What Is An Online Broker?

An online broker is an intermediary between a buyer and seller of a financial instrument with the aim to facilitate the sale or purchase for a fee. With the advancement of technology, traders and investors can transact online, courtesy of online brokers transacting over an electronic network. The transaction goes through the broker’s proprietary online trading platform in contrast to the old-school method of placing orders via phone call. Online brokers began to gain in popularity in the mid-to-late 1990s, facilitated by the development of high-performance computers and faster Internet connections. Online trading is convenient, as you can place orders, check quotes and make changes from anywhere. It also facilitates faster execution of traders, helping to take advantage of volatility, and is more cost-effective compared to trading through a traditional broker. Once you key in your order with your online broker and the order is placed in the database, the market matches the buyer and seller and sends a confirmation to the brokers of both parties.