Types of Brokers, Dealers and Exchanges in India

Types of Broker, Dealers and exchanges in India Investors who are new to the stock market often come across terms like - Dealers, Brokers, Exchanges, etc. There are various types of dealers, types of brokers and types of exchanges that new investors are not aware of. Most beginners do not understand the difference between ‘Dealers in the stock exchange’ and ‘ Brokers in the stock exchange.  In this article, we will cover 
  1. What is a stock exchange?
  2. Types of stock exchanges in India.
  3. Who are the dealers in the stock exchange?
  4. Types of dealers in the stock exchange
  5. Who are the brokers in the stock exchange?
  6. Types of brokers in the stock exchange.
  7. Difference between Dealers and Brokers
So, let’s begin!

What is a Stock Exchange?

A stock exchange is a place where shares of companies are bought and sold. The Stock market helps investors to trade and the companies get capital from investors. Stock Exchanges in India are regulated by SEBI - The Securities and Exchange Board of India. The two major and active stock exchanges in India are:
  1. National Stock Exchange (NSE)
  2. Bombay Stock Exchange (BSE)

National Stock Exchange (NSE)

The National Stock Exchange of India Limited is the largest stock exchange in India.  NSE was introduced in 1992 to provide solutions to simplify participation of common investors in the stock market. Later in the year 1994, the NSE introduced electronic trading.  The NSE offers a platform to companies for raising capital from investors and accordingly companies raise capital using the NSE platform through IPOs and Indian Depository Receipts (IDRs).

Bombay Stock Exchange (BSE)

The Bombay Stock Exchange (BSE) is the oldest and the most active stock exchange in Asia. It was established in the year 1875 as ‘The Native Share and Stock Brokers Association’ in Mumbai. The BSE one of the largest exchanges in the world with more than 5000+ listed companies.

Who are Dealers in the Stock Exchange?

A dealer is an individual or a firm who buys and sells securities for his own account. 

Types of Dealers in the Stock Market

1. Bear in the Stock Market

A bear type of dealer always expects the price to fall. A bear type of dealer is most likely to sell shares without having them in his Demat and buys the share when the price of the security falls. This is known as short selling. 

2. Bull in the Stock Market

A bull type of dealer always expects the price of the share to increase. A bull type of dealer is most likely to buy shares at a low price and sell stocks at a high price, popularly known as a long position.

3. Jobber in the Share Market

A jobber is a type of independent dealer in shares who buys stocks only to resell them at profit very quickly. 

4. Pig in the Share Market

Pigs are high-risk investors looking for one profitable opportunity in a short period of time.

5. Stag in the Stock Market

A stag is a speculator who buys large amounts of shares in a new issue (IPO) if he thinks the price is likely to rise upon listing. 

Who are the Brokers in the Stock Exchange

A broker is a person or a brokerage firm that executes transactions of buying and selling on behalf of another party. A broker generally charges a negligible amount as brokerage to execute the orders.  All brokers i.e. depository participants have to get themselves registered with either NSDL or CDSL.

Types of Brokers in the Stock Exchange

1. Traditional Brokers

Traditional brokers or full-service brokers offer a wide array of services and products, like investment advice, stock market tips, advisory services, etc.  Since traditional brokers offer personalized services they charge very high brokerage. 

2. Discount Brokers

Discount brokers or online brokers usually allow clients to trade on their own. Discount brokers charge a flat fee, which is usually not more than Rs 20 - Rs 30 per order.  Experienced investors who are fee conscious can open an account with a discount broker like Samco as Samco charges flat Rs 20 per executed order.  Discount brokers also offer free research and educational tools to help you make better investment decisions. [Don’t forget to check - How to save brokerage with Samco]

Difference Between Dealers and Brokers.

Dealers Brokers
Meaning A dealer is an individual or a firm that buys and sells securities from his own account.  A broker is an independent person or a company that executes financial transactions on behalf of another party. A broker generally charges a commission to execute the orders.
Execution of trades A dealer executes a trade on his behalf or with the help of a broker A broker executes orders on behalf of its clients and can be either a full-service broker or a discount broker. 
Decision Maker A dealer makes all decisions in respect of purchases and sale. A broker will only make purchases as per the client’s advice
Fees A dealer is not paid a commission as he/she is the sole authority of buying and selling of shares. A broker is normally paid fees in terms of brokerage for transacting the business.
Types Types of dealers are: Bull, Bear, Jobber, Pig, etc. Types of Brokers are: Traditional Brokers and Discount Brokers.

Final Thoughts

We hope that the basic concepts like the type of dealers and types of brokers and the difference between types of dealers and types of brokers are clarified in this article. Also, there are multiple benefits offered by discount brokers like Samco which provides you with unique products like Stock Plus, Option Plus, and a robust trading platform like Samco App. So, open a Samco Demat and Trading account and get a unique 3-in-1 Demat, Trading and Mutual Fund Investing account. [Suggested reading: 49 Stock Markets Terms & it’s Meaning - The Beginners Guide]

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