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Floor broker

Floor Broker

A floor broker is a licensed individual who executes buy and sell orders on behalf of clients on the trading floor of an exchange, such as the New York Stock Exchange (NYSE). Floor brokers represent their clients' interests, ensuring that orders are executed at the best possible prices. They play a critical role in maintaining market liquidity and efficiency, particularly in traditional open outcry markets, where human interaction supplements electronic trading systems.

Example

A floor broker receives an order from a mutual fund to buy 10,000 shares of a company. The broker goes to the exchange floor, interacts with other traders, and executes the order at the best available price.

Key points

• Executes trades on behalf of clients on the exchange floor.

• Works to secure the best possible prices for buy and sell orders.

• Vital in open outcry markets, enhancing liquidity and market efficiency.

Quick Answers to Curious Questions

How do floor brokers contribute to market efficiency?

They provide a human element that facilitates price discovery, especially in high-volume or complex trades, helping maintain orderly markets.

What skills are essential for a floor broker?

Key skills include quick decision-making, strong communication, and a deep understanding of market dynamics to execute trades effectively.

How has technology impacted the role of floor brokers?

Electronic trading has reduced the number of floor brokers, but they remain important in handling large, complex, or time-sensitive orders.

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