Discount brokers are stockbrokers who help carry a wide variety of business deals. Generally, they accept orders for stock, stock options and futures trading deals. They are known by different names such as discount commodity brokers, discount stockbrokers and discount real estate brokers. Compared to full-service brokers, discount brokers buy and sell orders at a reduced commission.
Discount brokers allow a person to buy “no-load” mutual funds at a reduced commission. Through an arrangement with a particular fund, free mutual funds are sometimes offered. Discount brokers will often provide (for a small fee) a free 1-page Standard & Poor’s Stock report on the stocks you are requesting and a 5-10-page research report. Twenty-four hour telephone stock quotes services are also provided, allowing the person to build trades.
There are four types of discount brokerage firms, “full-service,” “discount,” “deep discount” and “computer or electronic.” Full-service discount brokers offer services that are identical to a full-service broker. They own local branch offices for personal service, newsletters, a personal account representative and considerable literature. Discount firms carry out the same functions as that of the full-service discount firms. The only difference is they don’t have local branches. Their commissions are around 1/3rd the price of a full-service agent.
Deep discount brokers are stock brokers who execute only stock and option trades. They have fixed commissions (flat fee) for any trade of any size. Computer or electronic brokers offer services similar to deep discount brokers. Their service is primarily aimed at computer users who trade via the internet.
Some discount brokers, who cannot be clearly categorized, fall between “discount” and “deep discount.” They cater to skilled, high-volume traders with high demands for quality service.