Picking an Online Stock Broker

TOP CONTRIBUTORS

Hitesh Nagpal

If you want to invest your money in the stock market and other instruments, you need to get a stock broker. A Stock broker is the middle man between you and the market. He buys and sells stocks and other instruments on your behalf, and in consideration charges you with a small commission.

Today stock brokers provide you with a number of services besides trading. There are a large number of brokerage firms which provide different services and features. So it becomes an important task to find a broker which suits your need well.

How to Open an Online Trading Account

1. Choose a brokerage - evaluate their price per trade, minimum account balance, product offered, etc. (see below, Factors to Consider Before Choosing a Stock Broker)
2. Each brokerage will have its own sign-up interface; they often offer bonuses or promotions to sign up new members, so you might want to look for an advertisement that offers a special deal and sign up that way...

Companies involved in electronic trading

• TradeStation Group (TRAD) - electronic trading software/platform; online broker-dealer.
• OptionsXpress Holdings (OXPS) - online brokerage platform; "self-directed retail customers"
• Interactive Brokers Group (IBKR) - market maker and electronic broker; could be hit by less need for market makers?
• ESpeed (ESPD) operates an electronic trading platform that offers traders access to financial markets. It also produces software and other technologies aimed at helping investors execute trades and manage their portfolios.

Exchanges

Exchanges have purchased many of the independent ECNs (electronic communications networks, the basis for electronic trading), expanding their presence in the budding electronic trading market. For example, NYSE Euronext bought the Archipelago ECN, and Nasdaq bought Instinet, its own ECN. CME and CBOT offer Globex and e-cbot, respectively, etc. ICE and ISE are almost exclusively electronic.

• NYSE Group (NYX) -
• Nasdaq Stock Market (NDAQ)
• Chicago Mercantile Exchange Holdings (CME) has announced its purchase of CBOT Holdings (BOT).
• International Securities Exchange (ISE)

Investment products and services

• MarketAxess Holdings (MKTX) operates an electronic trading platform for trading of corporate bonds.

List of Major Online Brokerage Houses

• Questrade
• TradeKing
• OptionHouse
• Firstrade
• Wells Fargo
• Bank of America
• TD Ameritrade
• E*Trade
• Fidelity
• MicroPlace
• Muriel Siebert
• optionsXpress
• Schwab
• Vanguard
• Zecco
• Scottrade
• SogoTrade
• Sucden Financial
• MARSCO
• Barclays stock brokers

Types of Broker Services Available

• Execution dealing: Brokers are only responsible for buying and selling of stocks on the behalf of their clients.

• Advisory dealing: Here brokers provide you with complete education on stocks. They advise you about the best performing stocks and various other services to help earn a good return on your money.

• Discretionary dealing: Under this service the broker collects all the information regarding the stocks in your portfolio, manages the portfolio, and conducts trade himself on your behalf.

Factors To Consider Before Choosing a Stock Broker

1. Discount vs full service brokers: The first thing to consider is whether you want a discount or full service broker. Discount brokers are only responsible for trading on behalf of their clients, while full service brokers provide you a great number of featured services. These may include advisory dealing and discretionary dealing. Therefore, discount brokers charge you lower commissions than full service brokers.
2. Other costs: Beyond the commissions, there are a number of hidden costs charged by brokers. These include annual maintenance fees, asset transfer fees, account closing fees, inactive account fees, etc.
3. Minimum deposit: Different brokers have different minimum account opening balances. Some discount brokers also give free trades once your account has crossed a minimum threshold.
4. Products offered: Most brokers provide a variety of trading instruments such as stocks, mutual funds, futures and options. However, you should ask for exactly what all products can be traded through your account.
5. Customer service: You must collect some customer service reviews of the brokers you are evaluating. Evaluate the website user experience and the availability of real-time, over the phone customer service.
6. Execution and communication speed: One of the most important factors is execution speed. If a broker' execution speed is as slow as 15 - 20 minutes, then you may buy a loss for yourself. Equally important is the communication speed of your broker. If your broker delays the orders or is not sincere and answerable, you can lose money.
7. Availability: If you prefer trading on the phone, see whether the broker is easily accessible through this medium. Visit the broker's site a number of times to ensure that the link is available for online trading. Some sites do not work during login or while placing orders or server drops due to overload.
8. Research activities: Most brokers conduct research activities for their clients. It is important that your broker conducts regular analysis and research activities for use when advising you on your portfolio, market directions, new strategies and other reports.
9. Trading platform: For online trading your broker must use software which is comfortable to use, quick and easy to handle.
10. Extras: A good broker often has different plans and schemes for their customers. Look up such schemes as you'll pay a lower brokerage fee.
11. Other factors: It is important to ensure that the broker is registered with a regulatory authority and is registered with exchanges. Also make sure you get your statement regularly on weekly, monthly or quarterly basis.

Resources

Online Stock Broker Commission Chart http://www.bullishness.com/online-stock-brokers