If you want to buy shares in Company X, then without a stock broker you would have the tedious problem of finding someone who owned Company X and wanted to sell them to you. This is obviously a very inefficient way to trade shares. Stock brokers bring together buyers and sellers of publicly listed companies, thereby providing a market for you to trade in. The broker acts as an agent on your behalf. Only a stock broker who has a seat on the exchange can do this for you, and they earn their income as a commission on the value of shares you buy and sell.

Brokers can be broadly classified into two categories - the full services broker or the discount broker.

Full services broker - a full services broker will charge up to 2.5% to assist clients in buying and selling shares. They will provide advice to clients and circulate research on what is a buy, hold or sell over a range of stocks.

Discount broker - As the name implies, a discount broker will trade shares for you at a discounted price. Costs vary, but as an example Associated Equities Australia will charge $35.00* for a trade of up to $11,666. As the trade is significantly cheaper than a full services broker, you will not receive any advice on buying or selling. They are simply a conduit into the market place. The majority of the discount brokers use internet sites for transactions as this is a very fast and efficient way of placing an order.

A broker can also be involved in the listing of a new company by underwriting the float and marketing the float to their client base.

* - Price as at January 2008