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Role of the stockbroker

To invest on the JSE Ltd (JSE), investors are required to contact stock broking firms for assistance. Broking firms are intermediaries between investors and the market. One cannot start and finish the investment procedures on the JSE without the involvement of a stockbroker. In short, only registered JSE member firms can trade directly on the JSE. There is a good number of equities broking firm operating on the JSE. It is advisable to seek guidance from the exchange’ Education Department of firms which accept or deal with private investors.Some of the broking members operating on the JSE prefer to do business with institutional investors only. Others require high minimum sum of money to be invested on the market. Looking around for a suitable broking firm is necessary and strongly recommended. The broking members give guidance on share or equities investment, act as agents to buy and sell, and, administration of portfolio of shares. In terms of the JSE Rules, investors are required to open a trading account with a JSE registered broking firm before they could start trading. Investors’ instruction can only be carried out by a broking firm when there are sufficient funds deposited into the account. It is important to note that broking firms are allowed, in terms of the JSE Rules, to levy brokerage charges freely.

The stock broking members are independent or separate companies from the JSE. However, it must be remembered that these firms are regulated by the JSE in so far as their activities in the market are concerned.

A stock broker must not be confused with stock broking firm. The stock broker is a person suitably qualified to invest people’ money on the market on behalf of the stock broking firm. These professionals provide share investment related services – for a fee on behalf of their firms - to anyone who wants to buy or sell shares on the market. There are many shares listed (registered) on the JSE. If the potential investor doesn’t know when and which shares to buy, the role of stock brokers is to give the necessary advise and then buy on behalf of the investor. Stock brokers are permitted to act as either an ‘agent’ or principal. The difference between the two is that – ‘agent’ means that the broker is buying direct from the market, and trading as principal means that he is buying from his company’ account. The status in which the broker is acting must be disclosed to the investor concerned.

Investors who know procedures of the market, and need not broker’s advise may request to open what is called trading mandate account. This type of an account will enable an investor to participate in the market without an input from a stock broker, thereby also bringing charges down. Should the investor wants to assisted with appropriate advise, can request for such service.

In short, thus the role of the stockbroker on the JSE.

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