance fees
• Service fees when no transactions occur over a period
• Data analysis and trading signal services

3. Interest from client deposits
Brokers invest a portion of the client funds deposited and share the returns with clients in the form of interest.

4. Securities lending fees
When clients want to short sell (Short Selling) or use securities as collateral, brokers charge fees for this service.

5. Additional products and services
Selling other financial products such as mutual funds, futures contracts (Futures), CFDs (CFD), foreign currencies (FOREX), and cryptocurrencies.

Key criteria for choosing the right broker

Choosing a good broker involves considering multiple aspects, as it greatly impacts your experience and investment returns. Factors to consider include:

1. Fee structure and commissions
Compare fee rates among different brokers. If you plan to make frequent transactions, even small differences in fees can significantly reduce costs over time.

2. Trading platform
Check whether:

• The interface is user-friendly
• It has comprehensive analytical tools
• Trading signals are stable
• Bid-Ask spreads are narrow
• The platform is fast and rarely crashes

3. Features and functionalities
Consider whether the platform offers:

• Automated trading orders
• Technical analysis tools
• Access to real-time economic news and market data
• Updates on key economic figures

4. Product variety
A good broker should offer a wide range of products such as:

• Stocks
• Bonds
• Mutual funds
• Futures contracts (Futures)
• CFDs (CFD)
• Foreign currencies (FOREX)
• Cryptocurrencies

5. Customer support

• Multiple contact channels (Phone, Email, Live Chat)
• Service hours
• Responsiveness to issues
• Quality of advice and training

6. Additional services

• Investment consulting
• Trading training and workshops
• Market analysis and research reports
• Financial planning tools

The importance of regulation and licensing

A licensed broker under the supervision of a reputable authority is fundamental to protecting investors’ interests.

Why regulation is important:

• Investor safety: Regulations help prevent fraud and unfair practices by setting strict operational and fund management standards.

• Transparency: Regulated brokers must publish accurate and transparent financial reports.

• Risk management: Regulations promote appropriate risk measures, such as reserve funds, to prevent losses.

• Builds trust: Investors are more confident knowing the broker complies with strict requirements.

• Anti-money laundering: Regulatory agencies enforce KYC (Know Your Customer) processes to verify client identities and prevent illegal activities.

Examples of regulatory agencies:

1. Australian Securities and Investments Commission (ASIC) – Regulates brokers serving Australian clients

2. Financial Conduct Authority (FCA) – UK regulator known for strict oversight

3. Mauritius Financial Services Commission (FSC) – Regulatory authority of Mauritius

4. Cayman Islands Monetary Authority CIMA – Cayman Islands regulator

5. Cyprus Securities and Exchange Commission – Cyprus regulator

Types and differences of brokers

Understanding the types and differences helps you choose appropriately:

By service type:

• Full-Service Brokers Full-Service Brokers: Offer comprehensive services including investment analysis and personal advice, usually with higher fees.

• Discount Brokers Discount Brokers: Provide access to trading platforms without personalized advice, suitable for cost-conscious investors.

By order processing method:

• A-Book: Sends client orders directly to the market.

• B-Book: Keeps client orders internally without sending to the market.

Other differences:

• Fee structure: Varies based on billing models and rates.

• Market access: Some brokers offer stocks from multiple countries, others focus on specific markets.

• Platform features: Ease of use, analysis tools, and speed differ.

• Support services: Quality, channels, and response times vary.

• Reputation and trustworthiness: Regulated brokers generally provide more confidence.

What investors should pay attention to when choosing

Choosing a broker should not be based solely on fees. A holistic approach is crucial:

• Platform stability: Frequent outages and inaccurate signals can harm trading.

• Speed: Delays in order execution can impact profits and losses.

• Spread: Reasonable bid-ask spreads help reduce costs.

• Confidence: Track record, fairness, and compliance with regulations.

• Education: Training services and learning resources improve skills.

Summary

Selecting the right broker is an investment in your trading success. Whether you are a beginner or experienced investor, thorough research and comparison are essential before making a decision.

Consider fees, platform stability, signal accuracy, spreads, support services, and trustworthiness. When you choose carefully, you will enjoy a better and more efficient trading experience.