Commission Broker

AAA

DEFINITION of 'Commission Broker'

Someone who gets paid by the brokerage company for which he works for each order of securities he executes on a customer's behalf. The commission structure can encourage unethical behavior by unscrupulous commission brokers. For example, a dishonest commission broker may engage in a practice called churning, which means executing multiple trades in a customer's account for the sole purpose of generating more commissions. The additional trades do not benefit the customer.

INVESTOPEDIA EXPLAINS 'Commission Broker'

A broker who charges a flat fee for his or her services rather than earning a commission based on order size has more incentive to put the customer's best interest first. A flat-fee broker will not have an incentive to push a customer into certain securities because they are paying a high commission. Instead, he or she will have an incentive to get the customer into the best-performing investments so the customer will be loyal to that broker and be a steady source of business.

RELATED TERMS
  1. Address Commission

    The fee paid by vessel owners to charterers, the party who owns ...
  2. Outside Broker

    1. A real estate salesperson and deal facilitator who works for ...
  3. Flat Dollar

    A fixed dollar amount, generally in the context of fees or commissions ...
  4. Soft Commissions

    Any type of commission that is not paid in actual dollars. Soft ...
  5. Churning

    Excessive trading by a broker in a client's account largely to ...
  6. Commission

    A service charge assessed by a broker or investment advisor in ...
Related Articles
  1. Investing Basics

    Picking Your First Broker

    If you're a rookie investor, your first big investment decision should be an informed one.
  2. Brokers

    Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  3. Investing Basics

    Paying Your Investment Advisor - Fees Or Commissions?

    The way a professional is compensated can affect quality of service. Learn more here.
  4. Retirement

    Choosing A Compatible Broker

    We go over the factors that determine different investing personalities, and the services that best suit them.
  5. Investing

    Fee-Based Brokerage: Will They Work For You?

    Learn the pros and cons of this type of investing and whether it will work for you.
  6. Brokers

    Is Your Broker Acting In Your Best Interest?

    Learn the clues you'll need to determine whether you've chosen a reputable professional.
  7. Options & Futures

    10 Tips For Choosing An Online Broker

    This important investment decision happens before you pick your first stock. Find out how to get it right.
  8. Professionals

    What's the average salary of a bank teller?

    Read this article to find out more about average bank teller salaries, median hourly wage rates and potential future career prospects.
  9. Professionals

    What's the average salary of a business operations manager?

    Read about the average yearly salary of business operations managers, and find out which locations and industries offer the best pay for these professionals.
  10. Professionals

    What's the average salary of a compliance officer?

    Learn about compliance officers, the locations and industries in which compliance officers work and how much they earn on average.

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center