If you want to buy or sell stocks on any of the stock exchanges of the world, you will at some point be utilizing the services of a broker. A broker is simply a person who is authorized to sell and purchase securities and stocks. Stockbrokers are licensed as intermediaries to act on your behalf, and meet the demands of their clients with respect to their individual investment strategies. The fee you pay a broker is called a “commission,” and can be anywhere from $5 to $10 per trade, in the case of discount brokerages or online brokerages, or upwards of several hundred dollars in the case of some of the higher end traditional brokerage firms.
What most people really mean when they ask if they need a broker is whether they need the services of a traditional brokerage firm. Traditional brokerages tend to be more hands-on and expensive than an online brokerage or discount brokerage would be, and traditional brokers work one-on-one with clients to provide a wider range of personalized services. They act in an advisory capacity and can offer professional guidance on what sort of investments might be worthwhile for you.
If you choose to make stock trades online, it may seem as though you are not using a broker. However, in order to trade stocks online you will still need to open an account with an online brokerage and pay a commission per trade, albeit a much lower one. Online brokerages are called “discount brokerages,” and have the advantage of charging much lower fees than traditional brokerages do. They are able to do that because the service they provide is “execution only;” that is, they execute your order to buy or sell stock and do not provide any further advisory or discretionary guidance as to how you should manage your stock trades.
So, if you are buying and selling stock online, the short answer is that yes, you still need a broker in order to do so. With online trading sites, fast execution times and low fees make the broker’s service almost transparent. However, you are still using a broker to execute your trades. The only way to legally make a trade on the stock exchange without using a broker is to take the series 7 exam, and become an authorized broker yourself.