Floor Broker (FB)

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DEFINITION of 'Floor Broker (FB)'

An independent member of an exchange who is authorized to execute trades on the exchange floor on behalf of clients. A floor broker is a middleman who acts as an agent for clients, indirectly giving them the best access possible to the exchange floor. A floor broker’s clients typically include institutions and wealthy people such as financial-service firms, pension funds, mutual funds, high net worth individuals and traders. A floor broker’s primary responsibility is “best execution” of client orders, and to achieve this objective, he or she must continuously assess myriad factors including market information, market conditions, prices and orders.

Also known as “pit broker.”

INVESTOPEDIA EXPLAINS 'Floor Broker (FB)'

Once a floor broker receives a buy or sell order for a specific stock, he or she will attempt to get the most competitive market rate for the client. The floor broker does this by proceeding to the trading post on the exchange floor, where the specialist for the stock is located, and bids against other brokers and traders to get the best price for the stock purchase or sale. Upon completing the transaction, the floor broker notifies the client through the client’s registered representative.

A floor broker is different from a floor trader, who trades as principal for his or her own account, whereas the floor broker acts as an agent for clients. A floor broker also differs from a commission broker in that the latter is an employee of a member firm, while the floor broker is an independent member of the exchange.

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