A stock or securities broker is the access point between individual investors and the financial markets. Whether you’re buying a blue-chip stock, a government bond, or a complex derivative, it’s the broker that facilitates the transaction. They’re not just middlemen—they provide the infrastructure that makes modern investing possible. That includes trade execution, custody, market data, and increasingly, portfolio tools and tax reporting.
Over time, brokers have evolved from traditional, high-fee advisors on the phone to fully digital platforms offering zero-commission trades and algorithmic tools. But not all brokers are the same, and the differences still matter—especially when you’re managing more than one asset class, dealing across multiple markets, or trading at scale.
What a Broker Actually Does
At a basic level, a stockbroker executes buy and sell orders for investors. That role can be split into two categories:
- Execution-only brokers: They simply place trades on your behalf. You decide what to buy or sell, and they handle the logistics.
- Full-service brokers: These provide recommendations, market analysis, and sometimes manage investments for clients.
On the securities side, brokers may deal with more than just stocks. They can facilitate access to corporate and government bonds, ETFs, structured products, and even over-the-counter (OTC) instruments. Some also serve as underwriters or placement agents in primary markets, although that’s usually limited to institutional service providers.
Brokers are regulated by financial authorities in their jurisdictions. In the US, that means the SEC and FINRA. In Europe, MiFID II governs most conduct, while national regulators—like the FCA in the UK or Finansinspektionen in Sweden—handle oversight at the country level.
How They Make Money
Most people assume brokers make their money on commissions. And some still do. But in today’s environment, many brokers make most of their income in other ways:
- Payment for order flow (PFOF): Selling your trade order to a market maker for execution.
- Margin lending: Charging interest on borrowed funds used for leveraged trades.
- FX conversion fees: Applying markups when clients trade foreign assets.
- Account and inactivity fees: Charged when accounts fall below minimums or aren’t used regularly.
This shift means that even “free” platforms can carry hidden costs. Traders need to pay attention to how orders are routed, how quickly they’re filled, and whether pricing is affected by internal incentives.
Choosing the Right Broker
What matters in a broker depends on what you’re trading and how often. For active traders, low-latency execution and tight spreads are non-negotiable. For long-term investors, platform stability, low management costs, and portfolio tracking matter more.
Other important factors:
- Asset access: Not all brokers offer access to all exchanges or instruments.
- Platform tools: Look at charting, watchlists, trade history, and order types.
- Regulatory status: Make sure the broker is licensed in your country.
- Client fund protection: Understand how cash and securities are held in custody.
- Tax reporting: Some platforms simplify this. Others don’t.
For income investors or those dealing in fixed-income products, firms like Income Securities focus on bond market access, pricing transparency, and detailed income tracking. These services are rarely a priority at traditional equity-focused brokers, which often underserve fixed-income traders.
Meanwhile, if you’re trading or investing from Sweden, comparing Swedish brokers is essential. Local platforms may offer language support, tax-friendly account types (like ISK or KF), and access to the Stockholm Stock Exchange that international brokers don’t prioritise. Differences in currency conversion, dividend handling, and domestic fund access can all add up over time.
Broker vs Platform
Some providers blur the line between broker and trading platform. A platform may offer a sleek interface but operate as an introducing broker or white-label provider. That means your trades are still executed by another firm behind the scenes.
This setup isn’t inherently bad—but it introduces additional layers of risk and can affect execution quality. Always check who holds your funds, who executes your orders, and whether you have direct access to exchange liquidity or are routed through a market maker.
Passive vs Active Requirements
If you’re running a passive investment strategy—buying a few ETFs and holding them long-term—you may not need advanced execution features. What you do need is reliability, low-cost custody, and ease of use.
For active traders or those using derivatives, futures, or margin, execution tools and stability under stress matter more. A platform that works fine under normal volume might lag or freeze during high volatility. That’s where professional-grade platforms with direct market access justify their cost.
Avoiding Conflicts of Interest
Some brokers operate under dual structures—they provide the platform and act as counterparty to your trade. This creates a conflict, especially in CFDs, spread betting, or other leveraged products.
A skilled trader might be able to manage this, but newer investors can get caught in pricing games, slippage, or artificial spreads. Regulated brokers are required to disclose their order flow and execution policies. Reviewing these documents—dry as they are—is worth the time.
