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How do the Stock Exchange Agencies Function?
Due to the services they give the investors, the stock exchange agencies charge a commission that usually consist in a percentage of the total amount of the operation. For example: let’s suppose that one has to order the stock exchange agent to buy 100 shares of the ABC company and that the order has been executed at a price of $17. The operation has cost $1,700 ($17 x 100 shares). But on the other hand, the agency is charging a 2.5% commission for the execution and liquidation of the order: $42.50 (1,700 x 0.025). The total cost of the purchase is then, $1,742.50 (1,700 for the shares plus 42.50 of the commission).
From the point of view of the stock exchange agencies, the individual investors as oneself are retail traders, opposite to the institutional or to the wholesale investors.
The commissions of the individual investors only represent a part of the income of the stock exchange agencies. There are other incomes that come from the dealing of shares and other securities on their own account. When an agency executes an operation on account of a client (being retail or wholesale traders). It is said, that they act as financial agents or intermediaries; while when they buy or sell on their own account most of the stock exchange agencies (large or small) usually act both roles.
Whatever the role they adapt, it is said, that the stock exchange agencies operate in the secondary market, the market that the television news and newspapers talk about. On the secondary market, shares and other securities change hands daily.