Who can participate in trading on the Stock Exchange? Not everyone who wants to has access to the stock market and may enter into transactions on it. Stock exchange is not an institution widely available. However everyone may buy or sell through intermediaries. Institutions, companies and individuals use the services of brokers who represent their own brokerage company or banks. The customer is then allowed to stock market indirectly. Trades directly on the stock exchange are carried out by persons authorized to act on the stock market with the right to perform the transactions.
Depending on the country in which the stock market is situated, the group of entities that are allowed to trade on the stock market is chosen in different ways. It would be troublesome to explain these issues based on the individual stock exchanges worldwide. It will be more useful to provide simplified explanation.Before I’ll discuss the categories of people that occur on the stock market it falls to mention that everyone admitted to the stock exchange with the right to carry out transactions is checked “doubly” and sometimes even “triply” by stock exchange authority permitting entities to occur in the stock market and the capital market.
As a specialist – such person must have appropriate qualifications, as a member – have a good repute. It happens that the candidate’s financial status is taken into account. All this is intended to protect the fairness of transactions. Of course, they are controlled in “real-time” as well.
The broker is an intermediary acting on his own behalf and on behalf of the client. Dealer is a participant of stock exchange acting on his own behalf and for his own account. The boundaries of these divisions are so smooth, depending on the country, that sometimes it’s difficult to even talk about them. There are many classifications of eligible groups, there are different terms and different fields of competence. In light of the above it will be considered the most convenient to treat division: broker – dealer with a high tolerance.
On stock exchanges, there are a group of participants, that are a subject to specific duties and the resulting limitations.
Specialists (British: Jobbers), this group of brokers, specialize in trading of selected securities and is required to do so in an appropriate manner. Jobber trades only on the stock market and exclusively with its participants. He carries out operations in its own name and for its own account. Stock exchange operations are carried out according to the prices fixed by themselves, but with any intermediary who wants to buy or sell these securities. Specialist provides the liquidity of circulation of the selected group of securities.
On the German stock market brokers with special status are “course brokers” (German: Kursmakler). They designate exchange rates of securities in which they specialize, and which are located in this segment of the stock exchange, which is known as the official market. They don’t have the right to carry out transactions in their own name and for their own account with securities they designate. Occuring at the aforementioned, so-called official market the stock exchanges have absolute exclusivity to trade specific group of assets. Other participants of stock exchange are using this brokerage.
Mode of appointment of a broker with special status is different than regular admission to stock exchange operations. This is due to the fact that the broker fulfills specific functions. Specialist cares for a defined security (or group of securities). Any purchase orders of that security, which he takes care of are getting to him. Specialists are responsible for the continuity of trading of the selected security. Specialist determines exchange rates of this asset taking into account the implementation of the highest trading. In case of serious differences between the offers of buy and sell specialist may carry out the intervention (intervention purchase or sale). Specialist may intervene to a limited extent.