What is a contract broker?
Contract brokers are members of the stock exchange who decide to make orders for transactions on behalf of another investor who is also a member of the same stock exchange. The investor may decide to act as a contract broker for several different reasons. In general, transactions initiated by a contract broker will be routed through brokerage that a member usually uses, rather than a brokerage used by a second member of the stock exchange.
One more common reasons why a member would decide to facilitate transactions as a contracting broker is a good old -fashioned time management. Both members want to participate in the same investment activities associated with a given share or security. Rather than both members who have decided to start separate orders, one member receives the authorization from the other and plants both orders with a brokerage house. Using this approach, both investors have the opportunity to participate in trading according to their wishes, but only one one had to work on the leg.
As he refers, the contracting broker concludes an agreement with other members of the stock exchange in order to carry out trades on their name. The exact conditions that are included in the contract or agreement will differ from one situation to another. In any case, the conditions must be in accordance with the current laws regulating financial transactions with the jurisdiction of the record. This means that every individual who acts as a contractual broker in the United States is subject to laws and regulations regarding the business activities stipulated by the Securities and Exchange Commission.
The relationship between a contractual broker and other members of the stock exchange may be short or long -term. In some cases, the unified efforts of the broker and member investors may focus on a specific project and a specification period. In other cases, the agreement between the contractual broker and the individual member of the investor may be wide and aimed to provide permission for a wide range of trades for longer timesu. In both cases, there are generally escape provisions that each party can cause if necessary.