A stock broker is an intermediary that anyone buying and selling the shares of companies publicly listed on a stock exchange needs to go through.
An online stock broker is simply the digital, automated equivalent to the traditional role of a stockbroker.
And stock broker, online or otherwise, is an approved vendor of the financial instruments, such as stocks (company shares) and other exchange traded instruments such as some kinds of bonds and funds, bought and sold via public stock exchanges.
Stock exchanges oblige those trading shares to go through a stock broker as they would have to invest much more in the kind of infrastructure that would support the general public buying and selling exchange listed investments directly.
Stock brokers have existed for a surprisingly long time. The first recorded historical evidence of stock brokers facilitating the buying and selling of public shares is from Ancient Rome in 2 BCE. The oldest modern stock exchanges, such as the London Stock Exchange, date from the 16th and 17thcenturies.
While private individuals were using stock brokers before that, placing buy and sell orders over the telephone or by snail mail, it was the dawn of the internet that really saw stock trading become accessible to the everyday individual with a ‘normal’ job.
Online stock brokers, as a digital service, meant the cost of buying and selling shares came down considerably.
This in turn meant that investors didn’t have to invest larger sums to justify covering stock brokers’ fees, opening up the investment class to a wider audience.
It is also much more convenient to buy and sell shares and other exchange traded investments with the click of a button on the website of an online stockbroker, compared to having to call up or place an order via the postal service.
As online stock brokers have developed, their digital platforms have grown to also include a wide range of value added services and functionalities such as access to real time stock exchange prices and research, news and other information.
Gone are the days of stock owners checking how their investments have done and keeping track of them by writing out by hand their prices from a newspaper.
Different online stock brokers have different ranges of services with some offering a stripped back buy and sell service only and others providing information, research, education and nicely laid out stock market portfolio dashboards.
The cost charged by an online stock broker to buy and sell shares and maintain a digital account tends to reflect the depth of additional services and functionalities provided. As a general trend, the emergence of the online stock broker continues to push prices down for the end investor.
Thanks to InvestorGreg.com for informational support and preparation of the article.