Brokerage firms work as liaisons and help investors to buy and sell investment products such as notes, securities, stocks, commodities, etc. Those who work in the brokerage firms are call brokers.
The brokerage industry is considered a service industry. This profession has its roots traced back nearly one thousand years ago to France. The French created the first brokerage system during the 11th century – they started regulating and trading agricultural debts on behalf of the banking community. In the 1300’s, brokerage houses started to pop up throughout Europe. Commodity traders would have their meetings in these environments. And when the Venetians got more involved in government securities, the backbone of the financial industry was solidified.
However, the first true brokerage firms manifested themselves in London coffee houses. At that time, individuals were empowered to purchase stocks from many different companies. In 1801 this gave birth to the London Stock Exchange. In a case of “monkey see, monkey do” there were many copy cats of this idea. The first of these brokerage firms or exchanges was on Chestnut Street in Philadelphia. Eventually, the US exchange relocated to New York City, where it remains today.
During the 1900s brokerage firms became adept at quoting the buying and selling prices of securities. This provided firms to increase their profit margins by getting cuts of both the purchase price to an investor and from the immediate transaction of the sale. However, this resulted in fears of insider trading and now there is a system that limits communication between departments within brokerage firms. In the 20th century, goliaths of the brokerage industry started to gobble up and absorb the assets of their smaller competitors. The 21st century strengthened their online presence.
