TRADING OF SECURITIES

The mechanics of trading securities, critical information for every investor. Brokerage firms and their activities are analysed, as are the types of orders to buy and sell securities and the handling of these orders.

Brokerage Firms:

In general, it is quite easy for any responsible person to open a brokerage account. An investor select a broker or brokerage house by personal contact, referral, reputation, and so forth. Member firm of the NYSE are supposed to learn certain basic facts about potential customers, personal contact between broker and customer seldom occurs, with transactions carried out by telephone or in written. Customers can choose the type of broker they wish to use.

As of 1996, there were more than 500,000 brokers at approximately 5400 firms. They can be classified according to the services offered and fees charged.

Full-Service Brokers:

Full -service brokers offer a variety of services to investors , particularly information and advice. Thus, investors typically can obtain a wide variety of information on the economy, particular industries, individual companies, and the bond market. Full service brokers include names that many investors are familiar with, such as Merrill Lynch, Kidder Peabody , Dean Witter Reynolds, and Prudential- Bache.

Discount Brokers:

In contrast to full service brokers, discount brokers concentrate on executing orders and are able to charge less than the full- service brokers. Most offer services frequently used by investors in a manner similar to the full - service brokers, but they provide little, if any, investing information and give no advice. Thus, investors pay less and receive  less. Prominent discount brokers include Charles Schwab, Quick & Reilly, and Fidelity investments.

A deep-discount broker is a small firm that offers even lower trading costs, in some cases 2 or 3 cents a share, although a minimum commission may be imposed.These brokerage firms typically are very small, although accounts are insured against the failure of the firm. Unlike the regular discounters, these firms offer few frills, such as check-writing privileges, and they are open for shorter hours.