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How To Use An Execution Only Stockbroker

An execution only stockbroker offers a 'dealing only' service where no advice is given. This means that the investor bears all responsibility regarding investment decisions. The instructions to deal are usually made online or by telephone. The service is commission based and usually very low cost to the investor. This is now the mainstay of most stockbroking firms.

Not offering advice means that you, the investor, need to know in advance, what company stock is to be purchased (or sold), in what amount and any and all analysis will have been completed without the broker being involved.

This change in responsibility is very important. In the age of internet stockbrokers , investors are much more responsible for their financial actions than has ever been the case previously. This shift in responsibility may be beneficial for some investors, but for those that do not fully understand the markets, this may be a problem.

However, it should be noted that both advisory and discretionary management stockbrokers are unlikely to be willing to advise smaller scale investors. In other words, they are in the 'relationship' business and the relationships that they encourage and build are with wealthier investors with money, assets or a portfolio to manage.

However, online brokerages have enabled many millions of smaller investors to be able to participate more easily. This additional number of investors and their money provides extra upward price pressure (more demand for shares creates reduced supply and rising prices). This may be one of many reasons for the incredible increase in global stock market prices in the early years of this century.

How much?

Commission rates vary (as noted above) depending upon what sort of security is being bought or sold. The largest fees generally relate to foreign stocks and convertibles. Government securities (gilts, T-Bills etc), loan stocks (a type of bond or debt instrument) are usually the cheapest.

Generally, dealing in shares online is likely to be the lowest cost option. Traditionally, stockbroking was a relationship business in which a client would deal with a company based locally (to the client, not to the market). This meant that many large brokerages would have hundreds of offices located across the company.

Needless to say, this would create large overheads. There would be lots of offices to rent, staff to pay, bills and marketing expenses. These have all been slashed by online services. They need only a few offices, one marketing team, far less staff and very few expense account lunches! By reducing the operating costs so significantly, the cost of the service to the client can be reduced markedly as well.

It is these changes that has made 'day trading' possible. Without low cost dealing (mainly online), and vastly increased information sources (also online) day traders could not buy and sell quickly to take advantage of very low margin opportunities. In the past, under the old - pre-internet - system of buying and selling, this would have been impossible. (By the way - all day traders use execution only terms).

For obvious reasons, it is difficult to give an exact guide as to the execution only stockbroker charges likely to be paid, as each transaction on any stock exchange is different, but I hope that this information will at least offer useful guidance as to what they are and how they work.

If this type of service is not for you, perhaps you might like to read about:

Advisory Management Stockbroker

Discretionary Management Stockbroker

For other stockbroking related pages, please visit:


Internet Stock Broker

Discount Stockbroker

Stockbroker Commission

How To Choose A Stockbroker

A Question To Ask A Stockbroker