Brokerage Company – Definition

Cite this article as:"Brokerage Company – Definition," in The Business Professor, updated February 24, 2020, last accessed October 28, 2020,


Brokerage Company Definition

A brokerage firm is a firm that connects buyers and sellers for transactions. This firm can also buy and sell securities on behalf of clients. The services offered by brokerage firms are in exchange for a fee or commission. An individual can also act as a broker who helps to facilitate transactions between parties.

In some cases, brokerage companies are investment firms or financial institutions that perform the duties of a broker in a transaction. These companies either act as middlemen or act in the best interest of the client they are representing.

A Little More on What is a Brokerage Company

In the actual sense, individuals act as brokers whether in the real estate or investment industry. The connect a buyer and seller of securities or help clients purchase or sell securities in exchange for a fee. Individual brokers can work for brokerage companies or function as independent agents in an investment or real estate transaction.

The essence of brokers or brokerage firms lie in the fact that market investors or real estate buyers do not have sufficient information required to make the best decisions. Hence, the need to consult brokers who have accurate information about the market.

Types of Brokerages

Brokerage firms are also called a brokerage, they offer various products and services. Three major types of brokerage exist, they are;

  • Robo-advisors: There are investment advisory channels that offer services using algorithms. The services of Robo advisors are low compared to the other two brokerage firms. Given that services offered on this platform require little or no human intervention, they charge fewer fees and commissions.
  • Discount Brokerages: These are brokers that offer their services at a discount. Usually online platforms, discount brokerages allow investors and traders to make their own decisions through the ‘do-it-yourself’ channel. With this strategy, zero or low commission is paid by investors
  • Full-service brokerage: This is the most expensive of all the brokerages. It offers professional advisory services to clients, manage clients above and take decisions on their behalf.

In addition to these three types of brokerage firms, others include independent brokerage firm and captive brokerage firm.

Here are some points to note about brokerage firms;

  • A brokerage firm performs the role of a middleman in a transaction by connecting buyers and sellers.
  • A brokerage firm can also represent a client in a trade or buy and sell securities on behalf of clients.
  • Brokerage companies offer their services in exchange for a transaction fee or commission.
  • Brokers who have accurate information about the market can work for brokerage firms or act as independent agents.

Reference for “Brokerage Company”

Academics research on “Brokerage Company”

Virtual enterprise brokerage: a structure-driven strategy to achieve build to order supply chains, Molina, A. R. T. U. R. O., Velandia, M. A. R. C. E. L. A., & Galeano, N. A. T. H. A. L. I. E. (2007). Virtual enterprise brokerage: a structure-driven strategy to achieve build to order supply chains. International Journal of Production Research45(17), 3853-3880. This paper proposes the concept of the virtual enterprise broker as an innovative model to design and create build to order supply chains. The build to order supply chain responds to the demands of new global manufacturing economy offering high level of customisation, high customer driven design, volume flexibility, short cycle time, no inventory costs, minimal total cost and supply chain integration. A review of different manufacturing operational models, including make to stock, make to order, assembly to order, engineer to order and configure to order, is presented to set the context for the requirements of build to order operations. The virtual enterprise broker is proposed as a structure driven strategy to support the creation of dynamic supply chains to satisfy build to order requirements. The virtual enterprise broker strategy is described in terms of core processes and competencies. We also demonstrate of how the virtual enterprise broker strategy has been implemented in various industrial scenarios related to supply maintenance tooling for the aerospace industry, standard parts for capital goods equipment, and design and manufacturing of medical devices.

The market for residential real estate brokerage services: costs of production and economies of scale, Zumpano, L. V., Elder, H. W., & Crellin, G. E. (1993). The market for residential real estate brokerage services: costs of production and economies of scaleThe Journal of Real Estate Finance and Economics6(3), 237-250. Although the market for real estate brokerage services has been the subject of intense scrutiny for many years, little empirical evidence has been forthcoming regarding the performance of this market. This paper employs a translog cost function to model the underlying production function for the residential real estate brokerage industry. The results indicate that, except for very large firms, modest economies of scale persist throughout almost the entire range of output. Our results also indicate that while average firm size is increasing, many real estate firms are too small to take full advantage of the cost reductions possible with a larger scale of operation. Equally important, large firms do not command a competitive advantage over smaller firms, as fer as unit costs are concerned.

Entrepreneurial internationalisation: A case study of Libra company, Židonis, Ž. (2007). Entrepreneurial internationalisation: A case study of Libra company. Baltic Journal of management2(3), 273-287.

Distributed brokerage offices through information technology, Rockoff, M. L., & Malone, R. (1991). Distributed brokerage offices through information technology. Information Systems Working Papers Series, Vol. This paper describes some novel ways in which Edward D. Jones and Co., a successful brokerage firmwith 1650 offices nationwide, uses information technology to pursue a unique market niche: single-brokeroffices in communities too small to support a traditional, typically much larger, brokerage branch office.The paper focuses on the use of mainframes with “dumb” CRT terminals, rather than workstations orpersonal computers, to coordinate distributed operational work on a day-to-day basis.

Financial performance analysis of brokerage firms quoted on the Istanbul stock exchange using the TOPSIS method of analysis, Okay, G., & Kose, A. (2015). Financial performance analysis of brokerage firms quoted on the Istanbul stock exchange using the TOPSIS method of analysis. International Journal of Business and Social Science6(8), 1.

Was this article helpful?