What is an 'Agency Broker'

An agency broker is a broker that acts as an agent to its clients. When acting as the agent, the agency broker must look after its clients' best interests, which involves attempting to fill client orders at the lowest price and in the fastest way possible. An agency broker has a responsibility to find the best execution for its clients, as opposed to a broker acting in a dealer capacity and does not have a responsibility to the client placing the trade. Common clients of an agency broker include large institutional funds that place large block orders.

BREAKING DOWN 'Agency Broker'

An agency broker is a broker that acts as a middleman to the stock exchange, and places trades on behalf of clients. This is in direct contrast to broker-dealers, who purchase orders from clients and then sell these blocks into the market. Unlike the broker-dealer, the agency broker must put its client interests first and work to achieve best execution for the trade. Special care must be taken when using any broker, as there may be hidden fees associated with placing trades. When interacting with a broker, it is always a good idea to ask the capacity in which they are functioning — as your agent or simply as a broker-dealer. This will tell you about where their focus and obligation lies when working your trades.

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