Traders include brokers, market makers and specialists.



Brokers are traders that are authorized to deal at the exchanges themselves.  The public-at-large can only perform transactions through these brokers. 


Brokers can be split up into three major categories:

·    Full-Service Brokers

These brokers, in addition to being stock traders, also offer a full range of financial advisement.

·    Discount Brokers

Discount brokers charge lower fees than full-service brokers, but they do not give financial advice.

·    Online Brokers

These brokers run complex websites that allow the public to perform transactions directly, through the Internet.  Use of these websites demands considerable technical knowledge.  These brokers charge the lowest fees.


A few examples of large brokers:

·    Merril Lynch & Co. – Full-Service Broker.

·    Charles Schwab & Co.  – Discount Broker.

·    E*Trade Grouip – Online Broker.


Market Makers

Market makers are a type of securities dealer.  They purchase securities from investors that want to sell and sell them to investors that are interested in buying.  At the NASDAQ, hundreds of market makers are active, and many different market makers can trade on any given stock.  Market makers are also called Dealers.



Specialists are the owners of the stands inside many stock markets.  Every stand owner specializes in a few different securities, and those securities are bought and sold at his stand.  While the NASDAQ operates through market makers, both the NYSE and the AMEX function with specialists located on the exchange floor.  The exact difference between market makers and specialists is explained in chapter 2.