Commission

Commission. A stockbroker is a man who takes your money and invests it. Well actually, he keeps a little for himself, perhaps 1%, as a brokerage commission.

Most brokers work on a series of commission rates linked to the size of the trade you are making. This link may take the form of a percentage of the deal or it may be in fixed price bands.

Few markets around the world these days have fixed minimum commission rates. In London, fixed commission rates were done away with in October 1986, in the City's Big Bang. Up until then, it was common for smaller investors to pay 1.65% on their transactions. Today, private investors can find execution-only dealing services (operated over the telephone and increasingly over the Internet which charge 1% or less.

See commission in the context of financial advisers who sell products such as unit trusts and life insurance.

See Also: Online share dealing service Stockmarket Centre

Last Updated: May 2007 © Moneyextra.com

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