Exchanges and Brokers

#exchange

The stock exchange, called Exchange in English, is an institution that develops and maintains markets for buying and selling stocks, bonds, and futures. In the early days, the exchange did not have an electronic information system, and mainly relied on securities brokers entrusted by investors to quote in a trading hall. Today, some exchanges still retain the tradition of trading floors, but most exchanges use networked electronic trading systems.

There are several profit channels for exchanges:

Sales data: mainly some advanced statistical data, such as stock short data, option quotation data, etc. The price is not cheap, and the buyers are mainly investment institutions.
Data distribution authorization: authorization fees for some financial data providers who specialize in distributing data
Management fee: A company needs to pay a listing fee and an annual management fee for listing, because the exchange provides a platform for the company’s securities to be circulated and traded in the market.

There are some famous exchanges in the world, such as the Shanghai Stock Exchange in China, the Nasdaq Exchange in the United States, and the Tokyo Stock Exchange in Japan.

#broker

A broker is a company that operates securities transactions, or a securities company.

Whether it is an individual or an ordinary institution, neither can trade directly through the exchange, but must open an account with a brokerage company, and then conduct transactions through the brokerage company.

When you buy stocks, bonds and other securities, you do not directly trade with another trader, but send the request to the information system of the brokerage firm, and then the brokerage firm sends it to the trading center of the exchange, and the program of the trading center will process it. Your request and the trader’s request match the deal.

Of course, some brokerages will match orders internally. In this way, for investors, your order has not been sent to the entire market, so
Get the best buy and sell offers on the market that you can neither see nor get.

Exchanges, securities firms, and the China Securities Regulatory Commission all have clear responsibilities and work together to ensure that the market operates well:

Exchange: responsible for providing places and facilities for stock trading, and formulating the business rules of the stock exchange.
Brokers: Responsible for connecting individuals and institutions, including providing trading software, basic trading knowledge, trading news, wealth management products, margin financing, etc.
China Securities Regulatory Commission: Responsible for the supervision of the securities market, while paying attention to the behavior and trends of the market, researching policies, formulating laws and regulations, and preventing risks in the financial system.

#trading seats

The trading center of the exchange cannot be accessed by institutions or individuals casually, so that securities companies can be eligible to submit orders to the exchange, but this first requires securities companies to purchase a membership certificate of the exchange, commonly known as a “trading seat”, which means that this membership card is like Like a chair and a seat, it is a symbol of power. Of course, the price of the trading seat itself is not cheap, and it also supports transfer.

#transaction unit

After a broker purchases a trading seat, it can purchase an access identity, that is, a trading unit, from the exchange according to business needs.

A trading seat can have multiple trading units, and the general exchange will give one for free.
For the purchase of additional trading units, in addition to the basic application fee, there is also a flow rate fee and a traffic fee.
Funds, insurance companies, and asset management companies can also rent trading units from securities companies for trading needs.

The trading unit is mainly used for technical identification. In the end, when the exchange conducts transactions and clearing, it uses the trading unit.

A brokerage often has multiple trading units, such as dedicated to bond business, stock trading business, etc. For ordinary retail investors, one trading unit can be used to process requests. Due to the large number of users, the flow rate is of course slower.

Brokers can also apply for a trading unit to serve so-called “VIP users”, which is the legendary VIP channel. Generally, users with large trading volume or institutions such as funds can apply. In this way, VIP users send requests through a separate trading unit , you can enjoy faster speed.

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