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A discount brokerage is a business that charges clients significantly lower fees than traditional brokerage firm but without providing investment advice. Discount brokers typically allow investors to buy and sell securities on-line while offering comparatively fewer services and/or support.
In the securities industry, a brokerage helps clients buy and sell securities on an appropriate exchange. Before the advent of discount brokers it used to be that only the wealthy could afford a broker and access to the stock market. However the development of internet and electronic trading helped to develop discount brokers, which allow investors to trade for much smaller fees.
Discount brokerages usually allow their clients to trade for their own account with little or no action with a live broker. In addition some brokers offer no-commission trades to their clients that hold a balance greater than a specific amount with them.
Typically, discount brokers provide advanced electronic trading platforms which may be appealing to frequent and active traders but may deter some novice investors. Discount brokers typically do not provide financial advice or guidance and provide instead a service aimed at self-directed investors. Traditional brokers in contrast will often provide financial advice and investment planning as well as related wealth management services.
All brokerage firms, including discount brokerage and full-service discount brokerage are regulated in the same way and are licensed by each countries financial regulatory authority.
In the real estate industry, a discount brokerage helps clients buy and sell real estate properties, often listed on the MLS. The growth of discount real estate brokers has caused considerable concern with their full-service, full-fee competitors. In the US, the US Justice Department settled in 2008 with the National Association of Realtors to allow discount brokers to have access to the same MLS home listings as full-service agencies
- Iwata, Edward (30 May 2008). "Online Real Estate Agents Get Equality". USA Today. Retrieved 22 February 2009.