Definition
The investing term floor broker refers to an independent member of an exchange that helps execute client orders. Floor brokers buy and sell securities from a specialist; attempting to get the best possible price for their clients.
Explanation
Also known as a pit broker, a floor broker (FB) works on a stock exchange floor. The broker does not trade on their own behalf; rather they represent their clients' interests. Floor brokers earn a commission on each transaction, typically in the one to five cents per share exchanged. Clients include large financial institutions, mutual and pension funds, high net worth individuals, day traders, as well as hedge funds.
When an order is sent to the broker, they engage the floor specialist in that stock. The broker then proceeds to bid against other floor brokers in order to obtain the most competitive price for their client. Once the transaction is complete, the trade information is relayed back to the client. While the broker and market specialist are individuals sharing verbal information on the floor of the exchange, the data is transmitted back to clients electronically.
Related Terms
The financial investing term margin account refers to money set aside by securities traders to reduce their credit risk with a broker. When securities are purchased "on margin," the investor is using their brokerage firm's funds to help finance the transaction. Margin accounts allow the investor to realize greater gains as well as losses.
Moneyzine EditorJanuary 24th, 2024- The investing term stock exchange specialist refers to a member of a stock exchange that assists in the trading of certain stocks. The principal duty of a specialist is to match buyers of stocks with sellers, thereby ensuring liquidity in the stocks they trade.Moneyzine EditorSeptember 21st, 2023
- The investing term scalping refers to individuals that hold a large number of securities for a very short period of time with the hope of profiting from small movements in the price of the security. Scalpers will conduct these trades in common stocks, bonds, derivatives, commodities as well as foreign currency.
Hristina NikolovskaSeptember 21st, 2023 
The investing term day trading refers to individuals that buy and sell securities throughout the day, closing out their positions before the markets close. Trades include several standard securities, including stocks, options, and futures (currencies, commodities, interest rates).Hristina NikolovskaJanuary 15th, 2024- The investing term position trading refers to individuals that buy securities with the intention of holding onto them for an extended period of time. A position trader may hold onto a stock for months or even years, and is primarily concerned with the long-term prospects of their investments.Moneyzine EditorSeptember 20th, 2023
- The investing term swing trading refers to individuals who buy securities intending to capture gains in a matter of days or weeks. A swing trader looks to profit from stocks, options, and futures contracts exhibiting short-term price momentum.Hristina NikolovskaSeptember 21st, 2023
- The investing term over-the-counter market refers to decentralized securities exchanges where dealers act as market makers and trades occur between investors. Bonds, stocks, as well as non-standard derivatives can be traded by investors on the over-the-counter (OTC) market.Moneyzine EditorSeptember 20th, 2023
The term American option refers to an agreement that can be exercised at any time prior to, and including, its expiration date. Call or put options involving equities or common stock are typically American-style options.Moneyzine EditorJanuary 5th, 2024
The term European option refers to an agreement that can be exercised only on a specific day prior to its expiration date. Call or put options involving stock market indexes are typically European-style options.Moneyzine EditorJanuary 17th, 2024
The term ABC Agreement refers to a contract between a firm that purchases a seat on the New York Stock Exchange and the employee that uses the seat. An ABC Agreement ensures the firm can continue to trade on the exchange even if the employee leaves the company.Moneyzine EditorDecember 12th, 2023
