One of the key features of any mature capital market is the prevalence of trading platforms or exchange houses where the change of ownership of a security is done. For the sake of the investor community at large, there are restrictions as who can participate in the trades being executed on the trade floor. These are the agents or brokers who buy and sell on behalf of their clients and present the security at times of the settlements.
Thus anyone wanting to participate on the transactions must do so through a recognized broker on the given exchange. This would apply to anyone dealing in the equity, the forex, the commodity or for that matter any kind of financial instrument. Although any registered broker is expected to follow a minimum set of guidelines while dealing on the exchanges, there are a lot of areas that are left to the broker client relationship to be defined. Essentially, this means that the level of service offered by each broker would differ from the other by some operational parameters. The right choice of broker brings a number of advantages to the dealing client as laid out below.
While the intentions of each of the trading bourses would be to ensure a transparent dealing through them, it is possible that the broker is presented with certain leeway in the day to day operations. This sort of approach is necessary as the large number of individual clients that a broker gets to handle each day would typically mean a different set of situations. The smooth and efficient functioning of the exchanges makes it necessary for this sort of a procedure at best. Thus the most transparent of the brokers would also mean the most trustworthy ones too.
The ideal situation while dealing with a broker would be to be told what the further steps are while entering into any kind of deal. It must be said of the very fluid nature of the dealings that it is not possible to ensure that there is complete clarity but the better of the brokers would ensure that they do try to be above board on each of the dealings.
It would be the better of the broker community that acts quickly while dealing with their clients. One of the pressing needs for speed is when the quoted rates on the bourses tend to change by the time a deal is executed. This would put the clients at a disadvantage and the reputed of brokers would try and avoid such pitfalls.
There is indeed a big difference between the equity, the derivatives or for that matter any segment of the capital markets. It is important for the broker to understand the fine workings of the exchanges as it then becomes easy to deal with the other brokers as well as represent the client interest to the best possible extent. A good broker would then tend to ensure the smooth conduct of the dealing in the securities and thus the right choice of broker is crucial to say the least.
Quite unlike the situation a good two decades or so ago, the present day capital markets are dependent on one another. So it is not out of the ordinary to find dealers in securities in different countries having representative offices in other parts of the world. As for the investor, this sort of a working would give him the chance to diversify the portfolio and hence control the risks that he is exposed to at any time. No longer is it possible for financial intermediaries to be restricted in the manner the markets are accessed and it is this larger focus that each client would look to find in each broker that he would want to deal with.
Another feature of the brokers that operate across different regions is that they would be able to put through deals much faster than someone who is not connected. Also the size of the deals could tend to be much bigger too.
It is rather an old view that the most returns are done by exposing the investor to the most risks. Presently, the accent is on managing the risks optimally than put the client at the most risky situation. The modern day financial instruments are made out in such a manner as to facilitate this sort of an approach.
One of the features of the present capital markets are the use of binaries. The very power of these options makes its use important that the full extent of what the client is being exposed to is understood. Coupled with this feature is the fact that each segment of the capital markets are closely intertwined with each other that the risks in one part of the market would spill over into the other.
This is where the modern day management skills come into play in the handling of the risks and to bring in returns to the clients that would reflect the extent of risk exposure undertaken. Not only must the right broker know his field, but must have the necessary training to work in the increasingly competitive world markets.
The broker would be the go-between that connects the seller and the buyer most of the time. There are advantages that the correct pick of broker provides each of the buyers and sellers of a security. Not only are transactions done in quick time but in a transparent manner as well. Most exchanges do have proper channel to be chosen in case something were to go wrong with any aspect of the deal. But these tools are best left un-used at any time and should be something to be resorted to if everything fails.