Posted in Finance, Accounting and Economics Terms, Total Reads: 154
Definition: Brokered Market
A brokered market is a market where sellers and buyers are serviced and represented by agents or brokers. The buyers or sellers don’t indulge in actual buying or selling. This is done through agents or brokers. The brokers or agents serve as intermediaries between the buyers and sellers.
Generally a client asks the broker to search for counterparty and the broker does it for the buyer or seller. Stocks which are not so liquid and are not traded in public market are traded through brokers. Bonds are also traded in large numbers via agents. Brokers provide liquidity in the market and also increase the efficiency. An example can be taken of real estate brokers. Sellers generally need a broker to sell off their homes. This applies in the case of buyers too. Brokers charge a commission which is a percentage of what buyers pay or what sellers earn.
There are many advantages of investing in a brokered market. Firstly, a broker is well known of prospective customer base and can provide the best deal a buyer or seller can get. Also, they have resources, tools and skills necessary to get the best expected deals. They are also cost effective at times although it depends on the type of market they operate.
Brokered Markets are efficient and provide liquidity but buyers and sellers should always look for brokers that provide appropriate and optimum service. They should not eat into the returns earned by the clients and are not loss making. Their commissions should be reasonable and fair.